Cash vs Accrual Accounting: Which Method Gives Your Business the Clearest Financial Picture?
Choosing between cash and accrual accounting is not simply about when you enter transactions. The right approach can affect your business reports, cash-flow planning, GST obligations and income-tax reporting.
Key Takeaways
Cash accounting generally records income when payment is received and expenses when payment is made.
Accrual accounting generally records income when it is earned and expenses when they are incurred.
Your bookkeeping method, GST accounting basis and income-tax accounting method are related—but they are not necessarily the same.
Businesses with aggregated turnover below $10 million can generally choose cash or non-cash accounting for GST, subject to eligibility requirements.
Cash accounting can make cash movements easier to follow, while accrual accounting usually provides a more complete view of profitability and financial position.
Profit is not the same as cash in the bank. Well-managed businesses monitor both.
Changing accounting methods requires care so transactions are not counted twice or missed altogether.
What is the difference between cash and accrual accounting?
The main difference between cash and accrual accounting is when income and expenses are recorded.
Under cash accounting, transactions are generally recorded when money is received or paid.
Under accrual accounting, transactions are generally recorded when income is earned or an expense is incurred—even when the payment happens later.
“Cash accounting tracks the actual money coming in and out of your business.”
The Australian Taxation Office describes the income-tax distinction in similar terms. Under the cash basis, business income is generally reported when payment is received. Under the accruals basis, it is generally reported when it is earned.
Although the definitions sound simple, choosing the right method requires more than comparing two bookkeeping settings.
First, understand the three separate accounting decisions
One of the most important distinctions is that your business may need to consider three separate questions:
How should transactions appear in your internal bookkeeping and management reports?
When should GST be reported on your Business Activity Statement?
When should business income be recognised for income-tax purposes?
These methods may align, but they do not always have to be identical.
For example, a business may maintain accrual-based accounting records to monitor customer debts and supplier bills, while remaining eligible to report GST on a cash basis.
ATO guidance confirms that an entity can account for GST on a cash basis while using a non-cash method for income-tax purposes.
Think of these accounting methods as different tools in a goldsmith’s workshop. Each tool has a specific purpose. The best result comes from using the right tool for the right job—not from assuming one method controls everything.
What is cash accounting?
Under cash accounting, income is generally recognised when payment is received, while expenses are generally recognised when they are paid.
Imagine that you issue a $2,200 invoice in June, but the customer pays it in July.
Under cash accounting, the income would generally be recorded when the payment is received in July.
Similarly, if you receive a supplier bill in June but pay it in August, the expense would generally be recorded in August under a cash-based system.
Advantages of cash accounting
It can be easier to understand
Cash accounting closely follows the movement of money through the business bank account. This can make day-to-day bookkeeping simpler, particularly for a smaller business with straightforward transactions.
It may assist with cash-flow visibility
Because income and expenses are recorded when payments occur, cash reports can help business owners understand what has actually come in and gone out.
However, your bank balance is not the same as available profit.
Some of the money in your account may already be committed to:
GST;
PAYG withholding;
employee superannuation;
supplier bills;
loan repayments;
income tax; or
upcoming operating expenses.
A bank account may appear to glitter, but not every dollar is yours to spend. Some of that gold may already have another owner.
It may reduce GST timing pressure
Eligible businesses using cash accounting for GST generally report GST on sales when customer payments are received. They generally claim GST credits when purchases are paid.
This can reduce the risk of paying GST on an invoice before the customer has paid you.
For part payments, the corresponding portion of the transaction is generally reported as each payment is received or made.
Limitations of cash accounting
Cash accounting is not inaccurate. It accurately records cash that has been received and paid.
However, it may provide an incomplete view of business performance because it does not automatically show:
unpaid customer invoices;
outstanding supplier bills;
accrued expenses;
money committed to upcoming obligations;
stock movements; or
work completed but not yet paid.
business.gov.au notes that cash accounting does not show money owed to the business or money the business owes to others.
This can create misleading timing results.
For example, a business may appear highly profitable because several major supplier bills remain unpaid. Alternatively, it may appear to have had a poor month because it paid several older bills at once.
Cash accounting therefore answers an important question:
What cash has moved?
It may not fully answer:
How profitable was the business during this period?
What is accrual accounting?
Under accrual accounting, income is generally recorded when it is earned and expenses are generally recorded when they are incurred.
This is not always the same as the invoice date.
For example, an invoice may be:
issued before work is completed;
issued after goods or services have been supplied;
a request for a deposit;
a progress claim;
disputed by the customer; or
related to services delivered over several reporting periods.
The correct accounting treatment depends on the underlying transaction—not simply when someone pressed “send” on an invoice.
The ATO states that, under the accruals basis, businesses report income when it is earned, even when payment has not yet been received.
Advantages of accrual accounting
It provides a more complete view of performance
Accrual accounting can show:
sales earned during the period;
expenses incurred during the period;
amounts customers owe;
amounts owed to suppliers;
assets and liabilities; and
the timing of business activity.
This usually makes it easier to compare one month, quarter or year with another.
A clear accrual report can act like a polished gold business scoreboard. It helps reveal whether the underlying operation is genuinely performing—not merely whether cash happened to arrive during the reporting period.
It improves debtor and creditor visibility
Accrual accounting helps businesses monitor accounts receivable and accounts payable.
This can make it easier to identify:
overdue customer invoices;
slow-paying customers;
upcoming supplier commitments;
pressure on working capital; and
potential cash-flow gaps.
It may better support planning and finance applications
Lenders commonly want to understand more than the current bank balance. They may request:
profit and loss statements;
balance sheets;
cash-flow information;
aged receivables;
aged payables;
tax returns;
budgets; and
financial forecasts.
Accrual reports can provide a clearer view of business performance and financial position. However, they do not guarantee finance approval. Lenders will also consider repayment capacity, security, credit history and cash flow.
Limitations of accrual accounting
Profit may appear before the cash arrives
A business can report a profit while still experiencing serious cash-flow pressure.
For example, you may have earned $100,000 in sales, but if $60,000 remains unpaid by customers, you may not have enough cash to pay wages, suppliers or tax obligations.
That is why profit and cash flow must be monitored separately.
Profit tells you whether the business is creating value. Cash flow tells you whether it can pay its bills.
A profitable business can still fail if too much of its gold is trapped in unpaid invoices, excess stock or work in progress.
It can require more detailed bookkeeping
Accrual accounting often requires additional processes, including:
bank reconciliations;
accounts receivable reconciliations;
accounts payable reconciliations;
stock adjustments;
prepayment calculations;
accrued expense entries;
depreciation;
work-in-progress calculations; and
end-of-period cut-off reviews.
Its usefulness depends on the quality of the records. Poorly maintained accrual accounts can be just as misleading as incomplete cash records.
