ATO to launch pilot programs for dynamic PAYG instalments

The ATO is preparing to introduce dynamic PAYG instalments to streamline how businesses manage their pay-as-you-go (PAYG) instalments.

As part of the 2026–27 budget, the government announced it would provide $10.9 million to expand the pilot of the ATO's dynamic (PAYG) instalment calculations and to expand access to monthly payments.

From 1 July 2027, small and medium businesses will be able to opt in to reporting and paying PAYG instalments monthly and using an ATO-approved calculation embedded in accounting software to calculate and vary their instalments.

Treasury previously said that this would support businesses by enabling tax instalments to better reflect real-time business activity.

Under the changes, taxpayers with a demonstrated history of non‑compliance will be required to report and pay PAYG instalments monthly.

The ATO said that dynamic PAYG instalments will assist businesses to vary in line with their current, real-time business conditions.

"The change builds on our work with businesses to modernise PAYG instalments," it said.

"It means you’ll be able to opt into using an ATO-approved Dynamic PAYG instalment calculation built into accounting software you may already use [and] vary your payments to fit your business activity across the year."

The ATO said it has already begun preparing for the changes by establishing pilot programs for 2026–27 and working with software providers and stakeholders.

The Tax Office has also released a draft practical compliance guideline on the changes, PCG 2026/D3 Dynamic pay as you go instalments general interest charge on excessive variation.

The practical compliance guideline sets out the Commissioner of Taxation's approach to applying general interest charge (GIC) to excessive variations of PAYG instalments under Subdivision 45-G.

"This guidance clarifies our compliance approach and confirms we won’t allocate resources to apply or collect General Interest Charge if you use the Dynamic PAYG calculation method as intended," it said.

"The PCG will apply to pilot participants and businesses that opt into the initiative from July 2027."

The ATO is encouraging businesses and tax professionals to review the guidance and provide any feedback by 28 August 2026.