GST on invoice finance: when you pay it, whether the funder advances it, and how it shows on your BAS

GST on invoice finance follows your original sale, not the funding. You still owe the GST in each invoice, and it lands on the BAS your accounting method picks: on the non-cash basis, the period you issue the invoice; on the cash basis, generally the period you’re paid. Advances are usually worked out on the GST-inclusive total, so part of the early cash is the ATO’s.

That last sentence is the one that matters in practice. Funding an invoice doesn’t change your tax. It changes when cash arrives, and that can make the GST feel paid for when it isn’t. This guide follows one invoice from the day it’s issued to the day it shows up on a BAS, so you can see exactly where the GST sits at each step.

What stands behind the GST on a funded invoice?

Start with the question this site always asks: what stands behind this? An invoice is a debt your customer owes you. If you charged GST, one-eleventh of that debt is tax you collect for the ATO. Nothing about funding moves that slice.

There are two transactions to keep apart:

1. Your sale to your customer. A taxable supply. You charged GST, you owe it, and your accounting method decides which BAS it goes on.
2. Your deal with the funder. Either a loan secured by your invoices (often called invoice discounting) or a sale of the invoices (factoring). The ATO treats lending money and dealing in debts as financial supplies, which are input taxed. They don’t have GST in their price.

So the funder doesn’t take over your GST, and funding doesn’t add GST on top. The tax stays with the sale. If you want the wider comparison between this route and a term loan, see invoice finance versus a business loan.

Does invoice finance advance the GST?

In most facilities, yes, in effect. The debt your customer owes is the full invoice total, GST included, and funders generally calculate their advance as a percentage of that total. A $33,000 invoice is a $33,000 debt, not a $30,000 one.

That’s helpful and risky at the same time. Helpful, because the advance is bigger than it would be on the ex-GST figure. Risky, because $3,000 of that $33,000 was never yours to spend.

Three things to check on the term sheet before you rely on this:

• The base for the advance. Most quote “up to X% of approved invoices”. Confirm whether that means the GST-inclusive total.
• Concentration and ineligible amounts. Funders often cap how much they’ll advance against one customer, and exclude invoices that are old, disputed or to related parties.
• When the balance comes back. You get the rest, less fees, when your customer pays. If your customer pays late, the GST may fall due long before that balance returns.

Which BAS does a funded invoice land on?

This is where your accounting method decides everything. The ATO page on choosing an accounting method says businesses with aggregated turnover under $10 million can choose cash or non-cash accounting. Most larger businesses must use the non-cash method.

Your GST method	Loan against invoices (discounting)	Sale of invoices (factoring)
Non-cash (accruals)	GST goes on the BAS for the period you issue the invoice, or are paid if that’s earlier	Same. The GST was already reported when you invoiced
Cash basis	GST goes on the BAS for the period your customer’s payment is received	Less clear-cut. Get advice before your first sale

Non-cash basis: the GST is due before the customer pays

On the non-cash basis, you report GST in the period you issue the invoice or receive any payment, whichever comes first. Issue a 60-day invoice in late September and the GST belongs on your July to September BAS, even though your customer won’t pay until late November.

This is exactly why many non-cash businesses fund invoices in the first place: the ATO wants its share before the customer pays theirs. An advance closes that gap, as long as the GST portion goes where it belongs.

Cash basis: the loan isn’t your customer’s payment

On the cash basis, you generally report GST when you receive payment for the sale. With a loan secured by your invoices, the funder’s advance is borrowed money, not your customer paying you. The customer still owes you, and the GST is generally reported in the period their payment comes in.

Factoring is different, because you sell the debt. The ATO’s ruling GSTR 2004/4 covers assigning payment streams, including debt factoring and invoice discounting. It treats assigning book debts as the disposal of an interest in a debt, a financial supply. How that interacts with cash-basis attribution depends on your arrangement, so have your accountant read the facility before the first invoice is sold, not after the first BAS.

Ready to put a debtor book to work and want a second opinion on the structure? Check your options and we’ll look at the invoices and the timing together.

Is the invoice finance fee GST free?

Mostly, but read each line. The discount fee or finance charge is generally part of a financial supply, so it’s input taxed. No GST is built into it, and there’s no GST credit to claim.

Some facilities also charge admin, service, collection or software fees, and some of those may include GST. The rule is simple: claim a credit only where the funder’s tax invoice shows GST. Don’t assume either way.

