Highlights

  • Schedule 4 would let taxpayers who report and pay PAYG instalments quarterly elect to report and pay monthly instead.
  • The Commissioner could require monthly payments from taxpayers with a demonstrated history of non-compliance, though the test is undefined.
  • The bill materials contain no start date, while the September exposure draft proposed 1 July 2027.
  • From 2025-26, the general interest charge, cited at 11.51% in September, no longer earns a tax deduction.

If you pay PAYG instalments every quarter, your cash flow could soon look different. Schedule 4 of the Treasury Laws Amendment (Tax Reform No. 4) Bill 2026, introduced by Treasurer Jim Chalmers on Tuesday 27 October, would let you switch to monthly payments. It also has a sharper edge: the Commissioner of Taxation could require monthly reporting and payment from taxpayers with "a demonstrated history of non-compliance". It is a bill, not law, and quarterly arrangements continue until it passes.

What the bill would change

PAYG instalments are prepayments of income tax on business and investment income. They are paid during the year and credited against the final assessment when the return is lodged. Most payers do so quarterly, usually through their activity statement.

According to the second reading speech, Schedule 4 would let taxpayers who now report and pay quarterly elect to do so monthly. Total tax owed stays the same; only payment timing and size change.

The repeat-offender power

The second half of the schedule is the part advisers are likely to scrutinise. The bill materials released so far do not spell out how a history of non-compliance would be judged, whether a taxpayer could object to being moved, or how long a monthly requirement would last.

The policy logic is straightforward. A business that falls behind on quarterly instalments can build a larger debt before the ATO notices, whereas monthly obligations give the ATO earlier visibility and smaller amounts to chase.

The measure arrives as the ATO takes a firmer line on collectable debt, which Commissioner Rob Heferen said in September was last reported at $115 billion. Tax Ombudsman Ruth Owen's latest report found complaints up 74%, and she said the ATO had "significantly ramped up" debt collection. Falling behind also costs more: the general interest charge (GIC) was cited at 11.51% in September, and under enacted law it is no longer tax-deductible from the 2025-26 income year.

Hypothetical example: quarterly versus monthly

A café operator's instalments total $36,000 for the year. Paid quarterly, that is four payments of $9,000. Elected monthly, it becomes 12 payments of $3,000. The annual total is identical.

The difference is cash flow. Monthly payments may suit steady weekly takings and a thin buffer, but money leaves earlier on average and 12 due dates mean more chances to miss one.

Will it pass, and when?

Labor controls the House of Representatives but needs the Greens or crossbench in the Senate. The PAYG change is bundled with start-up CGT, R&D, venture capital and electric car FBT schedules. The Greens have said they will not back the R&D changes unless oil and gas companies lose access to roughly $350 million a year in R&D tax credits. A dispute over unrelated parts of the bill could therefore delay the monthly option.

On timing, the September exposure draft proposed 1 July 2027. The introduced bill's public materials do not confirm that date, so it remains a draft-stage proposal.

Monthly payments and instalment variations

Taxpayers can already vary the instalment amount or rate the ATO sets if they expect income to differ from the prior year. Albert de Jager of Byford Accountants said some small business clients have freed up "$10,000 to $15,000 per quarter" this way. He stressed it is cash flow, not a tax saving, and that varying too low, below 85% of the actual liability, can expose a taxpayer to GIC. Monthly payment would not replace variations.

What to watch

No Senate committee referral or reporting date for Tax Reform No. 4 had been confirmed at the time of writing. Also in focus: how non-compliance is defined, review rights, a confirmed start date, and the ATO's Senate Estimates appearance scheduled for 28 October.