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Enhance Cash Flow with GST-Compliant Cash Accounting

Cash Accounting Scheme

Unlock Your Business’s Cash Flow Potential with Our GST-Compliant Cash Accounting Scheme, Maximizing Financial Efficiency.

Objective

At BluTrust Pte. Ltd., we understand the challenges of managing a small business, especially when it comes to finances. That’s why we recommend the Cash Accounting Scheme for businesses with an annual turnover of less than S$1 million. This scheme offers two significant advantages:

Enhanced Cash Flow Management

With the Cash Accounting Scheme, you only account for output tax when payment is actually received from your clients. This is a boon for your cash flow. Similarly, input tax is claimable only upon payment to your vendors. 

If you’re not part of this scheme, you’d be bound by the standard time of supply rules, which could mean paying output tax before even receiving customer payments.

Streamlined Compliance

BluTrust Pte. Ltd. values efficiency, and so does this scheme. It simplifies your GST reporting by requiring you to track only the payments you receive and make.

Eligibility Criteria

To qualify for this beneficial scheme, you must:

  1. Be voluntarily registered for GST.
  2. Expect your taxable revenue to stay below S$1 million for the next 12 months.
  3. Have no outstanding GST returns or unpaid taxes.
  4. Have a clean record for the past three years in terms of GST Act or Customs Act violations, penalties, or removal from the Cash Accounting Scheme.

Approval Process

Your application will be approved if it aligns with your business’s nature, volume, and value of taxable supplies, as well as your accounting practices. Once approved, you’ll be notified of the effective date, which marks the beginning of your next accounting period. The scheme lasts for three years, and you can reapply three months before your current term expires.

Accounting and Reporting Guidelines

While enrolled in the scheme, your net GST for each period will be calculated as the total GST collected from customer payments minus the total GST paid on business purchases. Payment dates will depend on the payment method used.

Limitations

Please note that the scheme doesn’t apply to specific transactions like hire purchase agreements, conditional sales, or credit sales. For these transactions, standard time of supply rules are applicable.

Additional Responsibilities

If you decide to exit the scheme, you can continue to account for output tax based on payments received for supplies made while enrolled. However, for supplies made after your exit, you’ll need to follow the standard time of supply rules.

Important Note

If you’re deregistering from GST or closing your business, you’ll need to settle any outstanding output tax for the 12 months prior to your deregistration or closure in your final GST return.

Capital Allowances

Deductions for the decline in value of depreciating assets are available under the Uniform capital allowance (UCA) system. In addition to the rules for depreciating assets, deductions are allowed for certain other capital expenditure.

Small business entities have the option of choosing simplified depreciation rules. Under these rules, small business entities can claim an immediate deduction if the cost is below the relevant threshold or else add the asset to the small business depreciation pool.

Land, trading stock and most intangible assets (excluding exceptions such as intellectual property and in-house software) are not depreciating assets.

The decline in value is generally calculated by spreading the cost of the asset over its effective life, using one of two methods:

Prime cost method – decline in value each year is calculated as a percentage of the initial cost of the asset
Diminishing value method – decline in value each year is calculated as a percentage of the opening depreciated value of the asset
MORE: Australian Taxation Office (ATO) Decline in value calculator.

For most depreciating assets, taxpayers can either self-assess the effective life, or use estimates published by the ATO. Taxpayers can recalculate, either up or down, the effective life of an asset if the circumstances of use change and the effective life initially chosen is no longer accurate. An improvement to an asset that increases its cost by 10% or more in a year may result in an obligation to recalculate the effective life of the asset.

Decline in value of cars is restricted to the car limit. From 1 July 2022, the luxury car tax threshold for luxury cars is $64,741 (it was $60,733 for the year commencing 1 July 2021). Luxury car leases are treated as a notional sale and purchase, with decline in value restricted to the car limit.

The decline in value of certain depreciating assets with a cost or opening adjustable value of less than $1,000 can be calculated through a low-value pool. The decline in value for depreciating assets in the pool is calculated at an annual diminishing value rate of 37.5%.

Changes for 2022 and 2023

From 12 March 2020 until 31 December 2020, the asset cost threshold for the instant asset write-off (which is usually only available to small business entities) has increased from $30,000 to $150,000 and the eligibility criteria expended to cover entities with an aggregated turnover threshold of less than $500 million (up from $50 million).

Further, from 12 March 2020 until 30 June 2021 the Backing business investment measure applied to businesses with aggregated turnover below $500 million and provides either:

A deduction of 50% of the cost or opening adjustable value of an eligible asset on installation (existing depreciation rules apply to the balance of the asset's cost), or
For businesses using a small business depreciation pool, a deduction of 57.5% of the cost of the asset in the first year, with the balance added the asset to the small business pool
In addition, from 6 October 2020 to 30 June 2023, full expensing applies to allow eligible businesses with an aggregated turnover of less than $5 billion to deduct the full cost of new eligible depreciating assets. For businesses with aggregated turnover of less than $50 million, full expensing also applies to eligible second-hand assets.

Activity Statement

Businesses use activity statements to report and pay a number of tax obligations, including GST, pay as you go (PAYG) instalments, PAYG withholding and fringe benefits tax. Non-business taxpayers who need to pay quarterly PAYG instalments also use activity statements.

Activity statements are personalised to each taxpayer to support reporting against identified obligations.

Activity statements for businesses may be due either quarterly or monthly. Generally, businesses can lodge and pay quarterly if annual turnover is less than $20 million, and total annual PAYG withholding is $25,000 or less. Businesses that exceed one or both of those thresholds will have at least some monthly obligations. Non-business taxpayers are generally required to lodge and pay quarterly.

Taxpayers with small obligations may be able to lodge and pay annually. Some taxpayers may receive an instalment notice for GST and/or PAYG instalments, instead of an activity statement.

The Australian Taxation Office (ATO) web site provides instructions on lodging and paying activity statements. Detailed instructions are provided for each of the different tax obligations:

GST (Goods and Services Tax)
PAYG (Pay As You Go) Instalments
PAYG (Pay As You Go) Withholding
FBT (Fringe Benefit Tax)
LCT (Luxury Car Tax)
WET (Wine Equalisation Tax)
Fuel Tax Credits