Expansion of dynamic PAYG instalment calculations and monthly payments
Expansion of dynamic PAYG instalment calculations and monthly payments
The Government has announced three measures to ‘simplify’ the tax system, helping businesses focus more on running their operations and less on tax compliance.
Expansion of dynamic PAYG instalment calculations
The Government will invest $10.9 million to expand the ATO’s pilot of dynamic PAYG instalment calculations. This expansion will allow more businesses to benefit from instalments that adjust based on their current financial performance.
Monthly payments option for small and medium businesses
From 1 July 2027, small and medium businesses can opt in to report and pay PAYG instalments monthly. They will also be able to use an ATO-approved calculation embedded in their accounting software to calculate and vary their instalments, thereby aligning payments with real-time business activity.
Mandatory monthly reporting for non-compliant taxpayers
Taxpayers with a demonstrated history of non-compliance will be required to report and pay PAYG instalments monthly, ensuring closer monitoring and compliance.
BDO comment
While the measure offers small and medium businesses a practical way to adjust their PAYG instalments in line with their current trading status, it seems unlikely that taxpayers will want to opt into a scheme that brings forward tax payments and increases the frequency. This could also create cash flow challenges for some businesses.
In addition, it is unclear how the introduction of monthly reporting will result in any significant reduction of administrative tasks or free up small business owners to focus on their operations. It merely gives the Government ‘early’ revenue.
BDO considers that the mandatory monthly reporting for non-compliant taxpayers is a stark reminder of the importance of maintaining a strong history of timely lodgements and payments to avoid increased reporting burdens.
Businesses should prepare for these changes by reviewing their accounting software capabilities and considering how monthly reporting might affect their tax planning and cash flow. Additionally, businesses should be aware that instalments that are too low (less than 85% of tax payable) may result in interest and penalties. It is hoped that one of the ‘simplifications’ is to exempt businesses relying on the calculations made by their ATO-approved accounting software from such penalties.
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