For the whole cost picture in dollars, not just the GST question, our guide to the total cost of business finance walks through comparing offers line by line.

Illustrative example: one invoice, from issue to BAS

Illustrative only. The business, figures and advance percentage are examples, not a client or any funder’s policy.

A commercial print shop in Adelaide supplies a retail chain on 60-day terms. On 15 September it issues a tax invoice for $55,000: $50,000 plus $5,000 GST. It accounts for GST on the non-cash basis and lodges quarterly.

Here’s the trail:

1. 15 September: invoice issued. Because the shop uses the non-cash basis, the $5,000 GST is attributed to the July to September quarter.
2. 17 September: funder advances 80%. The advance is worked out on the full $55,000, so $44,000 lands in the account. The owner pays paper suppliers and wages.
3. 28 October: BAS due. The July to September BAS is due on 28 October 2026, per the ATO’s due dates for lodging and paying. The $5,000 is owed, though the customer hasn’t paid.
4. 14 November: customer pays. The chain pays the $55,000 into the facility account. The funder keeps its $44,000 and its fees, and releases the balance.

If the owner set aside $5,000 from the $44,000 advance in September, the BAS on 28 October is a non-event. If all $44,000 was spent, the shop now owes the ATO $5,000 with a three-week wait until the balance comes back. That’s the trap.

Same invoice, cash basis, with a loan against the invoices instead: the $5,000 GST would generally go on the October to December BAS, because that’s when the customer’s payment arrives. For most quarterly lodgers, that BAS is due on 28 February 2027.

The mistakes that cost funded businesses money

Spending the whole advance. The most common one. Treat one-eleventh of every funded invoice on a GST-inclusive sale as already gone. Some owners move it to a separate account the day the advance lands.

Paying the BAS late because the balance hasn’t come back. It’s tempting to wait for the customer’s payment. But general interest charge (GIC) incurred on or after 1 July 2025 can no longer be claimed as a tax deduction, as the ATO’s small business newsroom points out. A late BAS now costs more after tax than it used to. And an ATO debt makes your next funding conversation harder; see how funders read ATO debt and late lodgements.

Forgetting the adjustment note. If a customer disputes a funded invoice and you agree to reduce it, issue an adjustment note and claim the decreasing adjustment for the GST you no longer owe. The funder will usually pull back the advance on that invoice too. Both sides of the ledger move, and missing either one leaves the books and the facility out of step.

Claiming GST credits on finance charges. Most discount fees carry no GST. Claiming a credit on them is an error that surfaces at the worst time, during an ATO review or a lender’s due diligence.

Assuming factoring and discounting are the same for tax. They often feel the same day to day. On the cash basis especially, whether you borrowed against invoices or sold them can change your GST timing. Know which one you’ve signed.

Timing a facility around BAS season

The quarterly BAS dates are the pressure points: 28 October for July to September, 28 February for October to December, 28 April for January to March, and 28 July for April to June. Monthly lodgers generally lodge and pay by the 21st of the following month.

A practical routine for a business funding its debtor book:

• Tag every funded invoice in your accounting software with the date issued and the BAS period it falls in.
• Move the GST share of each advance into a holding account the day it lands.
• Two weeks before each BAS, reconcile funded invoices, adjustment notes and the funder’s statement against your GST figure.
• Keep the funder’s statements and tax invoices together, so fees with and without GST are easy to separate.

A tidy record like this also helps the next time you apply for anything. Our guide to building a funding pack lenders want covers the rest of the file.

Your invoices are already worth something. Let’s make the timing work for you

If you’re reading about GST on invoice finance, you probably have customers who pay well but slowly, and a BAS that doesn’t wait for them. That’s a strong starting point. A debtor book of reliable customers is one of the clearest assets a business can lend against, and the GST question is a planning step, not a roadblock. We look at what your unpaid invoices can fund alongside your BAS calendar, so the facility fits how your cash really moves.

The enquiry takes about a minute, and asking won’t touch your credit file: there’s no credit check when you first enquire. Your details aren’t passed around a pile of lenders, so your phone stays quiet. A real person reads what you send, looks at your customers, your terms and your GST method, and calls you to talk through the options.

Please fill the form in carefully: your turnover, your main customers’ payment terms, whether you’re on the cash or non-cash basis, and any ATO balance. Accurate answers mean the first route we suggest is the one that fits.

Let’s look at your invoices together →