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GST on an Invoice Basis
Once your revenue crosses a certain threshold, IRD requires you to file GST on an invoice basis. Here’s what that means and how to prepare.
GST Invoice Basis vs Payments Basis — What Changes When Your Revenue Grows
When you were smaller, you likely filed GST on a Payments Basis — meaning you paid or claimed GST when cash actually changed hands. That’s the simpler option, and it’s the default for most small businesses.
Once your revenue crosses the $2 million mark, IRD requires you to switch to the Invoice Basis. This means GST is returned based on when an invoice is issued, not when the cash is received.
What this means for your cash flow
The practical impact is that you may need to pay GST to IRD before your customer has actually paid you. For businesses with long payment terms or significant debtors, this can create a cash flow timing issue.
Planning for this transition — ideally before you hit the threshold — is important. Your accountant should be flagging this well in advance and helping you model the cash flow impact.