Two-monthly or six-monthly GST: which fits your business?

Most contractors pick a GST filing frequency at registration and never look at it again. It's worth reviewing once your income has settled into a pattern, because the frequency decision isn't about paperwork. It changes how long GST money sits in your account, how big each payment is, and, less obviously, how your provisional tax is scheduled. This guide is that review.

The options, and who can use them

• Two-monthly: the default. Six returns a year.
• Six-monthly: available while turnover is under $500,000. Two returns a year.
• Monthly: compulsory over $24 million and optional below it. For a solo contractor it's only worth considering if you're consistently due refunds and want them faster.

So for almost every contractor the real question is two-monthly versus six-monthly.

The cash-flow trade

Six-monthly means the GST you collect sits with you for up to half a year before it's handed over. That can look like a cash-flow cushion, but it also means a growing amount of money that isn't yours is sitting in your account, and a bigger single payment when the return lands. A contractor collecting $1,500 of GST a month faces a roughly $9,000 payment twice a year on six-monthly, versus $3,000 six times a year on two-monthly.

Which is better depends on how you manage the money. If you have a working set-aside habit (the three systems), the money is set aside either way and six-monthly just means less admin. If you don't, six-monthly is the frequency most likely to turn GST you've gradually spent into a difficult bill.

The admin trade

Two-monthly is six small reconciliations a year, and six-monthly is two big ones. Small and frequent tends to stay accurate, because the period is short enough to remember and errors surface quickly. Reconciling six months of receipts in one sitting is where input claims get missed. If your bookkeeping is continuous (software-tracked, reconciled as you go), the longer period costs nothing extra. If you tend to do it all in a batch, frequent small batches usually produce better returns.

How frequency changes your provisional tax

Two second-order effects most frequency comparisons skip:

• Instalment count. Six-monthly GST filers pay provisional tax in two larger instalments (28 October and 7 May) instead of three (28 August, 15 January, 7 May). That means fewer but bigger tax payments, stacked on top of your two bigger GST payments.
• Ratio option eligibility. The ratio option (provisional tax that tracks your actual sales) requires monthly or two-monthly GST filing. If you choose six-monthly, you can't use the ratio option while you're on it.

Switching

You change the frequency in myIR, and the change takes effect from the start of a taxable period rather than mid-period. The question to ask once a year is simple: did the current frequency's payments ever catch you out? If they did, that argues for shorter periods. If you had a year of non-events on a working set-aside system, you can take the six-monthly admin saving if you want it.

How Coffer helps

You set your filing frequency in Coffer, and the dashboard follows it. Due dates and countdowns match your actual cycle. The GST ringfence adds up per period, so you can watch each return's total build whatever frequency you're on. If you change frequency in myIR, change the setting to match and the dates stay accurate.