Accounting methods for business income

The amounts you include as assessable income in any income year depends on if you account on a cash or accruals basis.

On this page

• Accounting methods
• Cash basis
• Accruals basis

Accounting methods

The amounts you include as your assessable income in any income year depend on whether you account for your income on a cash basis or accruals basis. Don't confuse these 2 accounting methods with the 2 types of GST accounting methods (cash and non-cash).

You need to account for all transactions within an income year using the same method.

Cash basis

If you account for your assessable income on a cash basis you:

• include payments you received during the income year, even if the work was done in a different income year
• don't include amounts where the work was done, but you did not receive payment during the income year.

When you complete your tax return, you may have to reconcile any unpresented cheques to remove them from your income or deductions if you had previously included these amounts.

Accruals basis

If you account for your assessable income on an accruals basis, you include all income earned for work done during the income year. This is even if you hadn't received payment by the end of the income year.