Cash vs accrual accounting example
Assume your business completes work worth $11,000, including GST, on 20 June. You issue the invoice immediately, but the customer pays on 15 July.
Under cash accounting
The transaction would generally be recognised when the payment is received in July.
For GST purposes, an eligible business using the cash basis would generally report the GST when the customer pays.
Under accrual accounting
The income would generally be recognised when it is earned.
For GST purposes, a business using the non-cash method generally reports GST in the earlier reporting period connected with issuing an invoice or receiving payment, subject to the applicable GST rules.
This demonstrates why accrual accounting can show profit before the cash is available.
Who can use cash accounting for GST?
There are specific eligibility rules for GST cash accounting.
Businesses with aggregated turnover below $10 million can generally choose to account for GST on either a cash or non-cash basis.
Aggregated turnover may include the annual turnover of your business and certain connected or affiliated entities. It is not necessarily limited to the sales shown under one ABN.
Some other entities may also qualify, including certain organisations that account for income tax on a cash basis or fall within another eligible category.
Most larger businesses must use the non-cash method unless another eligibility rule or approval applies.
Eligibility should be reviewed as a business grows. Do not assume that the GST method selected several years ago remains appropriate indefinitely.
Which method applies for income tax?
Income-tax accounting is not simply an unrestricted choice between whichever method produces the better outcome.
ATO Taxation Ruling TR 98/1 explains that the method used must provide a “substantially correct reflex” of the taxpayer’s income.
Relevant considerations may include:
the nature of the business;
the size and structure of the operation;
how income is earned;
whether the business trades in goods;
its reliance on employees and equipment;
normal commercial practice; and
whether the chosen method appropriately reflects income.
The ATO notes that larger and more complex businesses are more likely to require an earnings or accruals method.
The method should also be used consistently until the circumstances of the business make another method more appropriate.
What happens when a customer does not pay?
Accrual accounting may result in income being recognised before a customer pays.
However, an overdue invoice cannot automatically be removed simply because payment is late.
For income-tax purposes, a business using accrual accounting may be able to claim a deduction when:
the amount was previously included in assessable income;
there is little or no likelihood of recovering it;
the debt is genuinely bad; and
it is written off correctly.
The ATO emphasises that writing off a debt as bad is not the same as forgiving or waiving the debt.
A cash-basis business generally has no corresponding income-tax deduction for unpaid income because the amount was not included as assessable income in the first place.
Separate GST adjustment rules may apply when a debt is written off as bad or later recovered.
These rules can be technical, particularly for companies, trusts, related-party debts and debts that are later recovered. Obtain advice before processing significant bad-debt adjustments.
Can a business use a combination of cash and accrual accounting?
A business may maintain accrual-based management accounts while accounting for GST on a cash basis, provided it satisfies the GST eligibility rules.
This is sometimes informally called a hybrid approach.
However, that does not mean the business can switch individual transactions between methods to create a preferred result.
Each reporting method must be applied consistently and in accordance with the relevant rules.
A business might, for example:
use accrual reports to monitor profitability;
review a cash-flow forecast to manage upcoming payments;
account for GST on a cash basis; and
use the appropriate income-tax accounting method based on its circumstances.
This combination can provide useful information, but it must be configured and reconciled correctly.
Should you change your accounting method?
Changing methods is not as simple as changing a setting in your accounting software.
When a business moves from cash to accrual accounting—or from accrual to cash—it may need to review:
outstanding customer invoices;
unpaid supplier bills;
opening balances;
GST already reported;
GST credits already claimed;
deposits and prepayments;
accrued income;
accrued expenses; and
previous income-tax treatment.
Without an appropriate transition review, transactions may be counted twice or omitted completely.
ATO guidance states that a GST accounting-method change begins from the first day of the relevant tax period. Transition rules may then be required.
Before changing methods, obtain professional advice and confirm how the change will affect your bookkeeping, BAS reporting, tax returns and management reports.
Which accounting method is best for your business?
There is no universal answer.
Cash accounting may be suitable when:
customers usually pay immediately;
transactions are relatively simple;
the business carries little or no stock;
there are few unpaid invoices or bills;
the business is eligible to report GST on a cash basis; and
the owner primarily needs straightforward cash-flow information.
Accrual accounting may be suitable when:
customers receive payment terms;
the business has substantial receivables or payables;
stock or work in progress is significant;
the business enters longer-term contracts;
detailed management reporting is required;
the business is growing;
finance may be sought; or
the business needs a clearer picture of profitability and financial position.
The best method should provide reliable information while meeting your legal and tax obligations.
The golden rule: monitor both profit and cash flow
Choosing cash or accrual accounting should never mean ignoring the other side of the financial picture.
A business using accrual accounting still needs a cash-flow forecast.
A business using cash accounting still needs to monitor unpaid invoices, outstanding bills and future commitments.
Your profit and loss statement, balance sheet and cash-flow information should work together. Each reveals a different part of the story.
A single report may show a flash of gold. Looking at the complete financial picture helps determine whether the business is building lasting value—or simply reflecting temporary movement in the bank account.
Get the right accounting foundation for your business
The correct accounting method can improve financial visibility, support better decisions and reduce the risk of GST or income-tax reporting errors.
At DJ Grigg Financial, we can help you:
review whether your current accounting method remains appropriate;
confirm your GST accounting eligibility;
improve the accuracy of your bookkeeping;
understand the difference between profit and cash flow;
set up useful management reports;
review debtors, creditors and working capital; and
manage a change of accounting method correctly.
Do not let an unsuitable accounting setup hide the real value—or the real risks—inside your business. Contact DJ Grigg Financial to make sure your financial records provide a clear and reliable path from groundwork to gold.
Important Information: This article provides general information only. It does not take into account your business structure, circumstances or reporting obligations. Accounting, GST and income-tax treatments may differ. Seek professional advice before selecting or changing an accounting method.
Stronger Than Gold: How to Protect Your Wellbeing, Build Resilience and Create a Mentally Healthy Business
Running a business can be rewarding, but it can also place enormous pressure on your time, finances and personal wellbeing.
Cash flow concerns, staffing shortages, customer demands and long working hours can gradually wear down even the most capable business owner. Like gold under pressure, resilience can be strengthened. However, no one should be expected to tolerate harmful working conditions simply by becoming “tougher”.
Genuine business resilience requires two things:
Healthy personal strategies that help you manage life’s challenges.
Safe work systems that address the causes of harmful workplace stress.
Understanding both can protect your health, support your team and help your business remain strong for the long term.
Key Takeaways
Some short-term stress is normal, but ongoing or overwhelming stress can affect your health, judgement and business performance.
Resilience can be developed through healthy coping strategies, supportive relationships and timely professional help.
