How the choice affects when GST actually falls due
You issue an invoice in March. Your customer pays it in May.
Which month's BAS does the GST on that sale actually belong to? The answer depends entirely on which accounting method you've chosen.
The short answer
Cash accounting reports GST in the period you actually receive or pay the money. Accrual accounting reports GST in the period you issue or receive the invoice, regardless of when payment actually happens. Most small businesses — those with an aggregated turnover under $10 million — can choose either method, and the choice can meaningfully affect cash flow timing.
Side by side
| Cash basis | Accrual (non-cash) basis | |
|---|---|---|
| GST on sales reported when | Payment is actually received | The invoice is issued |
| GST credits on purchases claimed when | Payment is actually made | The supplier invoice is received |
| Who can use it | Aggregated turnover under $10 million; or, regardless of turnover, if you account for income tax on a cash basis, or run a kind of enterprise the ATO has approved for cash accounting | Anyone — compulsory above $10 million turnover (with limited exceptions the ATO can approve on request) |
| Best suited to | Businesses wanting GST timing to match actual cash movement | Businesses wanting reporting that matches income and expenses to when they occurred |
A simple example
A caterer takes a $1,100 order (including $100 GST) on 10 September, with the customer paying 30 days later on 10 October.
On a cash basis: no GST obligation arises in September, because no payment has been received yet. The $100 GST is reported in the BAS period covering October, when the payment actually lands.
On an accrual basis: the $100 GST is reported in the BAS period covering September, the moment the invoice is issued — regardless of when the customer actually pays.
Why the choice genuinely matters for cash flow
Accrual accounting can create a real timing gap for businesses with longer payment terms — you may need to report and pay GST on a sale before you've actually collected the cash from your customer. Cash accounting avoids this specific problem, since GST only becomes payable once the money has genuinely arrived, which is exactly why it's popular with sole traders and small service businesses managing tight cash flow.
Why some businesses still choose accrual anyway
Accrual accounting gives a more accurate, real-time picture of how the business is actually performing — income and expenses are matched to when they genuinely occurred, not when cash happened to move. Larger or more established businesses, or those needing accounts that better reflect underlying performance for lenders or investors, often prefer this clarity over the cash-flow-timing benefit that cash accounting offers.
You can choose different methods for GST and income tax
It's worth knowing these are technically separate choices — many businesses use a consistent approach across both for simplicity, but the method used for BAS reporting and the method used for income tax purposes aren't automatically locked together. This is a genuinely technical area worth confirming with a professional rather than assuming.
Switching methods later
You can generally switch between cash and accrual accounting as circumstances change, but the switch needs to align with the start of a tax period and be handled carefully — done incorrectly, it can create reporting errors or duplicate/missed GST amounts around the transition point.
A quick self-check
Do I know which method — cash or accrual — my business currently uses for GST?
Does that method genuinely suit how my business collects payment and manages cash flow?
Am I eligible to choose, based on my aggregated turnover?
If I'm considering switching, have I thought through the transition carefully rather than just changing it mid-period?
Free official resource
The ATO explains both GST accounting methods and the eligibility rules for each.
ato.gov.au — Choosing an accounting method for GST https://www.ato.gov.au/businesses-and-organisations/gst-excise-and-indirect-taxes/gst/accounting-for-gst-in-your-business/choosing-an-accounting-method
When should you get professional help?
you're not sure which method genuinely suits your cash flow and business model;
you're considering switching methods and want the transition handled correctly;
your business is approaching the $10 million turnover threshold and want to understand what changes; or
you want to confirm your GST and income tax methods are aligned appropriately for your situation.
Continue learning
→ Understanding BAS — What Am I Actually Reporting and Paying?
→ Bad Debts — When Can an Unpaid Customer Invoice Become a Tax Deduction?
→ Why Is My Taxable Profit Different From the Profit in My Accounts?
SKC Accounting | Knowledge Centre | Knowledge Guide 068
Last reviewed: August 2026
General information only. This guide does not take into account your individual circumstances and is not a substitute for professional accounting, taxation, legal or financial advice.