Avoid excess GST payables


25th March, 2024

9 common GST mistakes for small businesses

Steering through GST rules can be quite a task when you’re running a small business.

You think you’ve got it all figured out, but you run into an unexpected issue and it’s back to square one — or worse, IRD penalties.

With the help of bookkeeper Laura Mason and MYOB Partner Success Manager Ian Barron, we’ve compiled a list of nine easy-to-miss GST mistakes that could trip you up.

1. Not registering for GST on time

If your turnover exceeds NZ$60,000, you need to register for GST. Late registration can result in penalties, and registering early could mean making unnecessary GST payments.

What’s the best way to get it right?

Laura says it’s good to keep a detailed, accurate record of your income so you can spot the moment your turnover crosses the threshold.

A digital accounting platform like MYOB is the easiest way to ensure every transaction is captured and categorised, giving you visibility over your financial situation on any given day.

Small business

2. Incorrectly claiming GST on expenses

Not all purchases are eligible for GST claims, for example, you can’t generally claim for overseas purchases, gift vouchers, entertainment, financial services, and rent for a residential dwelling.

It’s also important to note that landlords can’t claim GST on expenses like maintenance, rates, and insurance.

Reduce GST mistakes right by checking with your accountant or bookkeeper before you make a claim.

3. Failing to account for personal use of business purchases

Claiming full GST credits on items used for both personal and business is a common mistake.

For example, when you buy something you use for your business and personal life, like your home internet, you can’t claim GST for the full expenses on your business taxes.

Instead, you need to work out how much you use it for business and only claim for that portion of GST — your MYOB software it easy to work this out.

DOWNLOAD: MYOB’s FREE NZ EOFY resource guide

4. Overlooking regular GST reconciliation

Regular reconciliation of GST accounts confirms the accuracy of your records.

A retailer might discover discrepancies between bank records and reported sales, indicating unreported GST.

Ian explains that regular reconciliation can highlight these discrepancies early, allowing timely corrections.

5. Mistakenly registering to pay GST on an invoice basis

There are three methods to account for GST, depending on when and how your business operates, and your turnover. If you choose the payments basis, you account for GST in the taxable period when you receive or make a payment.

With the invoice method, GST is counted in the period when an invoice is created – even if payment isn’t made at the same time.

For small businesses, this choice can be significant, as paying a GST bill before receiving payment for an invoice could cause cash-flow issues.

MYOB supports both methods, letting businesses choose the best fit and adjust as necessary.

6. Picking the wrong GST returns schedule

Opting for a less frequent GST return schedule can reduce admin, but it can also delay refunds.

A construction company with significant upfront costs might benefit from monthly returns to recover GST credits sooner.

Laura notes that MYOB makes it easy to keep track of the GST obligations in real time, include previous dated transactions, reduce admin time and increase your expected cashflow.

7. Forgetting to change your entity

As your business evolves, its structure does too. Failing to update GST registration to reflect this can have serious implications.

For example, if you’re a sole trader turning your venture into a company, you must update your GST number to avoid compliance issues.

MYOB allows easy updates to business details, ensuring the GST entity type always matches the current business structure.

8. Miscalculating GST on property transactions

Property transactions are complex, with significant GST implications.

A developer misunderstanding GST obligations on a mixed-use development might face hefty adjustments.

By using a tax professional alongside MYOB, you’ll be better equipped to navigate these complexities so all property-related GST is accurately accounted for.

9. Your bookkeeping is an afterthought

Treating bookkeeping as a secondary task can undermine financial management. Why? Because you might miss GST deadlines or make inaccurate claims.

Integrating MYOB with daily operations makes bookkeeping seamless in business processes, keeping GST obligations front and centre.

Ian advises that if you’re using MYOB and you’re not sure how to code something – don’t blunder ahead.

“Instead, use the software to flag it. This means your accountant or bookkeeper doesn’t have to go back and figure out where you’ve made a mistake.”

Leverage MYOB for GST compliance

So, to avoid GST mistakes, remember these tips: only claim GST for things you use in your business, keep a good record of what you buy and sell, and file your GST forms on time.

Finally, don’t be afraid to ask for advice from your accountant or bookkeeper or use in-software help features to keep up with GST tracking.

MYOB is designed to streamline the GST process, even as your business grows and changes.

It records all your sale and purchase GST automatically, allows collaboration with your accountant and gives you flexibility around GST reporting.

Want to avoid GST mistakes? Find out how to do it with MYOB. 

Information provided in this article is of a general nature and does not consider your personal situation. It does not constitute legal, financial, or other professional advice and should not be relied upon as a statement of law, policy or advice. You should consider whether this information is appropriate to your needs and, if necessary, seek independent advice. This information is only accurate at the time of publication. Although every effort has been made to verify the accuracy of the information contained on this webpage, MYOB disclaims, to the extent permitted by law, all liability for the information contained on this webpage or any loss or damage suffered by any person directly or indirectly through relying on this information. 

MYOB is not a registered entity pursuant to the Tax Administration Act 1994 Agent Services Act 2009 (TASA) and therefore cannot provide taxation advice to clients. If you have a query concerning taxation including filing your BASGST return or annual tax statements then you should consult with your accountant or other registered tax adviser.