BAS season is here: What does the 5% GDP adjustment factor mean for your clients?
From July 1 2026, the ATO’s GDP adjustment factor increased to 5% in 2026-27.
The ATO tracks increases in businesses’ earning capacity as they grow, reflecting how the economy has performed since the previous GDP adjustments. These adjustments apply to the GST and PAYG instalment payments a business pays to the ATO as part of BAS instalment payments.
Does this mean a whole 5% increase in addition to the existing GDP adjustment?
No,
Consider if a 10% GST tax is levied on a business in Australia.
Price before GST= $100
GST= $10
Customer pays $110.
The 5% GDP adjustment does not mean the GST rate becomes 15%.
Instead, apply the 5% adjustment to the instalment amount.
For example, if the instalment amount is $10, a 5% GDP adjustment would be:
$10 + 5% of $10 = $10.50
So, the adjusted amount would be $10.50, not $15.
In short: 5% adjusts the instalment amount—it is not an additional 5% GST.
Similarly, if a business paid a PAYG instalment of $10,000 in the year 2025-26, with a 4% GDP adjustment, the adjusted amount will be,
$10,000 * 4%= $400
Which is $10,400.
After the 5% adjustment, the adjusted amount will be
$10,000 * 5%= $500
Which will be $10,500.
This is a simplified representation, and doesn’t apply to every taxpayer.
The ATO says the GDP adjustment applies to taxpayers using the relevant instalment amount method, and it does not affect those using the PAYG rate method.
The takeaway for accountants
With the September quarter BAS due in October for quarterly reporters, it is a good time to review how the new GDP adjustment factor applies to your clients.
The ATO is making the GDP adjustments to keep up with broader economic growth, and you should apply the changes to your client’s BAS filings in line with the current ATO rules.
So, in general, accountants need to ensure the following factors are in place.
- The accurate GDP percentage is applied to relevant clients
- BAS calculations from the previous year shouldn’t be carried forward, but need to be reviewed.
- Verify whether the instalment amount method or rate method is used, as the GDP adjustments are not the same for both methods.
- Communicate to clients that the changes in instalment processes are not additional tax, but GDP adjustments are a calculation technique.
