How to calculate GST for Small Businesses
GST, aka goods and services tax, is collected on most goods and services sold in New Zealand. It’s included in the price paid and collected by the seller, then paid to Inland Revenue.
The amount of GST charged and collected is 15% of the non-GST price. If something costs $100 before GST is added, then the GST inclusive price will be $115. That’s easy to work out for a nice number like 100, but not so easy otherwise. And going back the other way, from the GST inclusive price to the non-GST price is even less obvious. Clue: You don’t just subtract 15% off the GST inclusive price.
To make it quick and easy to add or subtract GST from a price, we created the handy GST calculator below. If you’re running your own business, chances are you’ll need this calculator a lot – feel free to add this page to your favourites.
But not all small businesses have to register for GST, and some goods and services don’t have GST added. If you’d like to know a bit more about the basics of GST in New Zealand, read on. Otherwise jump straight to the GST calculator below.
Instructions for using the GST calculator:
- Add your sales price in the box next to the $ sign above
- If you want to add GST to this price then you need RESULT 1
- If you want to deduct GST from this price then you need RESULT 2
Does my business have to register for GST?
If you’re going to earn more than $60,000 a year as a self-employed person or company, you have to register for GST. Otherwise it’s optional. The $60,000 threshold for self-employed people doesn’t include any PAYE income you might earn through wages or a salary from an employer.
When you’re registered for GST, you can claim back the GST you paid on business-related expenses. But you have to get a GST tax invoice for anything you claim over $50 and keep these records for seven years in case Inland Revenue audits your accounts.
You also have to include GST in the prices you charge customers, then file a GST return at regular intervals during the year and pay the GST owing to Inland Revenue each time. You can choose a monthly, two-monthly or six-monthly filing frequency. Filing more frequently reduces the paperwork involved each time and can keep the payments more manageable. But if you only have a few transactions a month you might prefer a longer frequency.
What has to be included in a GST invoice?
If you’re registered for GST you have to include certain things in invoices for the goods and services you sell. But if it’s something worth $50 or less you can just issue a receipt instead.
Here’s what a GST invoice must include:
- The words ‘tax invoice’ – usually as a heading
- Your name or the name you trade under
- Your GST number
- The date the invoice was issued
- A description of the goods or services
- The total amount payable and a statement that says it includes GST; if the invoice is for more than $1,000, you need to show the GST exclusive amount, the GST amount and the GST inclusive total
- If the invoice is for more than $1,000 including GST, the buyer’s name and address, plus an indication of the quantity or hours you supplied
If you have to reissue a duplicate invoice for a customer, you must add the words ‘copy only’.
What goods and services don’t have GST added?
While most goods and services sold in New Zealand have to include GST in their price, some can have a rate of 0% in certain circumstances and others are always exempt.
If you’re claiming GST on business-related expenses you should always check the receipt or invoice to make sure GST was included before filing your return.
If you think the nature of your goods or services means they can be sold without charging GST, it’s important to get professional advice to make sure. In the meantime, here‘s a brief summary of the main reasons GST may not be included in certain goods or services.
The seller is not registered for GST
If the seller is earning less than $60,000 a year from their self-employed or business activity, they don’t have to register for and charge GST. That means it’s possible to buy the same goods or services from different suppliers and pay GST to one but not the other. That’s why it’s important to check the invoice before claiming GST.
Zero-rated supplies
Zero-rated supplies are goods or services that would normally have to include GST, but in certain circumstances the rate is 0% rather than the usual 15%.
Here are some examples of where GST might be zero-rated:
- Goods that are purchased duty free in New Zealand when travelling
- International air travel, including a domestic connecting flight if sold as part of a single ticket or contract for the international journey
- Exported goods and certain exported services
- Specialised tools used solely to manufacture goods for export to a non-GST registered non-resident
- Goods and services applied to a temporary import, such as repairs made in New Zealand to a visiting boat
- Services performed outside New Zealand
- Sale of a going concern ( the whole or stand-alone part of a taxable activity) from one GST registered person to another
Exempt supplies
Exempt supplies are not subject to GST and you don’t include them in your GST return. Some examples include:
- Donated goods and services that are later sold
- Financial services, such as paying or collecting interest, bank fees and loans
- Penalty interest for overdue accounts
- Fines, such as parking tickets
- Renting or sub-letting a residential dwelling, and therefore landlords can’t claim GST on their property-related expenses
- Sale of fine metal (gold, silver and platinum) by a dealer or importer
Property transactions
GST is not normally charged on the sale of residential property. However, it can apply if the seller is GST registered and the sale is part of the seller’s business activity. GST can also apply if the seller has a pattern of buying and selling residential properties, including the ones they live in.
Whether you’re buying or selling residential or commercial property, it’s important to be sure where you stand regarding GST before signing any agreement, which can mean consulting a tax advisor.
Koha or gifts
GST is not included in an unconditional gift, which means a voluntary payment that’s made to a non-profit organisation and has no goods or services benefit to the giver or payer.
If you’re registered for GST and sell your goods or services for a koha or donation, you still have to collect and pay GST to Inland Revenue. That’s because the person made the koha in return for the goods or services you provided and would not have received them otherwise.
However, a non-profit organisation selling donated items doesn’t have to register for GST and therefore the prices do not include GST.
To learn more
- Visit the GST section of the Inland Revenue website
