• GDP adjusted PAYG and GST instalment amounts

    This overview explains how and why the gross domestic product (GDP) adjustment is applied to pay as you go (PAYG) and goods and services tax (GST) instalment amounts, and what to do if you think this will impact your tax liability.

    Note:

    The following information is based on a balancing date of 30 June, which is when the majority of taxpayers in Australia balance their accounts. For most taxpayers, the term income year used in this publication refers to a financial year (1 July to 30 June).

    How we calculate your instalment amount

    Eligible taxpayers who report PAYG instalments or GST quarterly have the option of paying instalment amounts that we calculate for them. These amounts are on your quarterly activity statement or instalment notice.

    We calculate your instalment amount from information you have previously reported and we adjust this amount to take into account likely growth in your business and investment income (for PAYG instalments) or your GST net amount.

    Why we adjust your instalment amounts

    The information we use to calculate your instalment amount is generally taken from your most recently assessed income tax return (for PAYG instalments) or annual GST return (for GST).

    As PAYG and GST instalment amounts are intended to reflect your expected tax liability for the current income year as accurately as possible, we adjust the instalment amount to reflect expected changes in the economy, as measured by gross domestic product (GDP) deflator.

    If instalment amounts were solely based on your previous tax situation without any adjustment, they might not cover your actual tax liability – leaving you with an additional payment to make when you lodge your annual return.

    How we calculate the GDP adjustment

    We update the GDP adjustment factor at the start of each income year using national accounts data provided by the Australian Bureau of Statistics. The adjustment is based on GDP activity over the previous two calendar years. The GDP adjustment for the 2016–17 year is 2%.

    The 2% GDP adjustment factor will:

    • apply to PAYG instalments for the 2016–17 income year for taxpayers whose income year starts on or after 1 April 2015
    • be used in the calculation of your PAYG instalments if you choose to pay the quarterly instalment amounts we work out for you.

    This does not affect you if you choose to work out your own instalments (using the 'rate' method) or pay annually, because the GDP adjustment factor is not applied to your instalments.

    See also:

    When the GDP adjusted amount does not match expected income or business turnover

    If you think the instalment amount we calculate will be too high or too low, you can do one of the following:

    • pay the instalment amount worked out by us and have any overpayments refunded (or make up any shortfall), once your income tax return or annual GST return is processed
    • vary your instalment amount
    • work out your PAYG instalment or actual GST net amount yourself.

    Next step:

    Paying the instalment amount worked out by us

    You can choose the instalment amount option in the first quarter of the income year - for most taxpayers, this is the activity statement or instalment notice due in October.

    If you choose this option for:

    • PAYG, you need to pay the amount shown at label T7 on your activity statement or instalment notice
    • GST, you need to pay the amount at label G21 on your activity statement or instalment notice.

    If you choose to pay the PAYG or GST instalments calculated by us, your actual income tax and GST liability will be worked out when your income tax return or your annual GST return is processed. Any overpayments will be refunded to you, provided you have no other tax debts.

    Vary your instalment amounts

    You can vary your PAYG or GST instalment amount if you believe the amount calculated by us (which includes the GDP adjustment) will mean you will pay more or less than your actual tax liability for the income year.

    Note:

    You may be liable to pay the general interest charge if you vary your instalment down and end up paying less than 85% of the actual tax that you should have paid on your business and investment income (for PAYG) or GST net amount.

    Work out your PAYG instalment or GST net amount

    You can choose to work out your PAYG instalment or GST net amount yourself for:

    • PAYG instalments, use PAYG option 2 (income × rate) on your activity statement
    • GST, use GST option 1 or 2 on your activity statement to work out your actual GST net amount.

    These options are generally only available in your first quarter.

    If you have received an instalment notice in quarter one and you want to go back to working out your PAYG instalment or GST net amount each quarter, you will need to tell us that you want to revoke your election to pay instalment amounts. We will then send you an activity statement to complete and lodge. You need to revoke your election to pay instalment amounts by 28 October.

    Next step:

    You can revoke your election by phoning us on 13 28 66 between 8.00am and 6.00pm, Monday to Friday.

      Last modified: 22 Feb 2017QC 16312