• 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 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 below 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 or twice yearly have the option of paying instalment amounts that we calculate for them. These amounts are shown on your quarterly activity statement or instalment notice.

    We calculate your instalment amount from information you have previously reported, and 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. 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 2017–18 income year is 4%.

    The 4% GDP adjustment factor will:

    • apply to PAYG instalments for the 2017–18 income year for taxpayers whose income year starts on or after 1 April 2017
    • 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:

    See also:

    • PAYG instalments - how to complete your activity statement labels

    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 or your registered agent believes 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) 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 or 2 on your activity statement to work out your actual GST net amount.

    Once you’ve chosen your option, you must continue to use that option for the remainder of the financial 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 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:

    • If you're eligible and you have a myGov account linked to the ATO, you can revoke your election online or by phoning us.

    How the PAYG instalment amount is calculated

    The PAYG instalment amount at label T7 on your activity statement or instalment notice is calculated using your most recently lodged income tax return. This calculation is based on the income tax that would be payable on your business and investment income (excluding any capital gains).

    When working out this instalment amount, we apply the GDP adjustment to take into account likely changes to your income since the year of that income tax return.

    Note: Your PAYG instalment amounts may change during the year if you vary your instalment amount or lodge an income tax return.

    See also:

      Last modified: 28 Jun 2017QC 16312