Change your GST accounting method in Xero

Change your organisation's GST accounting method in Xero, from accruals to cash or cash to accruals, in consultation with your accountant or bookkeeper. Check with them to make sure you understand the implications of changing GST accounting methods and that you're still reporting accurately to the ATO.

Change accounting methods with the ATO

Contact the ATO to see if you can change your accounting method, and when you can make the change.

How to change accounting methods (ATO website)

Review transactions, publish reports and set lock date

  1. Check that all transactions in Xero are correct and complete through to the end of the last tax period before the planned change.
  2. Run and publish your BAS and GST Reconciliation report with the current GST accounting method.
  3. Set or change the lock date to the end of the tax period before the planned change of accounting method.

Change GST accounting method in Xero

  1. In the Settings menu, select General Settings.
  2. Under the Organisation heading, click Financial Settings.
  3. In the GST Accounting Method list, click the method you are changing to.
  4. Click Save.

Record a GST adjustment

Once you’ve changed the GST accounting method, you may need to make an adjustment so your BAS is correct.

We recommend you confirm with your accountant, bookkeeper or the ATO what adjustments are required and how to calculate them.

To record the adjustment in Xero:

  1. Create a manual journal.
  2. Code all entries to the GST account using the relevant tax rates, and date the journal so it’s included in the BAS period you need.

For example:

  • Reduce sales (G1) by 11,000 (inclusive of 1,000 GST).
  • Reduce purchases (G11) by 2,200 (inclusive of 200 GST).

Activity statement before the adjustment

Image showing BAS statement.

Manual journal to record GST adjustment

Image showing manual journal.

Activity statement after adjustment

Image showing adjusted BAS statement.

Check your BAS after changing GST accounting method

Check the following in the first few BAS you create after changing the GST accounting method.

From cash to accruals basisFrom accruals to cash basis
Check all entries are included.Check entries already reported aren't repeated.
Unpaid invoices and bills raised prior to the change may not be reported when paid.Unpaid invoices and bills raised prior to the change may be reported again when paid.

GST Reconciliation report after changing the GST accounting method in Xero

All GST reports are based on the GST accounting method in place at the time the report is run.

Once you’ve changed the GST accounting method, the GST Reconciliation report may not be correct. This is because the report should include all tax periods, and some tax periods will have had a different GST accounting method. If the report is not correct, you need to manually reconcile GST.

Talk to your accountant or bookkeeper if you need assistance to reconcile your GST.