GST on a cash or accruals basis: which one is kinder to your cash flow?

The quick answer

If your business turns over less than $10 million, you can usually pick how GST lands on your BAS: on a cash basis or an accruals basis (the ATO calls it “non-cash”). Neither one changes how much GST you owe in the long run. What changes is when you pay it, and for a small business, timing is often the whole game.

Here’s the 1-2-3:

1. Check you’re allowed to choose. Under $10 million aggregated turnover, you generally are.
2. Work out who waits for whom. Do your customers make you wait, or do you make your suppliers wait?
3. Pick, then switch at the right moment. Changes start at the beginning of a tax period, not mid-quarter.

With the July–September BAS due on 28 October for many quarterly lodgers, this is a good week to ask the question. Most owners never do. They tick a box when they register for GST and live with it for years.

What’s the difference between cash and accruals GST?

The two methods answer one question differently: which BAS does this GST belong on?

Cash basis. The ATO’s guide to choosing an accounting method says you account for GST on sales in the reporting period in which you receive payment. If a customer pays only part of an invoice, you only account for the GST in the part you received. Purchases work the same way: you claim the GST credit when you pay, and only for the part you’ve paid.

Accruals (non-cash) basis. You report GST on a sale in the earliest period in which you either issue the invoice or receive any payment. On purchases, the ATO’s page on when you can claim a GST credit says you can claim the full credit in the first period in which either the supplier invoices you or you pay any part of it. One catch: you still need to hold a valid tax invoice before you claim, except for purchases of $82.50 or less.

Put simply:

	Cash basis	Accruals basis
GST on a sale is reported when…	The customer pays you	You invoice (or are paid), whichever is first
GST credit on a purchase is claimed when…	You pay the supplier	You’re invoiced (or pay), whichever is first
Who can use it	Generally under $10 million aggregated turnover	Anyone; required for most larger businesses
Cash flow helps when…	Customers pay you slowly	You buy on supplier terms but get paid fast

Step 1: are you allowed to choose?

The ATO says businesses with an aggregated turnover of less than $10 million, or that account for income tax on a cash basis, can use either method. Most larger businesses must use accruals.

This matters more this year than usual. In its bulletin Time to review your GST turnover, the ATO said some businesses had grown past the thresholds without updating how they report, and that it is moving some of them to the correct methods from 1 July 2026. Once GST turnover reaches $10 million, GST has to be accounted for on an accruals basis. At $20 million, reporting moves from quarterly to monthly.

So step one is a quick check:

• Well under $10 million? You have a genuine choice. Read on.
• Close to $10 million and growing? Plan for accruals now, so the change doesn’t arrive as a surprise bill.
• Already over? Accruals isn’t optional. If you’re still on cash, talk to your accountant before the ATO talks to you.

Step 2: who waits for whom?

This is the heart of it. Grab last quarter’s numbers and ask two questions.

Question A: how long do your customers take to pay? If you invoice on 30-day terms and many clients drift to 45 or 60, accruals means you’re paying the ATO GST on money still sitting in their bank account. Cash basis lets you wait until the money actually arrives. Trades, cleaning and maintenance contractors, B2B services and anyone on progress claims tend to fall in this camp.

Question B: how long do you take to pay suppliers? If you buy stock, materials or equipment on 30 or 60-day terms, accruals lets you claim the GST credit as soon as the tax invoice arrives, sometimes a whole quarter before you’ve paid it. Cafés, retailers and online stores, where customers pay at the till but suppliers invoice on terms, often come out ahead on accruals.

Then compare:

• Customers make you wait longer than you make suppliers wait → cash basis usually wins.
• You make suppliers wait longer than customers make you wait → accruals usually wins.
• About the same → the difference is small, and simplicity may decide it. Many owners find cash basis easier to match to the bank statement.

Slow payers are a cash-flow problem whichever box you tick. Our page on late-paying customers has three practical steps to get money moving, and invoice finance is one way to unlock cash that’s stuck in your debtor list.

If the next BAS already looks heavier than the account can carry, you don’t have to wait for a method change to fix it. Start a 60-second enquiry and a specialist will look at your numbers. There’s no credit check to ask.

A worked example (illustrative only)

Picture a commercial cleaning business that invoices offices on 30-day terms. These are made-up round numbers, and they include GST.

