What Does GST Registration Mean?
Goods and Services Tax (GST) is a tax on most goods and services in New Zealand, most imported goods, and certain imported services. GST is added to the price of taxable goods and services at a rate of 15%.
How Does GST Work?
GST is a tax that you collect on behalf of the government. You charge GST in your sales and income and claim it back for your purchases and expenses. You then calculate the difference in your GST return to work out if you have to make a GST payment to the IRD or if you are to receive a GST refund from the IRD.
What Are Taxable Goods And Services?
Goods include all types of personal and real property, except money:
- Services covers everything other than goods or money, eg TV repairs, doctor’s services and gardening services.
- Taxable goods and services are part of the business or taxable activity. This means you supply or receive taxable goods and services for a consideration (money, compensation, reward) but not necessarily for profit. We refer to taxable goods and services as “taxable supplies”.
Taxable goods and services don’t include:
Goods and services supplied by businesses that aren’t registered for GST, and:
- Exempt supplies such as:
- Letting or renting a dwelling for use as a private home
- Interest you receive
- Donated goods and services sold by a non-profit body, and
- Certain financial services
- Bank fees
This is how to calculate your Goods and Services Tax:
- You charge GST at 15% for sales and income. Calculate GST by multiplying the sales and the income figure by 3 then dividing by 23.
- You claim GST at 15% for purchases and expenses. Calculate GST by multiplying the purchases and expenses figure by 3 then dividing by 23.
If you have a Xero subscription, all GST will be calculated for you!
Business Health And GST
Being registered for GST helps your business:
- Completing regular GST returns helps keeping your records up-to-date and accurate.
- Generally, businesses prefer to work with GST-registered businesses.
- Charging GST enables you to work with this tax money over your taxable period (one-monthly, two-monthly or six-monthly) before filing your GST return by the due date and, if applicable, paying GST back to the IRD.
- If you purchase goods and services from someone who’s GST-registered, you’ll be charged GST and you’ll be able to claim it back sooner than waiting until your income tax return is filed.
You Must Register For GST If
You must register for GST if you carry out a taxable activity and if your turnover:
- Was over $60,000 for the last 12 months, or
- Is expected to go over $60,000 for the next 12 months (this equates to $5,000 per month. If your turnover is $5,000 per month and you expect to maintain that level all year, you’ll need to register for GST.), or
- Was less than $60,000, but you include GST in your prices, for example taxi drivers who have included 15% in their taxi fares.
You can choose to register for GST even if your annual turnover it less than $60,000. This is referred to as voluntary registration.