The Australian Taxation Office (ATO) recognises two ways to account for GST: a cash basis and a non-cash basis (accruals). The method you use does not change whether you report GST — it changes when you report it, which in turn changes when the money leaves your account. This article sets out who can use each method, how the timing differs on sales and purchases, and what to check before you decide or switch.
The two methods in plain terms
Under the cash basis, you account for GST on the business activity statement (BAS) that covers the period in which you receive or make payment for your sales and purchases.
Under the non-cash basis, you account for GST on the BAS covering the period in which you either received any payment or issued the tax invoice before receiving payment (for a sale), or received the invoice from your supplier before making payment, or made any payment (for a purchase). In practice, the earlier of invoice or payment usually drives the timing.
Who can use the cash basis
The ATO states that businesses with an aggregated turnover of less than $10 million can choose to account for GST using the cash accounting method. You can use it if any of the following applies:
- You are a small business entity — an individual, partnership, trust or company with an aggregated turnover of less than $10 million.
- You are not carrying on a business, but your enterprise's GST turnover is $2 million or less.
- You account for income tax on a cash basis.
- You run a kind of enterprise the ATO has agreed can account for GST on a cash basis regardless of GST turnover, namely a government school; an endorsed charitable institution or trustee of an endorsed charitable fund; or a gift-deductible entity (unless it operates a fund, authority or institution that can receive tax-deductible gifts or contributions).
If you do not fit into any of those categories, the ATO says you can ask to be allowed to account for GST on a cash basis. That is a request, not an automatic entitlement — confirm the outcome in writing before you change how you lodge.
Who generally has to use the non-cash basis
Businesses with an aggregated turnover of less than $10 million, or who use cash accounting for income tax, can use either method, according to the ATO. Most larger businesses must use the non-cash method. Small businesses can choose either.
One related point worth noting: the ATO says businesses using cash, accounting or simplified accounting methods are still eligible for Simpler BAS reporting if their GST turnover is less than $10 million.
Practical read: your turnover threshold is the first gate. If you are under it, the choice is genuinely yours. If you are over it and none of the special categories apply, your realistic options are the non-cash method or a formal request to the ATO.
How the timing differs
| Situation | Cash basis | Non-cash (accruals) basis |
|---|---|---|
| Sale — when GST is payable | The reporting period in which you receive payment | The reporting period in which you issue a tax invoice or receive full or part payment, whichever happens first |
| Sale — part payment | You account only for the GST in the part payment you received | Receiving any part payment brings the sale into that period |
| Purchase — when GST credits arise | The reporting period in which payment is made | The period in which you receive the supplier's invoice or make some payment, whichever comes first |
| Purchase — part payment | You claim the credit only for the part of the cost you paid | Payment or invoice triggers the timing |
| Tax invoice needed before claiming | Yes, except for purchases costing $82.50 or less | Yes, a tax invoice is required before you can claim a credit |
| Unclaimed credits | The ATO says you have 4 years to claim credits | The ATO says you have 4 years to claim credits |
The ATO notes it is to your advantage to claim GST credits in the period the purchase relates to (cash basis) or in the period you receive the invoice or make some payment (non-cash basis), but you are not obliged to.
What each method does well
The ATO lists two advantages for the cash method: the money flowing through your business is better aligned with your activity statement liabilities, making cash flow easier to manage, and it suits smaller businesses that handle cash transactions. It also notes the non-cash method is better suited to businesses that are not paid immediately, tracks your true financial position (what is owed and what you owe), and helps if you are dealing with multiple contracts and large amounts of money. The trade-off is that non-cash accounting can be more complicated, and the ATO suggests you may need assistance from a registered tax or BAS agent.
business.gov.au makes the same contrast at the level of your day-to-day books. Cash accounting tracks the actual money coming in and out: you do not record a cost until you have paid the invoice, and you do not record a sale until the customer pays. It is simple and shows what is in your till and bank accounts, but it does not show money owed to you or money you owe. Accrual accounting records sales and expenses when they take place rather than when cash changes hands, so it shows amounts owing to you and by you — useful if you invoice after delivering work or manage many contracts — but it is more complicated and may require a professional.
Your bookkeeping method is a related but separate decision
Do not assume the GST question and the bookkeeping question are the same form. The ATO's GST accounting method governs what goes on your BAS. business.gov.au's guide is about managing your books, and it suggests weighing the size of your business, how complicated your transactions and processes are, whether you have the resources to manage accrual accounting, and whether an electronic system would make a difference — and talking to a professional if you are unsure. A registered tax or BAS agent can tell you whether your software can actually support the method you are considering, which is often the binding constraint in practice.
Checklist before you choose
- Confirm your aggregated turnover against the $10 million threshold, and whether you account for income tax on a cash basis.
- Check whether your enterprise type appears in the ATO's agreed list (government school, endorsed charity or fund trustee, gift-deductible entity).
- Map your receivables: are customers paying on the spot, or do you invoice and wait? Waiting customers are the case the ATO says suits the non-cash method.
- Confirm you hold tax invoices before claiming credits, and note the $82.50 exception that applies on the cash basis.
- Check whether you can still report through Simpler BAS if your GST turnover is under $10 million.
- Ask your adviser or the ATO if you fall outside the listed categories and want to request the cash basis.
Changing methods later
If you are eligible to change, the ATO says you can contact it, or ask your accountant to do so on your behalf. Moving from the cash method to the non-cash method can only take effect on the first day of a tax period.
In the first tax period after that change you must:
- report the GST on any sales for which you had issued invoices before the date of the change but had not yet received payment;
- account for the balance of GST on any sales that had been partly accounted for before the change.
You are also eligible in that first period to claim any unclaimed GST credits you hold a tax invoice for. That transition period is the one to plan for — it is where two periods' worth of activity can land at once.
Food retailers have a further option: the ATO notes that small food retailers such as bakeries, milk bars and convenience stores that make both taxable and GST-free sales, and lack adequate point-of-sale equipment, can report using the GST simplified accounting methods for food retailers, which use pre-calculated business norms percentages.
Next step
Write down your turnover, how quickly customers pay you, and whether your records can produce tax invoices on time. Take that summary to your registered tax or BAS agent, or contact the ATO directly if you need to request the cash basis. Keep a dated note of the method you are using and when it started, because the change-over rules depend on that date.
General information only
This article is general information about the ATO's GST accounting methods, based on ATO and business.gov.au guidance current at the time of publication (the ATO page was last updated 14 September 2026). It is not personalised tax advice, and it does not account for your business structure, industry or circumstances. Rules, thresholds and administrative practice can change — verify the current position on the ATO website or with your registered tax or BAS agent before acting. Australian Ltd is not the ATO, a regulator, a lender or a broker.