Self-care does not replace an employer’s responsibility to manage workplace risks to psychological health.
Victorian employers must identify psychosocial hazards and control work-related risks to mental health.
Common psychosocial hazards include excessive workloads, poor support, bullying, unclear roles and poorly managed change.
Small-business owners can access free and confidential mental health coaching through Beyond Blue’s NewAccess for Small Business program.
Addressing stress early can help protect your people, productivity and business continuity.
Why Mental Health and Business Resilience Matter
Mental health challenges are common across the Australian community.
The Australian Bureau of Statistics found that 21.5% of Australians aged 16 to 85 experienced a mental disorder during the previous 12 months. Anxiety disorders were the most common, affecting 17.2% of people in that age group.
Work-related psychological injuries can also have significant personal and financial consequences.
Safe Work Australia reported that claims involving mental health conditions accounted for 12% of serious workers’ compensation claims in 2023–24. For 2022–23 claims, the median compensation paid for a mental health condition was $67,400—more than four times the median across all serious claims.
These figures reinforce an important message: workplace wellbeing is not a “soft” business issue. It can affect staff retention, productivity, absenteeism, decision-making and the sustainability of the business itself.
Your people are among your business’s most valuable assets. Protecting their psychological health is part of protecting the gold within your organisation.
What Is Resilience?
Resilience is the ability to adapt, recover and continue functioning when faced with difficulties, change or setbacks.
It does not mean ignoring distress, accepting unreasonable demands or pretending everything is fine.
Healthdirect explains that resilience can be strengthened through healthy coping strategies, positive relationships, trusted support networks and improved self-esteem.
Resilience may help you respond more effectively when:
a major customer leaves;
cash flow becomes tight;
an employee resigns unexpectedly;
new regulations affect your operations;
family pressures compete with business responsibilities;
an important project does not go to plan.
Resilience is not a suit of armour that makes someone immune to pressure. It is more like refining raw gold: the right support, habits and systems can make it stronger and more valuable.
When Does Normal Pressure Become Harmful Stress?
Stress is a natural response to challenging or unfamiliar situations. In manageable amounts, it may temporarily increase alertness and motivation.
However, stress can become harmful when it is intense, ongoing or begins interfering with everyday life.
Business.gov.au warns that ongoing stress can contribute to health problems, poor business results, staff turnover and reduced productivity.
Warning signs may include:
persistent sleep problems;
feeling constantly overwhelmed;
irritability or unusual emotional reactions;
difficulty concentrating or making decisions;
withdrawing from colleagues, friends or family;
losing interest in activities you usually enjoy;
frequent headaches, tension or exhaustion;
increased reliance on alcohol or other substances;
struggling to switch off from work;
reduced performance or increasing mistakes;
feeling unable to cope.
These signs do not automatically mean someone has a mental illness. They may, however, indicate that additional support is needed.
A GP or qualified mental health professional can provide individual advice when symptoms persist, worsen or interfere with daily life.
What Are Psychosocial Hazards?
A psychosocial hazard is a workplace condition, situation or interaction that may cause psychological harm.
Safe Work Australia describes psychosocial hazards as aspects of work that can harm mental health and, in some circumstances, physical health.
Examples include:
excessive or conflicting job demands;
unrealistic deadlines;
insufficient staffing;
low control over how work is performed;
inadequate support from managers or colleagues;
unclear duties and responsibilities;
poor recognition or reward;
bullying, harassment or discrimination;
customer aggression or occupational violence;
poorly managed organisational change;
isolated or remote work;
exposure to traumatic events or material;
conflict and poor workplace relationships;
inadequate equipment, training or resources.
Small businesses are not exempt from these risks. In fact, limited resources and close working relationships can sometimes make emerging problems harder to recognise or discuss.
Resilience Is Not a Substitute for Safe Work
Meditation, exercise, healthy eating and relaxation can support wellbeing. However, they cannot repair an unsafe workplace on their own.
A mindfulness app will not fix chronic understaffing. A lunchtime yoga session will not resolve bullying. Encouraging employees to “be more resilient” will not make an unreasonable workload safe.
“PCBUs must eliminate or minimise psychosocial risks so far as is reasonably practicable.”
The strongest approach is to address the source of the problem first.
That may involve:
redistributing unreasonable workloads;
providing clearer instructions and role descriptions;
improving staffing or scheduling;
setting realistic deadlines;
introducing procedures for customer aggression;
training supervisors to respond appropriately;
addressing bullying or inappropriate conduct;
consulting workers before major changes;
ensuring employees receive adequate support and resources.
Personal wellbeing programs may complement these measures. They should never be used as a substitute for them.
Victorian Employers Have Psychological Health Responsibilities
The Occupational Health and Safety (Psychological Health) Regulations 2025 commenced on 1 December 2025. WorkSafe Victoria states that employers must now take specific steps to identify psychosocial hazards and control work-related risks to mental health.
Employers should:
Identify psychosocial hazards.
Consider the risks those hazards create.
Eliminate the risks where reasonably practicable.
Reduce the risks as far as reasonably practicable when elimination is not possible.
Consult employees and health and safety representatives.
Review controls to ensure they remain effective.
WorkSafe Victoria provides current guidance, compliance information and hazard-specific resources.
This article provides general information only. Employers should obtain appropriate workplace health and safety or legal advice for their circumstances.
Seven Practical Ways to Strengthen Wellbeing and Business Resilience
1. Identify the Real Source of Pressure
Do not automatically assume the problem is a lack of personal resilience.
Ask:
Is the workload realistic?
Are responsibilities clear?
Do we have enough people and resources?
Are difficult customers being managed safely?
Is one person carrying too much responsibility?
Are financial problems creating avoidable uncertainty?
Are employees comfortable reporting concerns?
Finding the true pressure point is like identifying impurities before refining gold. You cannot improve what you have not properly examined.
2. Begin With One Achievable Change
Trying to overhaul your entire life or business at once may create additional pressure.
Choose one realistic improvement, such as:
taking a proper meal break;
setting a regular finishing time on selected days;
delegating one recurring task;
scheduling weekly cash flow reviews;
turning off non-essential notifications after hours;
holding a short staff check-in;
documenting a process that currently depends on one person.
Allow the change to become part of your routine before adding another.
3. Protect Time for Recovery
Long hours are sometimes unavoidable. Making them the permanent operating model is risky.
Create reasonable boundaries around work where possible. Recovery may involve sleep, exercise, family time, hobbies, quiet reflection or simply time away from business decisions.
Physical activity can support mental health, sleep and stress management. Exercise should suit your health, ability and circumstances. Speak with a health professional before beginning a new exercise program when appropriate.
4. Stay Connected
Isolation can magnify business problems.
