If you run a business and make pay as you go (PAYG) instalments, proposed changes could reshape how often you make payments to the ATO and how closely your tax payments track your actual trading results.
What is being proposed?
In the 2026-27 Federal Budget, the Government announced two measures building on the ATO’s work to modernise PAYG instalments.
The first measure was the expansion of the ATO’s dynamic PAYG instalment initiative. Under the proposal, from 1 July 2027, businesses would be able to opt in to using an ATO-approved dynamic PAYG instalment calculation built into accounting software to vary payments to fit in with their business activity. The ATO is preparing now, working with software providers and stakeholders and setting up pilot programs.
The second measure was to give more businesses the ability to make monthly PAYG instalments, and to allow the ATO to require taxpayers with a history of non-compliance with their tax obligations to do so from 1 July 2027. The Treasury released exposure draft legislation on monthly PAYG instalments for consultation, which closed on 28 September 2026.
Opting in to monthly PAYG instalments
Currently, most businesses pay PAYG instalments quarterly, with some paying annually where eligible. Monthly PAYG instalments are generally only required for entities with a base assessment instalment income of at least $20 million.
Under the draft legislation, if you are a quarterly or annual payer, you can opt in to making monthly PAYG instalments by notifying the ATO before the start of your next income year. If you notify the ATO after the start of the income year for which you want monthly instalments to apply, the choice generally won’t take effect until the following income year.
If you decide you want to return to making quarterly or annual PAYG instalments (if eligible), the ATO must be notified before the start of the next income year you want the change to apply, otherwise the change generally won’t take effect until the following income year.
A new power for the ATO
Currently, the law doesn’t allow the ATO to require businesses with a history of non-compliance with their tax obligations to make PAYG instalment payments more frequently.
Under the draft legislation, the ATO will have the ability to make a determination that you are to pay instalments monthly, instead of quarterly or annually, if it is satisfied that you have a history of failing to comply with your tax obligations.
The determination would generally take effect from the start of the income year immediately after the one in which it is made, and the ATO must give written notice of the decision and reasons. You can apply to have a determination revoked, and the ATO must revoke the determination unless satisfied you still have a history of failing to comply with your obligations. If you disagree with a determination, or with a refusal to revoke one, you can object under Part IVC of the Taxation Administration Act 1953.
Should I do anything now?
These changes are not yet law, and the draft legislation may be amended based on feedback Treasury received during the consultation period.
It’s still worth taking the time to consider whether monthly PAYG instalments might smooth your cash flow or create additional pressure, how your accounting software and bookkeeping processes would cope with monthly PAYG instalments, and your current compliance record with your tax obligations.
Contact us to discuss what the proposed monthly PAYG instalment changes could mean for your business and stay in touch for updates as the legislation progresses.