Accrued Income Explained: Key Impacts for Australians in 2025

Accrued income is one of those financial phrases that pops up in tax returns, investment statements, and business books—but it’s more than just jargon. For Australians navigating changing tax laws, investment options, or business reporting in 2025, understanding accrued income can help you make smarter decisions and avoid costly surprises.

What Is Accrued Income?

Simply put, accrued income is money you’ve earned but haven’t yet received. For individuals, it might be interest on a term deposit that’s earned daily but paid annually. For businesses, it’s revenue for goods delivered or services performed but not yet invoiced or paid. In both cases, this income is recorded in your accounts as soon as it’s earned, not when cash actually lands in your account.

Examples include:

• Interest accumulating on a savings account, paid at maturity

• Dividends declared but not yet received

• Consulting work completed in June, invoiced (and paid) in July

Why Accrued Income Matters for Australians in 2025

Recent updates in Australian tax policy and reporting standards have made it more important than ever to track accrued income accurately. Here’s why it matters this year:

• Tax Timing: The ATO requires income to be declared when it’s earned, not just when it’s received. With the 2025 tax year aligning more closely with international accounting standards (AASB 15 and IFRS 15), both individuals and businesses need to be vigilant about timing.

• Cash Flow Management: For small businesses and contractors, failing to track accrued income can distort your view of profitability and available cash. This can impact loan approvals, business valuations, and even the ability to pay suppliers or staff.

• Investment Reporting: Many investment platforms now provide detailed breakdowns of accrued interest and dividends, reflecting 2025’s greater focus on transparency. Not including these in your financial planning could mean missing out on potential deductions or underestimating your taxable income.

How to Track and Report Accrued Income

In 2025, digital tools and updated accounting software make it easier to stay on top of accrued income, but the responsibility remains yours. Here’s how you can stay compliant and informed:

• Use Accounting Software: Modern platforms (like MYOB, Xero, and QuickBooks) offer features to automatically track accrued income, helping you prepare accurate BAS and tax returns.

• Review Investment Statements: Banks and investment platforms now provide detailed reports. Look for sections on ‘accrued interest’ or ‘unpaid dividends’ in your 2025 statements.

• Consult Your Accountant: With the ATO’s ongoing digital transformation, rules around recognition of income (especially for trusts, partnerships, and sole traders) are evolving. A professional can ensure you’re not missing key updates or deductions.

For example, if you run a landscaping business and finish a project on June 28, 2025, but don’t get paid until July 5, that income is counted in your 2024-25 tax return—not the following year. Similarly, if you hold a fixed-term deposit, any interest that accrues up to June 30 must be declared for that year, even if it’s not paid until later.

Looking Ahead: Policy Changes and Best Practices

The Australian government’s push towards real-time reporting and digital tax compliance is only increasing. The ATO’s Single Touch Payroll (STP) Phase 2 and new e-invoicing standards, both rolling out in 2025, mean businesses must be more precise with timing and recognition of income—including accrued amounts.

Best practices for 2025 include:

• Reconcile accounts monthly, not just at year-end

• Keep records of all earned-but-unpaid income

• Stay informed about ATO guidance on timing and recognition of income

By staying proactive, you’ll avoid compliance headaches and gain a clearer picture of your financial position—whether you’re an investor, a business owner, or simply managing your household budget.