Build a trusted support network that may include:
family and friends;
other business owners;
industry associations;
mentors;
professional advisers;
a GP or psychologist;
confidential mental health services.
Seeking support is not a sign that you are failing. Even the strongest gold structures need sound foundations and regular maintenance.
5. Consult Your Team
Employees often recognise emerging workplace risks before management does.
Create safe opportunities for staff to discuss:
workloads;
deadlines;
customer behaviour;
communication problems;
workplace conflict;
unclear responsibilities;
inadequate systems or resources;
concerns about proposed changes.
Consultation may occur through team discussions, individual meetings, confidential surveys or health and safety representatives.
Safe Work Australia confirms that duty holders must consult workers and relevant health and safety representatives about work health and safety matters.
6. Review Your Business Systems
Poor systems can create unnecessary emotional strain.
Consider whether your stress is being increased by:
overdue bookkeeping;
unpredictable tax liabilities;
poor cash flow visibility;
late-paying customers;
inadequate pricing;
excessive stock;
manual processes;
unclear employee procedures;
dependence on one key person;
a lack of forward planning.
Improving financial reporting, cash flow forecasting and business processes may not remove every challenge. It can, however, replace uncertainty with clearer information.
Good figures are like a reliable gold map: they help you see where you are, where risks are forming and where to dig next.
7. Seek Help Before Reaching Crisis Point
You do not need to wait until everything feels unmanageable.
A GP can assess your circumstances and discuss suitable support. Business owners may also be eligible for services specifically designed around the pressures of running a business.
Beyond Blue’s NewAccess for Small Businessis a free and confidential mental health coaching program for small-business owners and sole traders experiencing stress, worry or overwhelm. It is available nationally by phone or video, and no GP referral is required.
How to Support an Employee Who May Be Struggling
Managers are not expected to diagnose mental health conditions.
Your role is to listen, respond respectfully, consider workplace risks and connect the person with appropriate support.
A helpful conversation may begin with:
“I’ve noticed you don’t seem like yourself lately. How are things going, and is there anything at work we should discuss?”
Choose a private setting and allow the employee to speak without interruption. Avoid making assumptions or promising complete confidentiality when workplace safety obligations may apply.
Focus on practical questions:
Is there something at work contributing to the problem?
Are any immediate safety concerns present?
What adjustments may help?
What support is available?
When should you check in again?
Possible workplace responses could include temporary adjustments, clearer priorities, additional support, changed duties or professional advice.
Keep in mind that the appropriate response depends on the situation, the employee’s role and relevant workplace obligations.
Business.gov.au provides additional guidance on creating a mentally healthy workplace.
When Leaving May Be Necessary
Some situations cannot be resolved through personal coping strategies alone.
If work is causing ongoing harm, consider:
whether the hazard can be removed or controlled;
whether the concern has been reported;
what workplace support is available;
whether a health and safety representative can assist;
whether medical, legal, employment or financial advice is required;
whether temporary adjustments are possible;
whether remaining in the situation is safe.
For employees, resigning can have financial and legal consequences. It should not be presented as the only response to a harmful workplace.
Immediate threats to personal safety should always be treated urgently.
Where to Get Help
These strategies can support wellbeing, but they are not a replacement for medical or psychological care.
For mental health information and support options:
Lifeline confirms its crisis service is available nationally at any time.
Build a Business That Is Strong Below the Surface
Gold does not become valuable simply because it shines. Its strength depends on what lies beneath the surface.
The same is true of a resilient business.
Healthy routines matter, but so do realistic workloads, clear responsibilities, reliable financial information, supportive leadership and safe workplace systems.
You do not need to carry every business pressure alone. Seeking help early can protect your wellbeing while giving you greater clarity and control over your financial position.
At DJ Grigg Financial, we help business owners understand their numbers, improve their systems and make informed decisions with confidence.
Contact us to discuss how stronger financial systems, cash flow planning and practical business advice could help reduce uncertainty and build a more resilient business.
Disclaimer: This article provides general information and does not constitute medical, psychological, workplace health and safety or legal advice. Seek advice from an appropriately qualified professional for your specific circumstances.
Salary Incentives for Staff: How to Reward Your Team Without Creating Tax, Super or FBT Problems
Staff incentives can be a brilliant way to attract, retain and motivate great employees. But like any good gold strategy, the value is in the structure. A poorly planned incentive can quickly lose its shine through unexpected tax, super, payroll or Fringe Benefits Tax obligations.
Key Takeaways
Salary sacrifice and salary packaging are commonly used to help employees receive part of their remuneration as benefits instead of cash.
Bonuses, commissions, allowances, super contributions, gift cards, cars and private expense payments can all have different tax consequences.
From 1 July 2026, employers must factor in Payday Super when managing staff remuneration and incentive arrangements.
The super guarantee rate is 12% for 2026–27.
Salary sacrificed super counts toward an employee’s concessional contributions cap, which is $32,500 from 1 July 2026.
Non-cash benefits can trigger Fringe Benefits Tax, reportable fringe benefits and payroll tax implications.
Incentives must still comply with Fair Work rules, awards, agreements and minimum wage obligations.
The safest incentive plan is one that is documented, costed and reviewed before it is offered to staff.
Why Staff Incentives Matter
Good employees are worth their weight in gold.
For many small businesses, wages are one of the largest ongoing costs. So when you find reliable, skilled and motivated staff, it makes sense to think carefully about how to keep them engaged.
Salary incentives can help with:
attracting new employees
improving staff retention
rewarding performance
supporting career development
creating a more flexible remuneration package
helping employees see more value in their overall employment package
But incentives should not be rushed.
A bonus paid through payroll is very different from a salary sacrificed super contribution. A gift card is different from a work-related laptop. A novated lease is different from a cash allowance. Each option can create different obligations for PAYG withholding, super guarantee, Fringe Benefits Tax, payroll tax and employee reporting.
That is why staff incentives should be treated like a gold mine: valuable when managed properly, but risky if you start digging without a plan.
Salary Sacrifice and Salary Packaging: What Is the Difference?
The terms “salary sacrifice” and “salary packaging” are often used together.
The Australian Taxation Office says salary sacrificing is also known as “salary packaging” or “total remuneration packaging”. In simple terms, an employee agrees to receive less cash salary before tax, and the employer provides benefits of a similar value instead.
Common salary sacrifice or salary packaging options may include:
additional super contributions
a novated lease
a work-related laptop or phone
professional memberships
tools of trade
some work-related training
certain employer-provided benefits
However, salary packaging is not automatically tax-free or cost-neutral.
The ATO explains that salary sacrificing is a formal arrangement between an employer and employee. To be effective, it should generally be agreed before the employee earns the income being sacrificed.
The Golden Rule: Cost the Incentive Before You Offer It
One of the biggest mistakes employers make is assuming an incentive has no extra cost to the business.
