Tax Planning
Understanding the 5% GDP Adjustment for GST and PAYG Instalments from 1 July 2026
From 1 July 2026, the ATO is increasing the GDP adjustment factor to 5%, affecting quarterly GST and PAYG instalments—here’s what that means for your cash flow and tax planning.
By NomadicTax Research Team • 5-8 min read • June 26, 2026
## What Is the GDP Adjustment Factor?
Each income year, businesses use a GDP adjustment factor to **index** their quarterly GST and PAYG instalments. This ensures instalments better reflect inflation and economic growth. In recent years, the adjustment was 4%. ([softwaredevelopers.ato.gov.au](https://softwaredevelopers.ato.gov.au/GDPupliftfactor?utm_source=openai))
## Recent Change: The New Rate From 1 July 2026
- As of **1 July 2026**, the adjustment factor rises to **5%** for the **2026–27** income year. ([softwaredevelopers.ato.gov.au](https://softwaredevelopers.ato.gov.au/GDPupliftfactor?utm_source=openai))
- If your company has a **substituted accounting period (SAP)** and that period commenced in **January, February, or March 2026**, you’ll continue using the **4%** rate because your income year started before the new adjustment comes in. ([softwaredevelopers.ato.gov.au](https://softwaredevelopers.ato.gov.au/GDPupliftfactor?utm_source=openai))
## How It Impacts Your Instalments
- **Higher Instalments**: Each quarterly instalment for GST or PAYG tax will be calculated based on a higher amount, leading to more consistent payments.
- **Budget for Cash Flow**: Businesses should plan for increased payments; smoothing cash flows becomes more crucial.
- **SAP Businesses Must Be Careful**: If your income year crosses the threshold period (like starting in April 2026), the entire year will use the **5%** rate. SAPs starting earlier keep **4%**.
## Examples
| Scenario | Accounting Period Start | Adjustment Rate | Behaviour Implication |
|----------|--------------------------|------------------|------------------------|
| A business with April–March year | 1 April 2026 | **5%** | Entire income year adjustment at 5% |
| A business with January–December | 1 January 2026 | **4%** | Even though year ends 31 December 2026, start was before 1 April so stays 4% |
## Actionable Steps for Businesses
1. **Review your accounting period**: Confirm whether you're using a standard or substituted accounting year, and when your income year commences relative to 1 April 2026.
2. **Estimate the new instalments**: Use your recent turnover numbers to forecast higher GST and PAYG obligations under 5%.
3. **Adjust your cash reserves**: Set aside enough to cover increased instalments, especially in first quarters under new rate.
4. **Check your software**: Many tax software packages automatically update rates—ensure yours is aligned.
5. **Consult tax advisor**: Particularly useful if your business has complex GST or PAYG arrangements, or if you're an SAP entity.
## Key Takeaways
- **5% adjustment applies** for most from 1 July 2026.
- **SAPs with income years starting before April 2026** will remain at **4%**.
- Expect **higher instalments**, rework cash flow, and double-check systems.
By adjusting early, tightening cash flow planning, and engaging your accountant or tax professional, you’ll be ready for the change without surprises.