Cash and non-cash basis (Accruals) are the two methods of accounting for GST.
Choosing these methods will make businesses decide how they want to report on GST ( Good and Services Tax).
Businesses with a turnover of less than $2 Million can choose any of the above methods for income tax purposes. However, Larger businesses use accrual or non-cash accounting method for reporting.
Managing your cash flow becomes really easy in cash-based accounting. You will be only accountable for the activity statement liability for the cash which has been flowing to the business.
Sales: – You only liable for GST credits that you have collected on the sales in the reporting period. If you have received part payment of the sales then you only pay the proportion of the GST credit you received on the sales.
Purchases: – You can claim GST credits when you paid for the services/Goods. In order to claim GST credits, you should have a tax invoice for any purchases of $82.50 or above. If you paid the part payment for the tax invoice then you can only claim the part payment of GST credits.
Non-Cash Basis (Accrual)
Larger business must use non-cash or Accrual accounting method for reporting. Non-cash reporting means you should report GST on the Business Activity statement that covers for any tax invoice been issued to the customer for payment and any tax invoice been issued by the supplier to you for payment.
Sales: You should pay GST on the sales for the tax invoices that you have issued in the reporting period of business activity statement regardless of any part payment or full payment been received by the customer.
Purchases: You must claim GST credits for any tax invoices you have received from the supplier regardless of any part or full payment you have made to the supplier.
Please note that you have four years to claim GST credits if any of GST credits you have not claimed.