That may be true in some simple arrangements, but not always.
A staff incentive may create extra costs through:
employer super guarantee
Fringe Benefits Tax
payroll tax
administration fees
payroll software setup
Single Touch Payroll reporting
record keeping
cash flow timing
award or agreement obligations
For example, paying an employee’s private mortgage, school fees, credit card bill or personal loan repayment may create an expense payment fringe benefit. The ATO’s employer FBT guidance specifically notes that fringe benefits in salary sacrifice arrangements often include car fringe benefits and expense payment fringe benefits, such as payment of an employee’s loan repayments, school fees, child care costs and home telephone costs.
Before agreeing to any incentive, employers should ask:
What exactly is being provided?
Is it cash, super, an allowance, a reimbursement or a benefit?
Does PAYG withholding apply?
Does super apply?
Is there an FBT issue?
Does it affect payroll tax?
Does it need to be reported through STP?
Does it comply with the employee’s award or agreement?
Has the arrangement been documented before the income is earned?
A shiny reward can quickly lose its polish if the hidden costs are not understood upfront.
Cash Bonuses, Commissions and Performance Payments
Cash bonuses are usually the easiest type of incentive for employees to understand.
They may include:
annual performance bonuses
sales commissions
productivity bonuses
retention payments
referral bonuses
Christmas or end-of-year bonuses
These payments usually need to be processed through payroll, with PAYG withholding applied. They may also attract super, depending on the nature of the payment.
The ATO provides guidance on payments that are considered ordinary time earnings or qualifying earnings for super purposes, including many bonuses and commissions.
For employers, the key point is this: do not treat a bonus as something separate from payroll unless you have confirmed the treatment.
A bonus can feel like a golden reward for employees. For the employer, it must still be reported, taxed and paid correctly.
Super Salary Sacrifice: Valuable, But Watch the Cap
Salary sacrificing into super can be an attractive option for some employees.
It allows the employee to redirect part of their pre-tax salary into super. This may reduce their taxable income and help grow their retirement savings.
However, it is not suitable for everyone.
Salary sacrificed super contributions count toward the employee’s concessional contributions cap. From 1 July 2026, the general concessional contributions cap is $32,500.
This cap includes:
employer super guarantee contributions
salary sacrificed super contributions
personal deductible super contributions
If an employee exceeds their cap, they may face extra tax consequences.
Employers also need to remember that salary sacrifice is separate from compulsory super guarantee. Employees cannot use salary sacrificed super to reduce the employer’s compulsory super obligations.
Payday Super: A Major 2026 Update for Employers
From 1 July 2026, Payday Super applies to employee earnings paid from that date.
The ATO says that, from 1 July 2026, employers must pay super guarantee for each payday. For most ordinary pay cycles, super must generally be received by the employee’s fund within 7 business days after payday.
This is a major change for employers who previously managed super on a quarterly cycle.
For 2026–27, the super guarantee rate is 12%.
This means incentive arrangements should be reviewed carefully. If you offer bonuses, commissions or additional super contributions, your payroll systems and cash flow need to keep up.
Payday Super makes timing more important than ever.
Think of it like refining gold: the value is not just in what you pay, but in when and how it is processed.
Fringe Benefits Tax: Where Incentives Can Become Expensive
Fringe Benefits Tax, or FBT, is one of the biggest traps in staff incentives.
FBT can apply when an employer provides a non-cash benefit to an employee or their associate because of their employment.
Examples may include:
cars
gym memberships
entertainment
private health costs
school fees
mortgage or loan repayments
private travel
gift cards
meal entertainment
housing costs
certain expense reimbursements
The ATO explains that employers pay FBT on certain benefits provided to employees, their family or other associates.
The FBT rate for the 2026–27 FBT year is 47%.
This does not mean every staff reward creates FBT. But it does mean every non-cash benefit should be checked before it is offered.
Minor Benefits: The Under-$300 Rule Is Not a Free Pass
This can be useful, but it is often misunderstood.
The ATO says a minor benefit may be exempt from FBT where it is both less than $300 in notional taxable value and unreasonable to treat it as a fringe benefit.
This means the benefit must generally be minor, infrequent and irregular.
A one-off small gift may qualify. A regular monthly gift card may not.
The gold nugget here is simple: “under $300” does not automatically mean “no FBT”.
Work-Related Items: Laptops, Phones and Tools
Some work-related items can be FBT exempt if they meet ATO conditions.
These may include:
portable electronic devices
computer software
protective clothing
briefcases
tools of trade
The ATO says work-related items can be exempt from FBT where they are mainly used for work purposes. However, there are limits, including rules around providing more than one substantially identical item in the same FBT year.
This can make work-related equipment a practical incentive, especially where it helps the employee perform their role better.
It is also usually easier to justify than paying private expenses.
Reportable Fringe Benefits and Employee Impacts
Some fringe benefits may also need to be reported on the employee’s income statement.
The ATO says that if an employee receives certain fringe benefits with a total taxable value of more than $2,000 in an FBT year, the employer reports the grossed-up amount.
Reportable fringe benefits do not increase the employee’s taxable income directly. However, they can affect income tests for things such as:
Medicare levy surcharge
private health insurance rebate
child support
Centrelink entitlements
HELP or study loan repayments
some tax offsets
This is why employees should understand the full effect of a salary package before agreeing to it.
Payroll Tax: Do Not Forget the State Rules
If your business is registered for payroll tax, or close to the payroll tax threshold, incentives may have state payroll tax consequences.
For Victorian employers, the State Revenue Office says certain fringe benefits must be included in wages declared for payroll tax. Common examples include cars, housing costs, school fees, meals and entertainment.
This is especially relevant for growing businesses.
A benefit that looks affordable from an income tax perspective may still affect payroll tax calculations.
Fair Work and Award Compliance Still Apply
Staff incentives should never be used to avoid minimum employment obligations.
Before introducing bonuses, commissions, annualised salaries or salary packaging, employers should check the applicable award, enterprise agreement or employment contract.
Fair Work guidance explains that some employees can be paid annualised wages or salaries, but awards and agreements may set rules around how these arrangements work.
The practical message is this: incentives should sit on top of a compliant wage structure.
They should not quietly replace overtime, penalty rates, allowances, leave loading or other entitlements unless the arrangement has been properly structured and documented.
Business.gov.au also notes that flexible working arrangements can support productivity, morale, job satisfaction, reduced stress, lower absenteeism, reduced staff turnover and attraction of new employees.
These incentives may not always deliver an immediate tax advantage, but they can be powerful retention tools.
Sometimes the best gold is not a bigger pay packet. It is a workplace where good people want to stay.
A Simple Incentive Checklist for Employers
Before offering a staff incentive, work through this checklist:
Identify the exact type of incentive.
