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GST registration and calculation: all you need to know

Most New Zealanders will immediately recognise the Goods and Services Tax (GST) as the 15 percent tax slapped onto most goods and services provided in New Zealand.

Many don't give it much more thought. But how does GST affect you personally, particularly as a small business owner?

Your business and GST

With GST being applied to so many goods, most New Zealand small businesses will likely have some GST obligations.

This will be reflected in the sales price of your products or services sold to both consumers and businesses.

Even though your business may pay GST on items, or add GST onto your own goods and services, you may qualify for GST credits for some transactions.

GST credits are a way to claim back some of the GST that you’ve paid and redirect that money back into your own business — more on this later, though. 

What items are GST-free?

There are certain items and categories that are exempt from GST — we call them zero-rated goods and services.

Zero-rated goods and services include products or services from New Zealand that are sold overseas, e.g. exports or some land transactions.

Zero-rated supplies still have to be recorded on your GST returns.

You can find more information about which items are GST-free here.

Registering for GST

If you're a business with GST obligations you'll need to register for GST.

You must register your business for GST with Inland Revenue (IR) if the following criteria applies to you:

  • your turnover was $60,000 or more in the last 12 months or will be $60,000 or more in the next 12 months, or

  • your prices include GST

There are three ways you can register for GST:

Claiming GST credits

GST registered businesses can claim back the GST they pay on their business expenses — you do this when filing your return.

For more information on how to do this visit Claiming GST on the IR website.

Issuing tax invoices

When you make a taxable sale of more than $50.00 (including GST), your GST-registered customers will need a tax invoice from you to be able to claim GST credits for their own businesses.

Understanding GST reporting obligations

When you register for GST you’ll decide how often you want to file your GST returns.

The period you choose is known as your taxable period or filing frequency.

You can choose to file your GST returns monthly, two-monthly or six-monthly.

If you don’t choose, two-monthly is the default option.

Monthly GST filing

  • Anyone can choose to file GST returns monthly

  • You must file monthly GST returns if your annual turnover exceeds, or is likely to exceed, $24 million

  • Monthly returns are a good choice if you're likely to get regular GST refunds, for example if you're an exporter

Two-monthly GST filing

  • Two-monthly GST return filing is the standard option

  • You can choose to file your GST returns on odd months (January, March, May etc) or even months (February, April, June etc)

  • Filing your GST returns every two months helps keep you on top of your GST requirements

  • Many businesses say that completing GST returns every two months helps keep their paperwork up to date

Six-monthly GST filing

  • Filing GST returns every six months is an option for smaller businesses with fewer transactions

  • You can choose the six-monthly filing option if the value of your total sales was less than $500,000 in the last 12 months or will most likely be less than $500,000 in the next 12 months

  • You only have to file two returns a year, but it can be a big job to account for six months' worth of trading in one go

Small business tips for managing GST

As a GST-registered business, issuing tax invoices, collecting GST from customers and sending information to IR can be a bit of a handful.

Here are three easy tips to make this process a little simpler:

  • Regularly put the GST you collect in a separate bank account, so you’re not caught out at reporting time

  • Use business accounting software to produce tax invoices and automatically generate reports of your GST liabilities and credits

  • Take advantage of the ‘cash accounting’ option to better align your GST liabilities with your business cash flow

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