Topic: ATO turnover threshold for cash basis reporting

Last reviewed: 09/12/2025

Focus: Accounting Practice Analysis

ATO Turnover Threshold for Cash Basis Reporting: 2025 Guide

The ATO turnover threshold for cash basis reporting is an important consideration for Australian businesses when determining their GST accounting method. As of 2025, the threshold is set at $10 million, meaning businesses with an annual turnover under this amount can opt to use the cash basis for GST reporting. This method allows businesses to account for GST on the basis of cash flow rather than invoices, providing significant advantages in terms of cash management and compliance simplicity.

Featured Answer: The ATO turnover threshold for cash basis reporting in Australia is $10 million. Businesses with an annual turnover below this threshold may choose to report GST on a cash basis, easing cash flow management and compliance burdens.

What is the ATO Turnover Threshold?

The turnover threshold established by the Australian Taxation Office (ATO) determines which businesses can opt for cash basis GST reporting. Specifically, businesses with a turnover of less than $10 million are eligible. This threshold is designed to accommodate smaller businesses by offering a simpler accounting method that aligns more closely with cash flow, rather than the accrual basis, which is mandatory for larger entities.

How Does Cash Basis Reporting Work?

Under cash basis reporting, businesses account for GST when they actually receive payments from customers, and claim GST credits when they pay their suppliers. This contrasts with the accrual basis, where GST is accounted for at the time an invoice is issued or received, regardless of when cash changes hands. This method can be particularly beneficial for businesses with significant time lags between invoicing and receiving payments.

Example Scenario

Consider a small marketing consultancy with an annual turnover of $8 million. Under cash basis reporting, the firm only accounts for GST when clients pay their invoices, which helps manage cash flow effectively. This is especially useful during periods of economic uncertainty or when dealing with clients who have lengthy payment terms.

Why Choose Cash Basis Reporting?

The choice of cash basis reporting can provide several advantages:

Improved Cash Flow Management: Businesses only pay GST to the ATO when they have received the corresponding cash from their customers, aligning tax obligations with actual cash flow.
Simplified Accounting: Reduces the complexity of accounting processes, as transactions are only recorded when cash is exchanged.
Reduced Risk of Overpayment: There is less risk of paying GST on sales for which payment has not been received, reducing the need for subsequent adjustments.

ATO Guidance and Compliance

According to ATO guidelines, businesses need to regularly assess their eligibility to use the cash basis for GST reporting. This involves monitoring annual turnover and ensuring it remains below the $10 million threshold. Additionally, businesses must comply with other ATO requirements, such as lodging Business Activity Statements (BAS) on time and maintaining accurate records.

Legal References

ATO Guidelines: ATO's official guidelines on GST accounting methods provide detailed information on eligibility and compliance for cash basis reporting.
Legislation: The GST Act and accompanying regulations outline the legal framework for GST accounting methods, including turnover thresholds.

What Happens if Turnover Exceeds the Threshold?

If a business's turnover exceeds the $10 million threshold, it must switch to the accrual basis for GST reporting, effective from the start of the next tax period. This transition requires careful planning and may involve significant changes to accounting systems and processes.

Example Transition

A growing retail chain surpasses the $10 million turnover mark in the 2025 fiscal year. To comply with ATO requirements, the business transitions to accrual basis reporting beginning in the 2026 tax year, necessitating adjustments to its accounting software and staff training.

Frequently Asked Questions

Q: Can a business switch back to cash basis reporting if its turnover falls below $10 million again?

A: Yes, businesses can revert to cash basis reporting if their turnover drops below the $10 million threshold, subject to ATO approval.

Q: What are the key differences between cash and accrual basis reporting?

A: Cash basis reporting accounts for GST when cash is received or paid, while accrual basis accounts for GST when invoices are issued or received, regardless of cash flow.

Q: Is there a deadline for notifying the ATO about a change in GST reporting method?

A: Yes, businesses must notify the ATO of any changes in their GST reporting method, typically by the due date of their next BAS.

Q: How often should businesses review their turnover in relation to the threshold?

A: Businesses should regularly review their turnover, at least annually, to ensure compliance with the ATO's cash basis reporting eligibility criteria.

Q: Does the cash basis reporting method affect other tax obligations?

A: Cash basis reporting specifically affects GST obligations. Other tax obligations, such as income tax, may still be subject to different accounting methods.

Conclusion & Next Steps

Understanding the ATO turnover threshold for cash basis reporting is crucial for effective compliance and financial management. Businesses should regularly evaluate their turnover and consider the benefits of cash basis reporting in alignment with their cash flow needs.

How Fedix Can Help

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Disclaimer: Tax laws are complex and subject to change. It's advisable to consult a qualified tax professional for personalized advice.