If you run a business and make pay as you go (PAYG) instalments, proposed changes could give you the option of making payments to the ATO monthly rather than quarterly — while also allowing your instalments to better reflect your actual business activity.
What is being proposed?
In the 2026–27 Federal Budget, the Government announced two measures aimed at modernising PAYG instalments.
The first is an expansion of the ATO’s dynamic PAYG instalment initiative. Under the proposal, from 1 July 2027, businesses would be able to opt in to an ATO-approved dynamic PAYG instalment calculation built into their accounting software. This would allow PAYG instalments to adjust more closely to changing business conditions.
The second measure would give more businesses the ability to choose to make PAYG instalments monthly, rather than quarterly or annually. It would also allow the ATO to require taxpayers with a demonstrated history of non-compliance with their tax obligations to make their PAYG instalments monthly.
Treasury released exposure draft legislation on the proposed monthly PAYG instalment changes, with consultation closing on 28 September 2026.
The proposed changes are intended to apply from 1 July 2027.
Opting in to monthly PAYG instalments
Most businesses that pay PAYG instalments currently make payments quarterly, although some businesses and individuals may be eligible to pay annually.
Under the draft legislation, if you are currently a quarterly or annual payer, you would generally be able to opt in to monthly PAYG instalments by notifying the ATO before the start of the income year in which you want the monthly payments to apply.
If you notify the ATO after the start of that income year, the choice would generally not take effect until the following income year.
You would also be able to choose to return to quarterly or annual PAYG instalments, provided you remain eligible. Again, the ATO would generally need to be notified before the start of the income year in which you want the change to apply.
The existing rules require some larger businesses to pay PAYG instalments monthly.
The proposed changes would expand access to monthly reporting and payment so that businesses that currently pay quarterly or annually could choose to make payments monthly.
A new power for the ATO
The proposed changes would also give the ATO a new power to require some taxpayers to make PAYG instalments monthly.
Currently, the PAYG instalment rules generally provide for quarterly payments, with monthly or annual payment arrangements applying in particular circumstances.
Under the draft legislation, the ATO would be able to determine that a taxpayer must pay PAYG instalments monthly if it is satisfied that the taxpayer has a history of failing to comply with their tax obligations.
Key features of the proposed determination process include:
- the determination would generally take effect from the start of the income year immediately after the income year in which it is made;
- the ATO would have to give written notice of the determination and its reasons;
- you could apply to have the determination revoked;
- the ATO would have to revoke the determination unless it remained satisfied that you had a history of failing to comply with your tax obligations; and
- if you disagreed with the determination, or with a refusal to revoke it, you could object under Part IVC of the Taxation Administration Act 1953 (Cth).
What about dynamic PAYG instalments?
The proposed monthly payment option is separate from the Government’s dynamic PAYG instalment initiative.
Dynamic PAYG instalments are intended to allow businesses to use an ATO-approved calculation built into their accounting software to vary their instalments based on more up-to-date business conditions.
The Government says the initiative is intended to help businesses manage cash flow by allowing instalments to respond more quickly when business conditions change.
For a business with fluctuating income, this could potentially be more useful than simply moving from four PAYG instalment payments a year to 12.
Should I do anything now?
Not yet. These changes are not currently law, and the draft legislation may be amended following the Treasury consultation process.
However, it is worth considering:
- whether making PAYG instalments monthly would help smooth your cash flow or instead create additional administrative pressure;
- whether your accounting software and bookkeeping processes could readily cope with monthly PAYG instalments;
- whether more frequent payments would make it easier to keep your PAYG instalments aligned with your current business performance; and
- whether your current tax compliance record could be affected by the proposed ATO determination powers.
The Government’s proposed changes are not simply about requiring more frequent payments. For businesses that choose to use them, monthly PAYG instalments could potentially provide greater flexibility in managing tax payments and cash flow.
Published 13 October 2026