Australian businesses may have a new option for managing their income tax instalments from 1 July 2027. Treasury has released draft legislation that would allow more taxpayers to report and pay Pay As You Go (PAYG) instalments monthly instead of relying mainly on quarterly payments.
Importantly, the change is still proposed and is not yet law. Treasury’s consultation on the draft legislation opened on 10 September 2026 and closes on 28 September 2026. The draft also proposes compulsory monthly PAYG instalments for taxpayers with a demonstrated history of non-compliance with their tax obligations.
PAYG instalments are regular prepayments towards the expected tax on business and investment income. Under the current system, most taxpayers who are required to pay PAYG instalments generally do so quarterly, although different arrangements can apply depending on the taxpayer’s circumstances.
Key highlights for small businesses
The proposed changes could affect how businesses plan their tax payments and maintain their accounting records.
- Monthly payments would be optional for eligible businesses – Under the draft rules, taxpayers required to pay PAYG instalments could choose to report and pay them monthly from 1 July 2027.
- Some taxpayers could be moved to monthly payments – The proposal would require taxpayers with a demonstrated history of tax non-compliance to report and pay PAYG instalments monthly. The final rules will determine exactly how this requirement operates.
- The proposed commencement date is 1 July 2027 – Businesses should not change their current reporting arrangements yet. Existing PAYG obligations continue to apply unless and until the proposed changes become law and the ATO confirms the new arrangements.
- ATO-approved dynamic calculations are also being developed – Separately, the ATO is working with software providers on a system that could use current business accounting data to calculate PAYG instalments more closely in line with actual business performance. The ATO intends to support broader software-provider adoption from July 2027, subject to consultation and pilot outcomes.
- Accurate bookkeeping will become even more important – Businesses choosing monthly calculations may need their accounts reconciled and updated more regularly so the information being used reflects current trading conditions.
- There is nothing businesses need to switch today – The ATO specifically notes that the ability for businesses to opt into monthly PAYG instalments is not yet law.
What this means for your business
For some businesses, monthly PAYG instalments may provide a more manageable way to spread tax payments across the year rather than dealing with larger quarterly amounts. This could be particularly useful for businesses that already review their accounts and cash flow every month.
The ATO’s planned dynamic PAYG system may also make it easier for instalments to respond to changes in business performance. If revenue or profitability changes during the year, more current accounting information could potentially produce an instalment amount that better reflects current conditions rather than relying primarily on historical information.
However, monthly reporting could also mean more frequent administration. Businesses with bookkeeping that falls several months behind may find it harder to take advantage of more responsive calculations. Regular bank reconciliations, accurate income and expense coding, and up-to-date financial reports will therefore remain important.
Businesses can start preparing by:
- Keeping bookkeeping up to date each month, rather than waiting until a BAS or tax deadline approaches.
- Reviewing cash-flow forecasts to understand how monthly tax payments could affect available working capital.
- Checking PAYG instalments against current business performance and discussing significant changes with an accountant where appropriate.
- Maintaining current ATO obligations, including lodging activity statements and paying amounts by their existing due dates.
- Monitoring the final legislation and ATO guidance before making any changes to reporting frequency or accounting systems.
For businesses in Newcastle, Maitland and across the Hunter Region, the proposed system is another reason to have reliable monthly financial information available. Good bookkeeping is not only about meeting tax deadlines—it can also help business owners understand cash flow, profitability and upcoming liabilities earlier.
Need help preparing for PAYG changes?
Bottrell Accounting can assist with bookkeeping, PAYG and BAS processes, business accounting and cash-flow planning. Consider discussing your current accounting systems with your accountant before the proposed July 2027 commencement date so you can determine whether monthly PAYG instalments may suit your circumstances if the legislation proceeds.
This article provides general information only and does not constitute tax or financial advice. The monthly PAYG instalment changes discussed above are proposed and may change before becoming law. Advice should be obtained based on your individual circumstances.