In the July–September quarter it:

• Invoiced $110,000 of work, which carries $10,000 of GST. By 30 September, clients had paid $66,000 of it, carrying $6,000 of GST.
• Paid $22,000 for supplies and subcontractors, carrying $2,000 of GST credits.
• Received a tax invoice for $11,000 of new equipment, carrying $1,000 of GST, not due until November.

Here’s how the GST lands on the BAS:

	Accruals basis	Cash basis
GST on sales	$10,000	$6,000
GST credits	$3,000	$2,000
Net GST for the quarter	$7,000	$4,000

On a cash basis, this business sends $3,000 less GST to the ATO this quarter. That isn’t a saving. The $4,000 of GST on unpaid invoices simply moves to the quarter when clients pay, less the $1,000 equipment credit once the supplier is paid. But for a business that’s always waiting on clients, never paying GST ahead of being paid can make every quarter feel lighter.

Now flip it. A café is paid at the till the moment each coffee is made, but buys a $55,000 coffee machine and fit-out package on 60-day supplier terms, with $5,000 of GST in it. On accruals, the café claims that $5,000 credit on the BAS for the quarter it’s invoiced, even before paying. On a cash basis, it waits until the supplier is paid. Same café, opposite answer.

Step 3: picking and switching

If the numbers point to a change, here’s how it works in practice.

1. Talk to your accountant first. Your GST method has knock-on effects on bookkeeping software settings, how debtors and creditors are tracked, and possibly your income tax approach. A 15-minute conversation is worth it.
2. Time it to a period start. The ATO says a move from cash to non-cash can only take effect on the first day of a tax period. For a quarterly lodger, that means 1 January, 1 April, 1 July or 1 October.
3. Expect a catch-up on the first BAS. When you move from cash to accruals, the first BAS after the switch has to include GST on invoices you’d already issued but hadn’t been paid for. That one quarter can be noticeably bigger. Budget for it.

The ATO says eligible businesses can make a voluntary switch through Online services for business, or ask their accountant or tax agent to arrange it.

Don’t let the switch land on a bad quarter

Moving from cash to accruals right before your busiest invoicing period is the classic mistake. The catch-up GST arrives at the same time as a big run of new invoices, and the BAS jumps. If a switch is coming, pick a quarter when the debtor list is short, or set money aside for the extra GST from the day you decide.

When is the next BAS actually due?

For the July–September 2026 quarter, the ATO’s BAS due dates page lists an original due date of 28 October 2026. Many businesses that lodge online themselves get an extra two weeks. Businesses using a registered tax or BAS agent may have a later date under the agent’s lodgment program. Your own BAS shows the date that applies, so check it rather than guessing.

Whatever your method, the money has to be there on that date. Our BAS time cash flow page sets out three ways through a heavy quarter. If you’re already behind with the ATO, ATO debt: three ways forward explains your options calmly and in order.

Three signs the method isn’t your real problem

Changing methods is a good fix when timing is the issue. It won’t help when the issue is something else. Watch for these:

1. GST money gets spent. If the GST you collect quietly pays wages and rent, every BAS will hurt on either method. A separate “tax” account with a weekly transfer fixes more than any box on a form.
2. The business is growing fast. Growth means more invoices out before cash comes in. Cash basis softens that, but the working-capital gap is still there. A business line of credit can bridge it without locking in a lump sum you don’t need.
3. One quarter is always the monster. Seasonal businesses often have one BAS that dwarfs the rest. That’s a planning job across the year, not a GST method job.

Not sure which family of finance fits your situation? The 1-2-3 finance finder asks three questions and points you to a sensible starting place.

A lighter BAS, and a backstop if you need one

Getting the GST method right is one of those quiet decisions that pays off every single quarter. But some quarters still bite: a client pays late, a big supplier bill lands, or the switch-over BAS is heavier than planned. That’s when it helps to have a plan in place before the due date, not after.

That’s what we do. We help business owners line up working capital, lines of credit and property-backed options for exactly these moments, including when there’s already some ATO debt in the picture.

Enquiring takes about 60 seconds, and there’s no credit check when you first enquire. We don’t send your details to a pile of lenders, so you won’t get a flood of calls from strangers. A real person reads your situation and rings you to talk it through. Please fill the form in accurately: your turnover, roughly what the next BAS looks like, how long customers take to pay, and whether you own property. Accurate answers mean we can match the right option the first time.

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