Confirm whether it is cash, super, an allowance, a reimbursement or a benefit.
Check PAYG withholding.
Check super guarantee treatment.
Check FBT treatment.
Check reportable fringe benefit obligations.
Check payroll tax impact.
Check Fair Work, award and employment contract obligations.
Document the arrangement before it starts.
Review the arrangement each financial year.
This checklist can help protect your business from costly surprises.
It also helps employees understand what they are really receiving.
Gold Nugget: The Best Incentives Are Clear, Compliant and Valued
A good staff incentive should do three things:
It should be valuable to the employee.
It should be affordable for the employer.
It should be compliant from a tax, super and employment law perspective.
When those three pieces line up, staff incentives can become a golden tool for retention and performance.
When they do not, the business may end up with unexpected FBT, super, payroll tax or Fair Work issues.
Final Thoughts
Offering salary incentives to staff can be a smart way to reward performance and strengthen your team.
But the structure matters.
A bonus, salary sacrifice arrangement, novated lease, gift card, laptop, allowance or training package can each create different obligations. The right option depends on your business, your employees, your payroll system and your compliance position.
Before you offer a new staff incentive, take the time to check the tax and payroll impact first.
It is much easier to polish the plan before it is offered than to clean up the dust later.
Need Help Structuring Staff Incentives?
If you are thinking about offering bonuses, salary sacrifice, salary packaging or other staff benefits, we can help you understand the tax, super, FBT and payroll implications before you commit.
Contact DJ Grigg Financial to review your options and structure staff incentives with confidence.
Let’s help you reward your team without creating unnecessary compliance headaches.
Compliance: Setting Up the Right Foundations for Business Success
Starting a business is exciting.
There is the name, the idea, the dream, the customers and the big plans.
But before the gold rush begins, every business needs something less shiny but far more valuable: strong compliance foundations.
Compliance is not just paperwork. It is the framework that protects your business, keeps the ATO and other regulators satisfied, and helps you avoid expensive mistakes later.
Think of it like building a mine. Before you can extract the gold, you need the right supports in place. If the foundations are weak, the whole operation becomes risky.
For Australian business owners, this means choosing the right structure, registering correctly, keeping proper records, understanding tax obligations and staying on top of payroll, super and reporting responsibilities.
Key Takeaways
The main Australian business structures are sole trader, partnership, company and trust.
Every business needs the right tax registrations, including an ABN and TFN.
You may also need GST, PAYG withholding, FBT and other registrations.
If you are setting up a company, directors must apply for a director ID before appointment.
GST registration is generally required once turnover reaches $75,000.
From 1 July 2026, employers must pay super at the same time as wages under Payday Super.
Good bookkeeping and record keeping are essential for tax, BAS, payroll and business decisions.
Licences, permits and industry rules should be checked before trading.
Getting advice early can prevent small errors from becoming costly compliance problems.
Why Compliance Matters from Day One
Many business owners focus first on sales, branding and customers. That makes sense. Without customers, there is no business.
But compliance is the quiet engine underneath.
If it is set up properly, you can trade with confidence, understand your numbers and meet your obligations on time. If it is ignored, problems can quickly build up: unpaid GST, missed super, incorrect payroll, poor records, tax debt or the wrong business structure.
The Australian Taxation Office states: “When you start a business you need to get an Australian business number (ABN) and a tax file number (TFN).”
That is the starting line, not the finish line.
Depending on your business, you may also need to register for GST, PAYG withholding, fringe benefits tax, a business name, industry licences and payroll systems.
1. Choose the Right Business Structure
Your business structure affects tax, legal responsibility, asset protection, administration costs and how profits are distributed.
In Australia, the common structures are:
sole trader
partnership
company
trust
business.gov.au explains that a sole trader structure is simple and gives full control, while a company is more complex and is a separate legal entity. A trust involves a trustee being responsible for business operations.
The ATO also confirms that your structure affects who owns and operates the business, your tax and registration requirements, and your legal liabilities.
There is no one-size-fits-all answer.
A sole trader structure may be simple and cost-effective. A company may provide a clearer separation between the business and the owners. A trust may be useful in some family or asset protection situations. A partnership may suit two or more people operating together.
The right structure depends on your goals, risks, income expectations and future plans.
Gold Nugget: Do not choose a structure just because it is cheap today. Choose the structure that can support the business you are trying to build.
2. Register Your Business Correctly
Once you understand your structure, the next step is registration.
Most businesses will need an ABN. Partnerships, companies and trusts generally need their own TFN. Sole traders use their individual TFN. Depending on your activities, you may also need GST, PAYG withholding, FBT, fuel tax credits or other registrations.
The Australian Government Business Registration Service allows businesses to apply for an ABN, register a company or business name, and apply for tax registrations in one place.
You may need to register a business name if you trade under a name other than your own personal name. ASIC explains that the registers you need depend on your business structure and the names you use when doing business.
Getting this right early helps avoid confusion with invoices, contracts, bank accounts, tax reporting and legal responsibilities.
3. If You Set Up a Company, Do Not Forget the Director ID
If you are becoming a company director, you must apply for a director identification number before appointment.
ASIC states: “All company directors must have a director identification number, also called a director ID.”
A director ID is unique to the person and is kept forever. It helps prevent false or fraudulent director identities and assists with tracing director relationships over time.
This is an important compliance step for anyone setting up a company or becoming a director of an existing company.
Gold Nugget: A company can be a powerful business structure, but it comes with director responsibilities. Make sure the paperwork is solid before you start digging.
4. Understand GST and BAS Obligations
GST is one of the most common areas where small businesses get caught.
Generally, you must register for GST if your business has GST turnover of $75,000 or more. The threshold is $150,000 or more for non-profit organisations. Taxi, limousine and ride-sourcing drivers must register for GST regardless of turnover.
Once registered, you generally need to include GST on taxable sales, claim GST credits where allowed, and report through business activity statements.
The risk is that many new business owners treat GST as income.
It is not.
GST collected belongs to the tax system. If it is not set aside, BAS time can feel like finding fool’s gold: the bank balance looked good, but some of it was never really yours.
A practical habit is to set aside GST regularly, reconcile your accounts often and review your BAS before lodgement.
5. Know Your PAYG Withholding Responsibilities
If you employ staff, you will usually need to register for PAYG withholding.
PAYG withholding means you withhold tax from payments to employees and certain other payees, then send that tax to the ATO.
The Australian Business Register explains that you must register for PAYG withholding if you pay employees, contractors under voluntary agreements, or businesses that do not quote an ABN.
This is separate from PAYG instalments, which are prepayments of tax on business and investment income.
The similar names can be confusing, but they are not the same thing.
PAYG withholding relates to amounts withheld from payments you make. PAYG instalments relate to prepaying your own expected tax.
