Should a trade business account for GST on a cash or accrual basis?

Most Australian trade businesses should account for GST on a cash basis to protect working capital. Cash accounting ensures you only remit GST to the ATO once your customer actually pays you. This prevents cash flow deficits caused by commercial builders or residential clients operating on 30 to 60-day trade credit terms.

What is the turnover threshold to use cash basis GST in Australia?

The ATO threshold for cash basis GST is an aggregated turnover under $10 million per financial year. Businesses exceeding this threshold must use the accrual basis unless granted a specific commissioner determination. Eligible trade contractors can register for cash basis directly via ATO online services or through a registered BAS agent.

Can I claim GST credits before paying a supplier under cash accounting?

No, under cash accounting you cannot claim input tax credits until you make payment. You claim GST credits on your Business Activity Statement proportionally in the reporting period you pay the supplier invoice. If you make a partial payment on materials, you claim the GST credit matching that specific paid amount.

How do you switch your GST method from accrual to cash?

You switch your GST method by notifying the ATO online or via a registered tax professional before the start of your chosen tax period. Your accounting software, such as Xero or MYOB, must be updated simultaneously. You must perform an adjustment calculation to prevent double-counting or omitting GST on pre-existing debtor and creditor balances.

Should I account for GST on a cash or accrual basis?

Choosing between cash and accrual GST accounting changes when sales and purchases are reported on your Business Activity Statement (BAS). The right method depends on ATO eligibility, how you invoice and get paid, and whether your business can fund GST liabilities before customers pay.

Quick answer

Trade businesses should generally account for GST on a cash basis if their aggregated turnover is under $10 million. Under cash accounting, you only remit GST to the ATO after receiving customer payment. This prevents working capital shortfalls caused by funding unpaid customer tax liabilities out of pocket.

Skill level: General guidance
Time: Varies
Trade: Bookkeeping & Cashflow
Updated: 30 October 2026

How does cash versus accrual GST accounting work for tradies?

What is the difference between cash and accrual GST under ATO rules?

Under the cash basis, GST is generally reported when payment is received from a customer or made to a supplier. Part-payments are usually attributed progressively, which can better align BAS reporting with bank movements.

Under the non-cash or accrual basis, GST is generally reported in the tax period when an invoice is issued or received, or payment occurs—whichever happens first under the attribution rules.

Cash accounting may assist cash-flow management where customers take time to pay, but it is not automatically the best option. Accrual accounting can provide a clearer view of amounts owed by customers and due to suppliers.

ATO eligibility rules apply to using the cash basis. Turnover limits and other eligibility conditions can change, so check current ATO guidance rather than relying on an old threshold.

Your GST method does not replace accurate record-keeping or change separate payroll obligations. Employers must still address ATO requirements for Single Touch Payroll and superannuation guarantee, along with Fair Work pay and entitlement rules.

How does a registered BAS agent determine your optimal GST accounting method?

Whether you are eligible to account for GST on a cash basis and whether your current ATO registration details are correct.

Your customer payment terms, debtor days, supplier arrangements and the timing gap between invoicing and receiving or making payment.

How your accounting software records invoices, bills, part-payments, credit notes, bad debts and GST-free or input-taxed transactions.

Your BAS reporting frequency, seasonal cash-flow pattern and ability to fund GST reported before customer invoices are collected.

Any transition adjustments required when changing methods so transactions are not omitted or reported twice.

Common Costly Mistakes

Treating “cash basis” as meaning only bank transactions need records, while ignoring invoices, bills and outstanding balances.

Reporting GST from invoice dates when registered on a cash basis, or waiting for payment when using the non-cash basis.

Changing the software setting without checking ATO eligibility, effective dates or transition treatment.

Claiming GST credits without holding appropriate tax invoices or without checking whether the purchase is creditable.

When To Get Professional Help

Professional help is sensible if you have overdue debtors, part-payments, complex transactions, payroll, inventory or uncertainty about previous BAS reporting. A registered BAS agent or experienced bookkeeper can review your GST method, software configuration and transaction history, and identify matters that may need correction or confirmation with the ATO.

Talk To A Specialist

Not sure whether your GST setting matches how your business actually operates? Request a balanced bookkeeping health check to review your BAS workflow, records and cash-flow implications: Talk to a bookkeeping specialist.

