Dynamic PAYG instalments are coming, here’s what it means for you

The Government has announced a new way for businesses to manage PAYG instalments.

What’s changing

From 1 July 2027, businesses will be able to opt into Dynamic PAYG instalments. Instead of your instalment being based on last year’s tax bill (indexed up by a set factor), an ATO-approved calculation built into your accounting software will work out your instalment from your actual, current trading performance.

Businesses will also be able to choose to report and pay instalments monthly instead of quarterly. If you have a history of not complying with your obligations, monthly reporting will not be optional, the ATO will require it.

The upside

If your income moves around during the year, this should mean your instalments track what you are actually earning, rather than a flat percentage of last year’s result. That means less chance of a large tax bill at year end and less chance of overpaying and having your money sit with the ATO for months before a refund comes through.

The catch

Bringing tax payments forward and potentially onto a monthly cycle is not free of downsides. For businesses with tighter cash flow, more frequent payments can be harder to manage than a smaller number of larger ones.

There’s also a bigger issue than just keeping the books current. Software shows what’s been recorded, not the final tax position. Most entities have year end adjustments a live calculation won’t catch, things like trust distributions, Division 7A, tax versus accounting depreciation and non-deductible expenses. For trusts and companies especially, the gap between what the software shows and what the tax return reports can be significant.

Key takeaway

Nothing changes for now, this is an opt-in measure starting 1 July 2027. It’s a good prompt to think about whether your bookkeeping is up to date enough to support a real time tax calculation. Talk to your accountant about whether Dynamic PAYG instalments would suit your business once they become available.

Are you a physiotherapy business owner looking for long-term accounting, tax and advisory support? Book a free 20-min initial chat with Inspire Accountants.