From 1 July 2011, entities that use the GDP adjustment factor method to work out their quarterly PAYG tax instalments will have to remit less income tax instalments from the 2012 income tax year onwards.

By way of background, the GDP adjustment factor for PAYG instalment taxpayers increases the previous year’s adjusted taxable income by the previous year’s nominal GDP growth to determine the amount of the tax instalments to be paid in the income tax year.

The GDP adjustment factor will be reduced from 8% to 4% from that date.  According to the Government, this reduction will lead to significant cash flow benefits.