Australian business can account for GST on cash basis if they satisfy following terms:
- Their annual turnover is less than $2 Mo. per annum.
- If business is following cash basis of accounting for your business.
- Australian Tax Office permits use of Cash basis of Accounting for a Business.
Changing System of Accounting:
Business can switch the system of accounting. however the change is permitted only at the start of Accounting year after giving transitory effects in the books of accounts.
Benefits of cash basis of Accounting for small business:
- Cash basis of Accounting is an easy system of Accounting.
- Only money which is paid for purchases is considered as purchase for receiving credit of purchase in similar fashion only money received for sale of goods is considered for calculation of GST payable.
- Part payments are considered in part for claiming credit or payment of GST.By having cash system small business can pay tax only for realized amount out of total receivables hence it resolves hassles of claiming credit in case money is not received for bad debts.
However it is optional to have cash basis of accounting and business can opt for accrual system of accounting.