Frequently Asked Questions

Is cash or accrual GST accounting better for a small business?

Neither method is universally better. Cash accounting may align GST liabilities more closely with actual payments, while accrual accounting may suit businesses with strong debtor management and more detailed reporting needs. Eligibility and your transaction patterns should be reviewed before deciding.

Can a sole trader account for GST on a cash basis?

A sole trader may be able to use the cash basis if the ATO’s eligibility requirements are met. Business structure alone does not determine the answer, so check current ATO rules and confirm the setup with a registered BAS agent where needed.

Does cash-basis GST mean I do not need to enter invoices and bills?

No. You still need complete business records and should track invoices, bills, credit notes and outstanding balances even though GST attribution is generally linked to payment. Entering documents correctly also supports debtor management, supplier control and reliable cash-flow reporting.

Can I change from accrual GST to cash GST?

A change may be possible if you meet the relevant ATO requirements, but it should not be treated as a simple software toggle. The effective date and transition treatment need to be managed carefully to avoid duplicated or missed GST amounts.

Will changing GST methods reduce the total GST I pay?

Generally, the method changes the timing of GST reporting rather than creating an automatic reduction in the overall GST payable. The actual outcome depends on your sales, purchases, payment timing and entitlement to GST credits, and no saving can be guaranteed.

Important — General Information Only

This guide is general information only and is not personal bookkeeping & cashflow advice. It does not take into account your objectives, financial situation or needs, and you should consider your circumstances and seek advice from a licensed or registered professional before acting. Confirm GST and BAS requirements with the ATO and, where appropriate, use a BAS agent registered with the Tax Practitioners Board; payroll and employment obligations should also be checked against ATO and Fair Work guidance.

Frequently asked questions

Is cash or accrual GST accounting better for a small business?: Neither method is universally better. Cash accounting may align GST liabilities more closely with actual payments, while accrual accounting may suit businesses with strong debtor management and more detailed reporting needs. Eligibility and your transaction patterns should be reviewed before deciding.
Can a sole trader account for GST on a cash basis?: A sole trader may be able to use the cash basis if the ATO’s eligibility requirements are met. Business structure alone does not determine the answer, so check current ATO rules and confirm the setup with a registered BAS agent where needed.
Does cash-basis GST mean I do not need to enter invoices and bills?: No. You still need complete business records and should track invoices, bills, credit notes and outstanding balances even though GST attribution is generally linked to payment. Entering documents correctly also supports debtor management, supplier control and reliable cash-flow reporting.
Can I change from accrual GST to cash GST?: A change may be possible if you meet the relevant ATO requirements, but it should not be treated as a simple software toggle. The effective date and transition treatment need to be managed carefully to avoid duplicated or missed GST amounts.
Will changing GST methods reduce the total GST I pay?: Generally, the method changes the timing of GST reporting rather than creating an automatic reduction in the overall GST payable. The actual outcome depends on your sales, purchases, payment timing and entitlement to GST credits, and no saving can be guaranteed.
Should a trade business account for GST on a cash or accrual basis?: Most Australian trade businesses should account for GST on a cash basis to protect working capital. Cash accounting ensures you only remit GST to the ATO once your customer actually pays you. This prevents cash flow deficits caused by commercial builders or residential clients operating on 30 to 60-day trade credit terms.
What is the turnover threshold to use cash basis GST in Australia?: The ATO threshold for cash basis GST is an aggregated turnover under $10 million per financial year. Businesses exceeding this threshold must use the accrual basis unless granted a specific commissioner determination. Eligible trade contractors can register for cash basis directly via ATO online services or through a registered BAS agent.
Can I claim GST credits before paying a supplier under cash accounting?: No, under cash accounting you cannot claim input tax credits until you make payment. You claim GST credits on your Business Activity Statement proportionally in the reporting period you pay the supplier invoice. If you make a partial payment on materials, you claim the GST credit matching that specific paid amount.
How do you switch your GST method from accrual to cash?: You switch your GST method by notifying the ATO online or via a registered tax professional before the start of your chosen tax period. Your accounting software, such as Xero or MYOB, must be updated simultaneously. You must perform an adjustment calculation to prevent double-counting or omitting GST on pre-existing debtor and creditor balances.

Written by Tally, the Bookkeeping & Cashflow specialist at WA.Tools.