GST accounting methods — cash vs non-cash¶

When you account for GST, there is a question of timing: in which period do you count the GST on a sale or a purchase? The Australian Taxation Office (ATO) lets you use one of two methods to answer that — cash or non-cash (also called accruals).

The method you use changes which business activity statement (BAS) a sale or purchase lands on. It does not change how much GST you pay overall in the long run — it changes the timing.

In one line

On a cash basis you count GST when money changes hands; on a non-cash basis you count it when an invoice is issued or received, even if it has not been paid yet.

Why this matters¶

The two methods can put the same sale on different quarters' BAS. That affects your cash flow — when you have to hand GST over, and when you can claim it back. Knowing which method you use helps you understand your BAS and plan for it.

What you will learn¶

The difference between cash and non-cash GST accounting
Who can use the cash method
The practical cash-flow difference between the two

Understanding the concept¶

Cash basis. The ATO says that on a cash basis, you account for GST on the BAS that covers the period in which you actually receive or make payment. So you count the GST on a sale when your customer pays you, and you claim the GST on a purchase when you pay your supplier.

Non-cash (accruals) basis. The ATO says that on a non-cash basis, you account for GST on the BAS that covers the period in which you issue or receive an invoice — even if the money has not been paid yet. So you count the GST on a sale when you invoice your customer, and you claim the GST on a purchase when you receive your supplier's invoice.

Who can use the cash method. The ATO says a business with an aggregated GST turnover of less than $10 million can choose to account for GST on a cash basis. (Some other businesses may also be eligible.) If your GST turnover is $10 million or more, you generally have to use the non-cash (accruals) basis.

The cash-flow difference. On a cash basis, you only have to pay the GST on a sale after your customer has actually paid you. That can help cash flow if your customers take a while to pay. On a non-cash basis, you may have to account for the GST on a sale in a period before the customer pays — but you can also claim GST credits on purchases as soon as you receive the invoice, before you pay for them. Which method suits a business depends on the business and on the ATO's eligibility rules.

For accountants & bookkeepers

The attribution rules in the GST law drive this. Under cash (attribution on a receipts basis), GST is attributed to the tax period in which consideration is received or paid, and only to the extent of that consideration. Under accruals, GST is attributed to the earlier of the tax period in which any consideration is received or paid, or the tax period in which an invoice is issued. Eligibility to use the cash basis includes the aggregated-turnover test and certain other grounds such as accounting for income tax on a cash basis.

Example¶

Sam runs a small landscaping business, registered for GST and using the cash method. On 25 June, Sam finishes a job and sends the customer a $1,100 invoice (including $100 of GST). The customer does not pay until 10 July. Because Sam is on a cash basis, the $100 of GST goes on the BAS for the period that includes 10 July — when the money was received — not the June period.

If Sam were on a non-cash basis instead, that same $100 of GST would go on the BAS for the period that includes 25 June — when the invoice was issued — even though the customer had not paid yet.

Common mistakes¶

Mixing the two methods — a business uses one chosen method for its GST accounting.
On a cash basis, counting GST when the invoice is issued instead of when the money is received.
Assuming any business can use cash — the cash method has eligibility rules, including the turnover test.
Thinking the method changes how much GST you pay overall — it changes the timing, not the total.

How this works in myaccountant¶

In the app — you set your GST accounting method, and myaccountant works out your GST on sales and purchases on that basis when it prepares your BAS. Amounts are picked up in the right period for the method you have chosen.

Key points¶

Cash and non-cash are two methods for timing when you count GST.
Cash basis — count GST when payment is received or made.
Non-cash (accruals) basis — count GST when an invoice is issued or received.
A business with GST turnover under $10 million can choose the cash method.
A business with GST turnover of $10 million or more generally uses non-cash.
The method changes the timing of GST, not the total amount over time.

Learn next¶

General information only — not tax, super or financial advice.

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