Cash basis (GST and accounting)

Cash basis in ATO GST reporting is the election where GST liability triggers on cash received from the customer and GST credit triggers on cash paid to a supplier, rather than on the date the invoice was issued. Available to small business entities with annual turnover up to $10 million. Cash basis is strongly preferred for residential builders because the gap between invoice issued and cash received can be weeks: a progress claim issued on day 0 might not be paid until day 14-28, and treating GST as due on the invoice date when the money isn’t yet in the bank creates a working capital problem. Verified per ATO GST guidance (2026-05-23).

Cash basis vs accrual basis:

Aspect	Cash basis	Accrual basis
GST liability triggers	When you receive cash (e.g. progress payment)	When you issue the invoice (e.g. progress claim)
GST credit triggers	When you pay the trade/supplier invoice	When you receive the trade/supplier invoice
Turnover limit	Available to businesses ≤ $10M annual turnover	Available to any (and required above $10M)
Match to builder cashflow reality	Strong (GST due when cash is in hand)	Weak (GST due before cash received)
Bookkeeping complexity	Simpler	More complex (requires accrual reconciliation)
Tracking	Bank account = the reporting	Invoice + payment dates both tracked

Why cash basis is preferred for residential builders:

A typical residential build cycles:

1. Stage completes (e.g. frame finished).
2. Builder issues progress claim (invoice for $120,000 GST-incl.).
3. Client/bank arranges payment (5-30 days typical).
4. Builder receives payment.

On accrual basis: GST liability ($10,909) crystallises at step 2 (invoice date). The quarterly BAS is due 28 days after quarter end. If the invoice is issued in late Q1 and the payment arrives in early Q2, the builder owes GST on Q1’s BAS for cash that arrived in Q2.

On cash basis: GST liability crystallises at step 4 (payment received). The BAS in the quarter the payment was received is the relevant one. The builder isn’t paying GST on money not yet in the bank.

For a builder with $1.5M turnover and 3-5 progress claims per quarter, the difference in working capital exposure is material: cash basis avoids the timing mismatch.

How to elect cash basis:

1. At GST registration: Cash is an opt-in election on the GST registration form (NAT 2954).
2. Switch from accrual to cash: Apply via the ATO Business Portal; effective from start of next quarter.
3. Confirm turnover is below $10M: ATO can disallow if turnover grows past the threshold; should switch to accrual.

Eligibility:

Turnover band	Eligibility
< $10M annual	Eligible; election available
$10M-$20M	Eligible if a “small business entity” under aggregated turnover; check specific rules
> $20M	Generally accrual basis only

Most residential builders fall comfortably under $10M.

Implications for the BAS:

BAS line	Cash basis	Accrual basis
G1 (Total sales incl. GST)	Sum of cash received that quarter	Sum of invoices issued that quarter
1A (GST collected)	G1 / 11 (cash received basis)	G1 / 11 (invoice basis)
G10/G11 (Purchases)	Sum of invoices paid that quarter	Sum of invoices received that quarter
1B (GST credits)	G10+G11 / 11 (paid basis)	G10+G11 / 11 (received basis)

The arithmetic is the same; the timing of recognition differs.

Implications for the tax account:

The tax account discipline aligns perfectly with cash basis: on cash receipt, sweep 1/11 of the gross to the tax account. At BAS lodgement, the tax account holds the exact GST liability.

On accrual basis, the alignment is broken: GST liability is due on invoice issue but the cash may not be in hand. The tax account discipline is harder to maintain.

When cash basis doesn’t work:

Scenario	Why accrual may be needed
Turnover crosses $10M	ATO may require switch to accrual
Custom contract terms with extended payment	Cash basis still works (in fact, helps); accrual is harder
Large invoice issued for work already done but not yet paid	Cash basis defers the GST liability to actual payment
Investor or lender reporting on accrual basis	Internal management reporting may need accrual reconciliation alongside ATO cash basis
End-of-year accounting	Cash and accrual reconcile annually for tax return

Common defects:

• Defaulted to accrual on GST registration: builder didn’t elect cash basis; switch at next BAS cycle.
• Reporting GST on invoices issued but unpaid: cash basis applied incorrectly; correct via amendment.
• Mixing cash and accrual reporting: pick one; reconciliation gets messy if mixed.
• Not adjusting at year-end: cash and accrual reconcile for income tax purposes; cash basis on GST doesn’t change the income tax position.

Cash basis for income tax vs GST:

Cash basis can also apply to income tax for some small businesses, but most builders prefer accrual for income tax because:

• Customer payments commonly cross financial years.
• Trade invoices commonly cross financial years.
• Accrual for income tax matches commercial reality better than cash for income tax.

Many builders are cash basis for GST + accrual basis for income tax. This is allowed and common.

Builder takeaway:

• Elect cash basis at GST registration if you haven’t.
• The single biggest cashflow help for a residential builder.
• Pair with the tax account discipline.
• If on accrual now and eligible for cash, switch: contact a BAS agent or use the ATO Business Portal.

Also known as: cash accounting; cash GST; cash reporting basis; cash GST election.

Category: Contracts & commercial.

Related

• BAS (Business Activity Statement)
• Tax account
• Payment claim

See also

• BAS / GST timing for builders

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Last updated: 2026-05-23. Verified: 2026-05-23. Quarterly review for currency.