Topic: Cash basis GST vs non-cash basis explained

Last reviewed: 09/12/2025

Focus: Accounting Practice Analysis

Cash Basis GST vs Non-Cash Basis Explained

Understanding the differences between cash basis and non-cash basis GST is crucial for Australian businesses as it impacts how and when GST is reported and paid to the Australian Taxation Office (ATO). The choice between these methods can significantly affect cash flow and tax liabilities.

Featured Answer: Cash basis GST allows businesses to account for GST on the basis of cash flow, meaning GST is paid only on received payments and claimed on payments made. Non-cash basis (accruals) requires businesses to account for GST on invoices issued and received, regardless of whether the cash has been exchanged.

What is Cash Basis GST?

The cash basis of accounting for GST involves reporting GST on the basis of actual cash transactions. Under this method, businesses only pay GST on sales when they receive payment from their customers and can only claim GST credits when they pay their suppliers.

Advantages of Cash Basis GST

Improved Cash Flow: Businesses only remit GST to the ATO once they have received payment, which can be beneficial for cash flow management.
Simplified Accounting: Aligns with the actual cash transactions, making it easier for businesses with less complex financial structures.

Eligibility for Cash Basis GST

According to the ATO, businesses with a turnover of less than $10 million can choose the cash basis method. However, businesses that are not small businesses or do not meet specific criteria must use the non-cash basis.

What is Non-Cash Basis GST?

The non-cash basis, also known as the accruals method, requires businesses to account for GST on invoices. This means GST is owed to the ATO once an invoice is issued, regardless of when payment is received.

Advantages of Non-Cash Basis GST

Accurate Financial Picture: Provides a more comprehensive view of financial health, as it records income and expenses when they are incurred rather than when cash changes hands.
Compliance with Accounting Standards: Often required for businesses that adhere to more complex accounting standards.

Who Should Use Non-Cash Basis GST?

Businesses with a turnover exceeding $10 million or those required by their accounting or financial reporting standards to use the accruals method must adhere to the non-cash basis.

How Does the ATO Regulate GST Reporting?

The ATO provides guidelines and requirements for both reporting methods. According to ATO guidelines, businesses must choose a method that suits their cash flow needs and business size. The choice should also comply with the Income Tax Assessment Act 1997 and ATO Tax Rulings.

Practical Example

Consider a small retail business with a turnover of $5 million. Under the cash basis, this business would only pay GST when customers pay for their purchases and claim GST when they pay suppliers. Conversely, a large corporation with a turnover of $15 million must use the non-cash basis, reporting GST based on issued invoices regardless of payment status.

Frequently Asked Questions

Q: What is the main difference between cash basis and non-cash basis GST?

The main difference lies in the timing of GST payments. Cash basis aligns with cash flow, while non-cash basis depends on invoice issuance.

Q: Can a business switch from cash basis to non-cash basis GST?

Yes, businesses can switch methods, but they must notify the ATO and meet eligibility requirements for the new method.

Q: How does using cash basis affect business cash flow?

Using cash basis can enhance cash flow by delaying GST payments until cash is received and deferring GST claims until payments are made.

Q: Is it mandatory for small businesses to use cash basis GST?

No, while small businesses are eligible, they can choose either method based on their financial management preferences.

Q: How does GST reporting differ for large businesses?

Large businesses typically must use the non-cash basis due to their size and potential accounting requirements.

Conclusion & CTA

Understanding the nuances of cash basis versus non-cash basis GST is essential for optimizing your business's financial management and ensuring compliance with ATO requirements. If you're considering which GST reporting method is best for your practice, Fedix’s MyLedger platform can assist in managing your GST reporting efficiently with its AI-powered features and ATO integration. Learn more about how MyLedger can streamline your accounting processes and boost your practice’s efficiency today.

For further information, refer to ATO resources at [ato.gov.au](https://www.ato.gov.au) or consult with a qualified tax professional to ensure compliance with the latest tax regulations.