When to register for GST
You must register for GST as soon as you think you’ll earn more than $60,000 in 12 months – whether you're a sole trader, a contractor, in partnership or a company.
You may be charged penalties if you don't register when you need to.
If you don't think you'll earn that much, it's up to you whether or not to register. If you register and you don’t end up earning that much, you may be able to claim a GST refund.
Once you've registered, you have to complete regular GST returns.
What you can claim GST on
Joanne runs a home-based business selling bags she makes herself. She's GST registered, so collects GST on her sales. 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.
How GST works
When you register for GST, you have to decide your:
- taxable period
- accounting basis.
Taxable periods
Your taxable period is how often you’ll file returns: monthly, two-monthly or six-monthly.
Keep a record of all your invoices and expense receipts, and keep these records for seven years. Put aside any GST payments you receive to pay to Inland Revenue at return time.
Accounting basis
Your accounting basis can be:
- payments basis – you account for GST in the taxable period in which you've made or received a payment (this is the most common for small business)
- invoice – you account for GST in the taxable period when you've sent or received an invoice (even if the payment hasn't been made)
- hybrid method – a combination of payment and invoice methods.
Registering for GST
Register online through myIR.
You'll need:
- your IRD number
- your business industry classification (BIC) code
- to know which taxable period you want
- to know which accounting basis you want.
Once registered, you can manage and pay GST online using myGST, a section of Inland Revenue’s myIR service.
Completing a GST return
When you complete a GST return, you'll need to know:
- your total sales and income
- your total spending, including purchases and expenses
- the total amount of GST you've charged to customers.
GST can be paid online using Inland Revenue’s myIR service.
Zero-rated goods and services
Some goods and services have GST charged at 0%. These are called zero-rated supplies and usually include products or services from New Zealand that are sold overseas.
Zero-rated supplies still have to be recorded on your GST returns.
Keep zero-rated invoices separate from your other invoices as these go in a different section of your GST return.
Filing GST returns
Most small businesses choose to file two-monthly or six-monthly GST returns.
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.
Deregistering for GST
Let Inland Revenue know if either:
- you earn less than $60,000 a year and you don't want to keep charging GST, or
- you close down your business.
Let them 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.
If you’re deregistering, you should account for the GST on any business assets you hold at the time you deregister.
If you keep assets after cancelling your GST registration, for private use or for another business, you must make an adjustment in your final GST return.
Your final GST return must include all taxable goods and services from the beginning of the taxable period to the date of the GST cancellation.
Common mistakes
These are some common mistakes to be aware of when considering registering for GST.
- Registering for GST before you reach the earning threshold of $60,000. Make sure you weigh up the advantages and disadvantages of registering.
- Choosing the wrong accounting basis when registering – as in, the way you claim and return GST.
- Not keeping accurate records, or all your receipts and invoices, or not keeping them for seven years.
- Not charging GST because your turnover is low if you're GST-registered – you must keep collecting and paying GST up until the date you let Inland Revenue know you're deregistering.
- Making mistakes in GST returns – don’t just send a new return. If your error is less than $1,000, you may be able to account for it in your next return. If the error is for more than $1,000, request an amendment to your return through your myIR account.
- Not deregistering if you close your business and don’t plan on starting a new taxable activity over the next 12 months – in this case, you must cancel your registration within 21 days.
- Not accounting for the GST on any business assets you hold at the time you deregister, if you keep assets after cancelling your GST registration, for private use or for another business – you must make an adjustment in your final GST return. Your final GST return must include all taxable goods and services from the beginning of the taxable period to the date of the GST cancellation.
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