6. Understand Company Tax Rates
If you trade through a company, company tax may apply.
The ATO states that the full company tax rate is 30% for companies that are not eligible for the lower company tax rate. From the 2021–22 income year onwards, eligible base rate entities apply the 25% company tax rate.
This is why it is important to avoid generic statements such as “companies pay around a quarter of profits in tax.”
Some companies may pay 25%. Others may pay 30%.
The correct rate depends on the company’s circumstances, including whether it qualifies as a base rate entity.
Company tax is only one part of the picture. Directors and shareholders also need to consider wages, dividends, Division 7A, franking credits and personal tax outcomes.
This is where advice can be worth its weight in gold.
7. Open a Separate Business Bank Account
A separate business bank account makes bookkeeping cleaner and tax reporting easier.
For companies, trusts and partnerships, a dedicated business bank account is usually essential because the business is separate from the individuals involved.
For sole traders, a separate bank account is still strongly recommended.
Mixing personal and business transactions creates unnecessary confusion. It can make it harder to identify deductible expenses, reconcile income, prepare BAS and respond to ATO questions.
A clear bank account structure helps you see what is business income, what is private spending and what needs to be set aside for tax.
Gold Nugget: A clean business bank account is like a clear stream in a goldfield. You can see what is flowing in, what is flowing out and where the value is going.
8. Set Up Bookkeeping and Record Keeping Properly
Bookkeeping is not just data entry. It is the financial evidence trail for your business.
The ATO says businesses need records to meet tax, superannuation and registration obligations.
business.gov.au also provides guidance on which business records to keep, how to keep them and for how long.
Good records may include:
sales invoices
purchase receipts
bank statements
loan documents
asset purchase records
payroll records
superannuation records
BAS workings
contracts and agreements
stock records
motor vehicle records
home office records where relevant
Cloud accounting software can help, but software alone does not guarantee accuracy.
You still need correct coding, regular reconciliations, source documents and review processes.
Expert tip: The question is not just “Can I claim this?” The better question is “Do I have the records to support this claim?”
9. Prepare for Payroll, Super and Payday Super
Hiring staff brings extra obligations.
Before hiring, you need to understand wages, awards, agreements, leave, payslips, payroll tax where relevant, PAYG withholding, superannuation and Single Touch Payroll.
Fair Work explains that minimum employment terms and conditions come from awards, registered agreements, employment contracts and the National Employment Standards.
From 1 July 2026, Payday Super applies. Employers must pay superannuation contributions at the same time as wages. The super guarantee rate is 12% from 1 July 2025.
This change means employers need stronger payroll systems and cash flow planning. Super can no longer be treated as a quarterly catch-up.
Gold Nugget: Payday Super turns super from a quarterly boulder into a regular payroll nugget. Smaller, more frequent payments may be easier to manage if your systems are ready.
10. Check Licences, Permits and Industry Rules
Tax registrations are only part of compliance.
Your business may also need licences, permits, registrations or approvals from federal, state or local government.
business.gov.au recommends using the Australian Business Licence and Information Service to find licences and permits for your business type.
Business Victoria also directs business owners to ABLIS to find local, state and federal licences, registrations and permits.
This can be especially important for businesses in food, building, health, beauty, transport, accommodation, childcare, professional services and trades.
Do not assume that having an ABN means you are fully compliant.
An ABN lets you identify your business for tax and commercial purposes. It does not automatically cover council permits, industry approvals, professional registrations or workplace obligations.
11. Build a Compliance Calendar
A compliance calendar helps you stay ahead of important dates.
Depending on your business, your calendar may include:
BAS due dates
income tax lodgement dates
PAYG withholding payment dates
super payment dates
payroll reporting dates
ASIC annual review dates
workers compensation renewals
insurance renewals
licence and permit renewals
employee review dates
trust distribution resolution dates, where relevant
The goal is to move from reactive to prepared.
Instead of scrambling when something is due, you can plan ahead, protect cash flow and avoid penalties.
Compliance becomes much easier when it is built into your business rhythm.
12. Get Advice Before Small Problems Become Expensive
Many compliance mistakes start small.
A missing registration. A poorly chosen structure. A bank account used for everything. A payroll category set up incorrectly. GST not set aside. Super paid late. Records missing.
At first, these may not seem serious.
Over time, they can create tax debt, ATO attention, staff issues, director risk and unnecessary stress.
That is why it is worth getting advice early.
The right accountant can help you choose the right structure, understand your registrations, set up bookkeeping properly, plan for tax and avoid common compliance traps.
At DJ Grigg Financial, we help business owners build strong financial foundations, from startup registrations through to tax, bookkeeping, BAS, payroll and ongoing business compliance.
Because when the foundations are solid, your business has a better chance of finding real gold.
Final Word
Compliance may not be the glamorous part of business, but it is one of the most valuable.
Strong foundations help you protect your business, understand your numbers and make better decisions.
Whether you are starting a new business, restructuring an existing one or trying to clean up your records, now is the time to make sure your compliance systems are working properly.
Need help setting up your business the right way?
Contact DJ Grigg Financial today and let us help you build golden foundations for long-term business success.
Is Checking Your Supplier’s ABN Worth Its Weight in Gold?
FOCUS: Why checking supplier ABNs protects your GST credits, BAS accuracy and business cash flow
When you receive a supplier invoice, it is easy to focus on the amount owing and move straight to payment. But before that invoice is approved, there is one golden check every business should make: is the supplier’s ABN valid, and are they registered for GST?
A supplier ABN check may feel like a small bookkeeping step, but it can protect your business from incorrect GST claims, invalid tax invoices, PAYG withholding issues and avoidable BAS corrections. Think of it as panning for gold before you bank the claim: a few minutes of checking can help separate compliant invoices from costly surprises.
Key Takeaways
An ABN alone is not enough. To claim GST credits, the supplier generally needs to be registered for GST and you need a valid tax invoice.
If a supplier does not quote a valid ABN, you may need to withhold 47% from the payment and send it to the ATO.
For purchases over $82.50 including GST, you generally need a valid tax invoice before claiming a GST credit.
For tax invoices of $1,000 or more, the buyer’s identity or ABN must also be shown.
Overseas supplier invoices need extra care. GST rules differ for imported services, digital products and low-value imported goods.
ABN Lookup helps confirm ABN status, business type and GST registration, but it does not verify bank account ownership or protect you from invoice fraud.
Regular supplier checks are good business governance and can reduce BAS errors before they become bigger problems.
What is an ABN and why does it matter?
An Australian Business Number, or ABN, is a unique number used to identify a business when dealing with the ATO, other businesses and government agencies. ABN Lookup provides free access to public Australian Business Register information, including whether an ABN is active or cancelled, the business type, public ABR details and GST registration status.
