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  • GDP adjusted GST and PAYG instalment amounts

    This overview explains how and why the gross domestic product (GDP) adjustment factor is applied to GST and pay as you go (PAYG) 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 below refers to a financial year (1 July to 30 June).

    How we calculate your instalment amount

    If you report GST or PAYG instalments quarterly or twice yearly, you may have the option of paying instalment amounts that we calculate for you. These amounts are shown on your activity statement or instalment notice.

    PAYG instalment amounts

    We calculate your PAYG instalment amount using information from your most recently assessed income tax return, and adjust this amount to take into account likely growth in your business and investment income.

    If you vary your instalment amount or lodge an income tax return, this amount may change again during the year.

    GST instalment amounts

    We calculate your GST instalment amount from information you have reported on your activity statements and your most recent annual GST return, and adjust this amount to take into account likely growth in your net GST amount.

    If you vary your instalment amount or lodge an annual GST return, this amount may change again during the year.

    If you are newly registered for GST, the net amount for your first quarter is excluded from the calculation of your GST instalment. This is because the net amount for your first quarter might be affected by start-up costs.

    Why we adjust your instalment amount

    As GST and PAYG 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. This may leave 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 2018–19 income year is 6%.

    The 6% GDP adjustment factor will:

    • apply to PAYG instalments for the 2018–19 income year for taxpayers whose income year starts on or after 1 April 2018
    • be used in the calculation of your GST and PAYG instalments if you choose to pay the quarterly (or twice yearly for PAYG instalments) 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.

    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:

    See also:

    Paying the instalment amount worked out by us

    You can choose to pay by using the instalment amount 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 (PAYG instalment amount) on your activity statement or instalment notice
    • GST – you need to pay the amount at label G21 (GST instalment amount) 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 GST or PAYG instalment amount if you believe the amount calculated by us (which includes the GDP adjustment) is too high (or too low).

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

    See also:

    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 option 2 'instalment rate' on your activity statement (income x rate)
    • GST – use GST option 1 'Calculate GST quarterly and report quarterly' on your activity statement.

    Once you’ve chosen your option, you must continue to use that option for the remainder of the income year. You can change your option in the first quarter of the next financial year.

    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 yourself each quarter, you 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.

    Changing your election

    You can change your election either:

    • online
    • by phone
      • 13 28 66 – for businesses
      • 13 28 61 – for individuals not in business
    • through your registered tax agent.
      Last modified: 05 Jul 2018QC 16312