You may be eligible to change your GST accounting method from accruals to cash, therefore not being required to pay GST on debtors.
If your small business entity has an aggregate turnover (business and connected entities) of less than $10m, then please read on.
The Government in recent years has increased the small business entity turnover threshold from $2m to $10m. A small business entity (and connected entities) turning over less than $10m have access to a range of concessions, which were only previously available to a small business entity (and connected entities) turning over less than $2m.
Once of these concessions relates to being able to choose your GST accounting method, being either cash or accruals.
Before the recent change, it was mandatory to use the accounting accrual method for GST reporting if the turnover of your small business entity (and connected entities) was more than $2m. As discussed, this has now moved to $10m.
This means that if your small business entity (and connected entities) turn over less than $10m, you may be eligible to use the cash method for accounting on your GST.
What is the benefit of moving from accruals to cash for GST reporting?
The benefit of moving from accruals to cash for GST reporting, is you are only reporting GST on what you receive for sales or make payment for purchases. This means that you are not reporting on Debtors until they have actually paid. For many businesses, this would be a welcome change.
We suggest checking your eligibility for this concession and seeing what other concessions may be available to you if your small business entity (and connected entities) have an aggregate turnover less than $10m.
We suggest you should take advice if it is in the best interests of your small business entity to move from accruals to cash.
About the Author
Mark Rogerson- Managing Director, Rogerson Kenny Business Accountants.
Mark became a Director at Rogerson Kenny Business Accountants in 2011 and is currently Managing Director, CPA qualified, and an SMSF Specialist Advisor™. Mark believes the vision of the firm gives him great focus on how to add value when dealing with clients, being: helping clients achieve their financial goals, guided by our advice and active participation in their business ventures.
Article created, October 2019
If you would like to discuss this topic further, please contact Rogerson Kenny Business Accountants on (03) 9802 2533.