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Taxpayers paying quarterly business and investment income tax using an instalment rate advised by the Australian Taxation Office (ATO) will be getting some money back. The ATO has acknowledged that it overcharged these taxpayers on their quarterly Pay As You Go (PAYG) instalment amounts for the 2000/01 financial year. Instalment amounts are adjusted by a statutory formula that takes into account economic growth. This is known as the Gross Domestic Product (GDP) adjustment. The ATO calculates and updates the GDP adjustment at the start of each income year using data provided by the Australian Bureau of Statistics (ABS). At the time the 2000/01 GDP adjustment factor was calculated, the Tax Office mistakenly used 1998 economic data from the ABS March 1999 publication, rather than the revised 1998 data from the ABS March 2000 publication. Although the change in value was marginal, the rounding impact meant the GDP adjustment was 1% higher than it should have been. The GDP adjustment was then applied to instalment amounts resulting in the overcharge. Annual PAYG taxpayers and GST instalments are not affected. For most taxpayers the amounts involved are quite small - around $13 or less in overpayment and $1 in compensation. Tax Commissioner Michael Carmody apologises for the error and says the ATO will pay compensation to everyone affected. "We have talked to the Ombudsman, tax practitioners, small-business people and individuals to ensure we did the right thing and to find a way of crediting the money with minimum inconvenience," Carmody says. "We have also acted quickly to improve our quality-control procedures to ensure this does not happen again. "We will shortly be writing to everyone affected or their tax agent to let them know what has happened and what it means for them." People who have lodged their 2000/01 income-tax return have already had the overcharged instalment credited against their income-tax liability. They will also receive a compensation amount separately with small amounts being credited to their income-tax account, and larger amounts paid directly. Those who are yet to lodge their 2000/01 income-tax return will have the overcharged instalment credited against their income tax-liability when they lodge their 2000/01 return. At that time they will also receive a compensation amount. The compensation payment is not assessable income and, therefore, does not need to be included in income-tax returns.