Goods and services tax (GST) is added to the price of most products and services. If you’re GST registered, you can claim back the GST you pay on goods or services you buy for your business. You can also charge GST (15%) on what you sell — this is collecting it on the government’s behalf.
As soon as you think you’ll earn more than $60,000 in 12 months, you have to register for GST. You may be charged penalties if you do not register when you need to.
If you don't think you'll turn over that much, it's up to you whether or not to register. One benefit of voluntary registration is you might be able to claim a GST refund, eg if you have a lot of expenses but not much income. Once you've registered, you have to complete regular GST returns.
Joanne runs a home-based business selling bags she makes herself and Mike's just started his building business.
Joanne is GST registered, so collects GST on the sales of her bags, and claims it back on purchases like:
She can also claim:
Mike's just started his building business. He's not sure if he'll earn more than $60,000 in his first year, but he's registering for GST straight away because he has big expenses — he'll claim GST back on:
When you register for GST, you have two choices to make.
Two-monthly means more paperwork but can be easier to keep track of. Six-monthly filing is only available if your turnover is less than $500,000 (although some exceptions apply), and it might be good if you don’t have a lot of expenses or invoices.
Keep a record of all your invoices and expense receipts (and keep these records for seven years), and put aside any GST payments you receive to pay to Inland Revenue (IR) at return time. Remember — you're just collecting GST on behalf of the government, and you’ll need to pass on that GST when you do your return.
You can register online through myIR or download a GST registration form (IR360) (external link) from the Inland Revenue website.
For partnerships and companies, it’s the same as your partnership or company IRD number.
When you complete a GST return, you'll need to know:
Working out your GST (external link) — Inland Revenue
Some goods and services have GST charged at 0% — these are called zero-rated supplies and are typically provided to people overseas. Zero-rated goods and services include products or services from New Zealand that are sold overseas, eg exports or some land transactions. Zero-rated supplies still have to be recorded on your GST returns.
Check if zero-rated supplies apply to your business (external link) — Inland Revenue
If your turnover falls below $60,000 a year and you don't want to keep charging GST, or if you close down your business, you need to let Inland Revenue know — call or send a message via myIR. You'll need to let Inland Revenue know the date you intend to stop charging GST. GST is usually payable on goods and services held at the time you cancel your registration.
And you may have to pay GST on any payments you collect, even if you haven't charged it.
Avoid these common GST mistakes: