Cash or accrual GST accounting: compare the timing

Use this comparison when reviewing your reporting basis. It assumes ordinary taxable sales and fully creditable purchases, with valid tax invoices held by lodgement. Hire purchase, progressive supplies and other special arrangements need their own check.

Put the same transactions through both methods

Consider a fictional repair business that reports quarterly. It issues a $6,600 sales invoice on 18 September and receives the full amount on 15 October. A supplier issues a $2,200 bill on 22 September, paid on 20 October. Both amounts include GST; neither has an earlier payment.

Reporting period	Cash basis	Non-cash basis
July to September	Sale GST $0; purchase credit $0; net $0	Sale GST $600; purchase credit $200; net $400 payable
October to December	Sale GST $600; purchase credit $200; net $400 payable	No further GST for these two settled invoices
Total across both quarters	$400 payable	$400 payable

Read the two columns as alternatives, not two sets of entries. The example excludes other BAS obligations. Original ASBG worksheet; all example figures are fictional.

The ATO cash-basis lesson explains payment-based timing; its non-cash lesson explains the earlier invoice-or-payment trigger. The table isolates timing. It doesn't show a tax saving from selecting cash accounting.

Look at purchases as well as customer debts

Cash accounting can postpone sales GST while customers take time to pay. It can also postpone purchase credits while you owe suppliers. A business that pays for stock well before selling it has a different cash pattern from a consultant whose customers pay late.

Run the comparison using one ordinary quarter and one busy quarter. For each invoice record the issue date, gross amount, GST, payment dates and reporting period under each method. Add the resulting GST reserve to your cash-flow forecast. Keep wages and income-tax instalments outside this particular comparison.

Partial payments need their own row. Under the ordinary cash rules, a part payment brings in the corresponding part of GST. Under the ordinary non-cash rules, a part payment can trigger attribution of the full amount. Don't use the amount deposited as a shortcut when checking a non-cash BAS.

Check whether you can choose

The ATO's accounting-method guidance says businesses with aggregated turnover below $10 million, or businesses using cash accounting for income tax, can generally choose either method. Aggregated turnover includes relevant connected businesses and affiliates; looking only at one bank account's deposits won't establish eligibility. Other eligibility provisions and permissions exist, so a business above the threshold should check its position rather than assume a cash-flow problem creates an exception.

GST basis, income-tax accounting and the basis used for a management report are separate settings. You can need an accrual profit and loss report while reporting GST on cash. The BAS foundation guide explains the surrounding reporting obligations.

Prepare the transition before changing a setting

Changing from cash to non-cash takes effect at the start of a tax period. Arrange the change with the ATO or your agent and retain the effective-date confirmation. Before touching the software, export unpaid sales, unpaid bills and the previous BAS working papers.

Ask the agent which open transactions have already contributed GST and which have not. The transition must prevent both missed amounts and double counting. A software dropdown won't, by itself, prove that this work has happened.

Your handover should answer four questions: which method is recorded with the ATO, when the new method starts, how each outstanding balance is treated, and which reports will confirm the first new-basis BAS. Save the approved transition schedule with that BAS.

Continue with the next question

• Why BAS sales do not match your profit and loss report
• Review transactions around your GST registration date

Key takeaways

• Compare the same invoices and payments across both methods.
• Cash timing can delay purchase credits as well as sales GST.
• Confirm eligibility and the treatment of open items before switching.

Where to get help

Use the ATO accounting-method guidance and ask a registered tax or BAS agent to check the transition against your records. The Bookkeeping and BAS reading guide connects reporting basics with the work behind them.