Who needs to register for GST?

Businesses that sell goods and services in New Zealand and have or expect to have an annual turnover (sales total) of $60,000 or more in a 12-month period are required to register for GST. However, if your annual turnover is less than $60,000 you can voluntarily register for GST. This can be beneficial if you have GST on your purchase invoices and your customers are larger businesses that are also GST registered (they will be able to claim back the GST you charge them). 

It’s important to note that once you’re registered for GST, you must file GST returns and pay the GST you collect to the Inland Revenue. 

If your annual turnover falls below $60,000, you may choose to cancel your GST registration.

Payments, Invoice and Hybrid methods

A business can account for GST on a payments basis, an invoice basis or a hybrid basis depending on certain criteria:

  • Payments basis – A business can account for GST when you pay suppliers and receive funds from customers (cash transaction) if the business has sales less than $2.0m in the last 12 months or likely to be less than this amount in any 12 month period (beginning at the first day of a month)    
  • Invoice basis – Any business can account for GST on an invoice basis (account for GST on sales invoices and purchase invoices and expense claims)    
  • Hybrid basis – Any business can account for GST on a hybrid basis but it can be more complex and is rarely beneficial. A hybrid basis means a business can account for GST on sales using the invoice basis and account for GST on payments on a payments basis 

How do I register for GST?

To register for GST, complete an electronic form online through Inland Revenue’s website or use a cloud small business management service like Afirmo.  The registration process is simple and requires basic information about your business, including your business name, contact information and IRD number. 

Part of the registration process involves choosing whether you’ll file GST returns every month, two months or every six months.  If your turnover is or not likely to be more than $500,000, you can apply to file GST returns on a 6-monthly basis.  

If you’re a sole trader, you’ll use your personal IRD number for paying GST. If you’re a company or a partnership, your GST number will be the same as your company or partnership IRD number. More on understanding GST.

How do I charge GST?

Once your registration is complete, 15% GST needs to be added to every invoice or sale. To calculate the GST amount, multiply the price of the goods or services by 15% and add  that amount to the total price (the GST inclusive price). You can use the Afirmo GST calculator if you get stuck.  

For example, if you sell a product for $100, the GST amount is $15 (100 x 15%). Therefore, the total price that you would charge the customer will be $115.  Read our article about invoicing. 

How do I claim GST?

As a GST-registered business, you can claim back the GST you pay on business related expenses. For example, if you purchase business-related stationery for $115 and pay $15 of GST, you can claim back the $15 on your GST return. 

Business expenses you can claim GST on include:

  • Purchases of goods and services for business use, such as office supplies, equipment, and software
  • Business-related domestic travel expenses, such as airfare, hotel accommodation and meals
  • Advertising and marketing expenses, such as print and online ads, website development and promotional materials
  • Professional fees, such as legal and accounting services
  • Rent and utilities for business premises
  • Vehicle expenses, such as fuel, maintenance, and insurance
  • Training and education expenses, such as conferences and seminars

You may need to make private use adjustments where the GST claim involves both business and private use. Afirmo can take care of that for you as part of our year end process.  

What are GST returns?

GST returns are reports that GST-registered businesses must file with Inland Revenue to report the amount of GST that they have charged and paid during a GST period. 

As a sole trader or small business, you’ll usually file returns every two months, being the IRD default filing frequency. However, you can file every six months if your annual business sales are $500,000 or less. The choice of two or six-monthly is made when you register or if you apply at a late date. You can also file returns monthly but that increases the admin load a lot and is therefore only really helpful if you are claiming regular refunds and cash flow is tight.  

Your GST return must include the total amount of sales (including GST), the amount of GST charged on those sales. It also needs to show the total amount of expenses (including GST) and the amount of GST you’re claiming back on those purchases. 

There are special rules for goods and services that you may need to consider as an exporter or importer.  

If the amount of GST charged is greater than the amount of GST claimed, you pay the difference to the Inland Revenue.. If the amount of GST claimed is greater than the amount of GST charged, you’ll receive a refund. 

GST returns made easy with Afirmo

To streamline your entrance into the GST world, sign up with Afirmo. We’re a one-stop cloud-based business management solution for sole traders, freelancers and small businesses including companies and partnerships. Afirmo’s GST tool makes GST returns easy providing:

  • Automated GST calculations: Afirmo automates the calculation of GST for your business, eliminating human error in manual calculations by automatically calculating GST on sales and purchases, and generating GST returns. Afirmo does this based on your sales invoice, expense claims and bank transaction data. 
  • GST filing: Your GST return is filed by Afirmo direct to Inland Revenue.
  • Real-time data tracking: Afirmo tracks all financial transactions in real-time, so you can always see accurate and up-to-date financial data. This makes it easy to monitor your GST situation. 

Join Afirmo today – the Starter Plan is free and you can subscribe to extra tools and services as you need them. Using Afirmo costs much less than working with a chartered accountant. Once you are signed up with Afirmo, you can explore the other great tools available for money management, marketing, sales, and insurance. 

Our comments are general in nature and should not be considered as a substitute for tax advice.  We are happy to help with any particular issue relevant to your business.