Compliance
Key Compliance Steps for PAYG Instalments and GST After the GDP Uplift Factor Change
With the GDP adjustment factor rising to 5% from 1 July 2026 for GST and PAYG instalments, businesses and individuals must update their cash-flow and instalment calculations to stay compliant.
By NomadicTax Research Team • 5-8 min read • July 25, 2026
## What Changed as of 1 July 2026
From **1 July 2026**, the **Gross Domestic Product (GDP) adjustment factor** used for both **GST instalments** and **PAYG instalments** has increased from **4% to 5%**, for the 2026-27 income year. ([softwaredevelopers.ato.gov.au](https://softwaredevelopers.ato.gov.au/GDPupliftfactor?utm_source=openai)) Businesses with substituted accounting periods (SAP) that started **1 January, 1 February, or 1 March 2026** will **still use the 2025-26 GDP adjustment rate of 4%**, because their income year commenced before the effective period. Those starting on or after **1 April 2026** use 5%. ([softwaredevelopers.ato.gov.au](https://softwaredevelopers.ato.gov.au/GDPupliftfactor?utm_source=openai))
## Why This Matters for Compliance
- **Underestimated instalments**: Using the old 4% rule will lead to under-payment and potential liabilities.
- **Cash flow effects**: More tax payable earlier in the year if instalments rise.
- **SAP entities**: Must verify if they fall into the old or new regime. Different adjustment rate rules apply.
## Actionable Steps You Can Take Right Now
1. **Check your accounting period** – determine whether you are subject to the 4% or 5% adjustment factor depending on when your income year started. If uncertain, consult with your accountant or check your ATO client file.
2. **Recompute instalment obligations** for the 2026-27 year using 5%. For SAPs commenced before April, ensure you stick with 4%.
3. **Revise cash flow forecasts**, especially for Q1 and Q2 instalments. Set aside enough capital so you're prepared for potentially higher instalment payments.
4. **Update systems and software** to reflect the new adjustment rate—this ensures accounting and tax reporting tools compute correctly.
5. **Communicate internally** (for businesses) or to clients (for advisors) the likely impact – for example, businesses expecting PAYG instalment increases may need to dampen expense or investment plans in advance.
## Example Scenario
George operates a service business with non-SAP income year beginning **1 July 2026**. Under old system (4%), his quarterly instalment estimate was AU$20,000. With 5%, that rises to **AU$20,500**. Over four quarters, that’s an additional AU$2,000 liability over what he would expect under the previous rate—affecting cash flow.
Meanwhile, Julia is a seasonal produce farmer whose income year began 1 February 2026 under a substituted accounting period. She continues to use the 4% rate – the change to 5% only applies to years beginning **after 1 April 2026**. This difference saves her from a premature rise.
## Penalties and Risk Exposure
- **Incorrect instalment rates** can result in under-payments, possible interest or late payment penalties.
- **Audit risk**: large discrepancies between reported instalments and actual income could trigger scrutiny.
- **SAP misclassification**: Businesses must ensure they correctly register and understand their substituted accounting period status. Mistakes here can lead to using wrong rate.
## Ongoing Monitoring
- Look out for further ATO guidance or rulings, especially with software developers publishing formulae and rules.
- Track actual income vs. estimates. If income rises significantly, instalment obligations may need adjustment.
- Consider working with tax professionals to simulate carry-forwards or variations in instalments where possible.
## Conclusion
This small change in the GDP adjustment factor can make a **big difference** in tax instalments and cash-flow planning. Businesses and individuals should act early to use the correct rate, forecast impacts, and ensure compliance. Staying informed and aligning your internal practices with ATO guidance will reduce the risk of surprises.