That makes ABN Lookup a useful first stop before claiming GST or paying a new supplier.
However, an ABN is not the same as GST registration. A supplier may have an active ABN but not be registered for GST. If they are not registered, they generally cannot charge GST, and you generally cannot claim a GST credit on that purchase.
Why this matters for GST credits
GST is 10% on most goods and services sold or consumed in Australia. For GST-registered businesses, the GST included in business purchases may be claimable as a GST credit, provided the rules are met.
Business.gov.au explains GST as “a tax of 10% on most goods, services and other items sold or consumed in Australia.”
The ATO says you cannot claim GST credits for purchases from a supplier that is not registered, or required to be registered, for GST.
In plain English: if a supplier charges GST but is not registered for GST, the invoice may look polished, but the GST claim may be fool’s gold.
The golden rule: check both ABN and GST registration
Before claiming GST on a supplier invoice, check:
The ABN is valid and active.
The ABN belongs to the supplier named on the invoice.
The supplier was registered for GST at the time of the supply.
The invoice is a valid tax invoice.
The purchase was for your business.
The GST amount has been calculated correctly.
The ATO recommends checking contractor and supplier details, including ABN, name and GST registration, using ABN Lookup or the ATO app.
What makes a valid tax invoice?
A valid tax invoice is more than just an invoice with the words “Tax Invoice” at the top.
Taxable sales under $1,000, the ATO says a tax invoice must include enough information to clearly determine details such as the seller’s identity, the seller’s ABN, the date of issue, a description of what was sold, the GST amount or a statement that the price includes GST, and the extent to which each sale is taxable.
For sales of $1,000 or more, the tax invoice must also show the buyer’s identity or ABN.
For GST credit claims, the ATO says: “You must have a tax invoice to claim a GST credit for purchases that cost more than A$82.50.”
Business.gov.au also notes that if a GST-registered business makes a taxable sale of more than $82.50 including GST, or the customer asks for a tax invoice, the supplier has 28 days to provide one.
What if a supplier does not quote an ABN?
This is where many businesses get caught.
If a supplier does not quote an ABN, and the total payment for goods and services is more than $75 excluding GST, you generally need to withhold tax at the top rate and pay that amount to the ATO.
The current withholding rate is 47%.
Business.gov.au also states: “if you don’t have one, other businesses must withhold 47% tax from any payments they make to you.”
The ATO also warns that if the ABN quoted on the invoice is not valid or the details do not match the supplier, you must withhold from the payment at the top tax rate.
There are exceptions, including where the supplier provides a valid Statement by a supplier not quoting an ABN. If a statement is provided separately, keep it with the transaction records so you can show why you did not withhold.
Do you need to check every supplier every time?
For long-standing suppliers, checking every invoice may not be practical. But supplier details can change. ABNs can be cancelled, GST registrations can end, and business structures can change.
A practical approach is to check:
all new suppliers before the first payment
suppliers before claiming GST for the first time
high-value suppliers before payment
suppliers with changed bank details
suppliers with invoices showing GST for the first time
overseas or online platform suppliers
contractors included in Taxable Payments Annual Reporting
your supplier list before BAS lodgment or at least annually
ABN Lookup offers tools for multiple searches using ABNs, ACNs or names, which can be helpful for reviewing a larger supplier list.
Be careful with overseas supplier invoices
Overseas invoices can be tricky.
Australian GST may apply to imported services, digital products and low-value imported goods sold to customers in Australia. However, the rules differ depending on whether the customer is an Australian consumer or a GST-registered Australian business.
The ATO explains that simplified GST registration is available for non-resident businesses that do not need an ABN and sell imported services, digital products or low-value imported goods to Australian consumers.
This means you should not assume that GST shown on an overseas invoice automatically gives your business a GST credit. For GST-registered Australian businesses, it is important to provide your ABN where required and check whether the supply should have GST charged in the first place.
What if you find an error after lodging your BAS?
If you discover that GST was claimed incorrectly, do not simply ignore it and hope it washes through next quarter.
The ATO has rules for correcting GST errors. Some errors can be corrected on a later BAS, but only if the ATO’s conditions are met. The ATO also says you cannot correct an error to claim additional GST credits where the four-year credit time limit has expired.
A good supplier ABN review process helps you catch these issues before BAS lodgment, rather than digging through old transactions later.
Keep digital evidence of your checks
When you check a supplier’s ABN and GST registration, save evidence. This could include a dated PDF extract, screenshot, supplier onboarding checklist or system note attached to the supplier record.
Business.gov.au says businesses can keep digital or paper records, and that the ATO recommends digital record keeping where possible.
Business.gov.au also reminds businesses that records are generally kept for five years.
A dated digital trail is like a gold hallmark: it helps prove the quality of your process if a question is asked later.
ABN Lookup is useful, but it is not a fraud shield
ABN Lookup can help confirm public business details, ABN status, business type and GST registration status. But it does not verify that the bank account on an invoice belongs to that supplier.
Before paying a new supplier, or changing existing supplier bank details, confirm the details using a trusted contact method. Do not rely solely on the email requesting the change.
This is especially important for businesses with high invoice volumes or multiple staff approving supplier payments.
Suggested supplier ABN checklist
Use this checklist before paying a new supplier or claiming GST:
Search the supplier on ABN Lookup.
Confirm the ABN is active.
Confirm the entity name or business name matches the invoice.
Confirm GST registration applies at the time of supply.
Check the invoice is a valid tax invoice.
Check whether the invoice total is over $82.50 including GST.
For invoices of $1,000 or more, check your business name or ABN appears.
If no ABN is quoted, consider whether 47% withholding applies.
If the supplier provides a Statement by a supplier, save it with the transaction.
Save a dated copy of the ABN Lookup result.
Confirm supplier bank account changes through a trusted channel.
Why this should be part of your bookkeeping process
The ATO’s latest GST gap estimates show why good GST governance matters. The estimated net GST gap increased to $8.7 billion in 2023–24, or 9.4% of theoretical GST.
For small and medium businesses, this is a reminder that GST compliance is not just an end-of-quarter task. It starts when the invoice arrives.
A strong supplier checking process can help your business:
reduce incorrect GST claims
improve BAS accuracy
avoid no-ABN withholding mistakes
identify supplier record issues early
strengthen internal controls
reduce the risk of invoice fraud
keep cleaner records for tax time
Need help refining your supplier process?
Supplier ABN checks might not be glamorous, but they are golden when it comes to protecting your business.
At DJ Grigg Financial, we help business owners strengthen their bookkeeping, GST and BAS processes so they can make confident decisions and avoid costly compliance issues.
If you would like help reviewing your supplier list, checking your GST processes or improving your bookkeeping controls, contact DJ Grigg Financial today.
