The basics business owners need to know about GST

GST (Goods and Services Tax) is a tax on most goods and services sold by businesses. While it feels like a tax on businesses, it really isn’t. Instead, it’s ultimately paid by people living out their day-to-day lives.​

Businesses act like tax collectors for the government by charging an additional 15% on top of each sale, which they later forward to Inland Revenue.​

A business’s process of forwarding the GST to the government is called a GST Return.​

In New Zealand, GST is a standard rate of 15%. However, there are exemptions and things (such as bank/transaction fees) that don’t include GST.​

To calculate the GST-inclusive price, multiply the price by 1.15, while for a GST-exclusive price divide the price by 1.15.​

Our GST calculator can calculate inclusive and exclusive prices. Feel free to bookmark if you regularly need to calculate this.​

We’ve got a whole article about registering for GST if you want a full rundown of this.​

To summarise:​

If you’re earning over $60,000 per annum, you must register for GST (this also includes overseas sales).​

If you’re earning under $60,000 per annum, GST registration is voluntary.​

As a business, you collect GST on the sale of your product or service on behalf of the government. At the same time your business is also paying GST each time it buys something (and for most purchases you can claim this back).​

At the end of each GST period, you need to calculate the difference between the amount of GST you’ve collected and the amount you’ve paid to figure out if you need to make a payment to the IRD, or receive a refund.​

If you’ve collected more GST (from sales) than you’ve paid (from expenses), then you’ll have a balance to pay.​

If you’ve paid more GST (from expenses) than you’ve collected (from sales), then you’ll get a refund.​

Once you’re registered for GST, you charge it on goods and services you supply, and provide your customer with taxable supply information (commonly known as a receipt or invoice).​

If you’re using an accounting system for invoicing, it’s usually set up to capture all the information you need to supply.​

You can claim GST on most transactions. However, there are some complex areas. For example, second-hand goods, assets brought into the business, software providers, zero-rated and exempt items, private use of a business asset etc...​

GST on property transactions (including land) is also a complex area and you need specialised advice before signing any documents.​

Read these articles for a deeper look at specific topics:​

GST on second-hand goods​

GST and special transactions (zero-rated, GST-exempt, donations, land)​

GST on remote services (also known as the 'netflix' tax)​

Typically, this depends on the filing frequency that was chosen when you registered for GST - six-month, two-month or monthly.​

In some cases, you might not have a choice about your filing frequency as it depends on your yearly revenue.​​

A GST return records the amount of GST you’ve collected and the amount of GST you’ve paid over the last reporting period. ​

It also includes any adjustments that need to be made (your accountant will do this if they prepare and file your GST returns).​

GST returns are due (for filing and payment) by the 28th of the month following the end of each GST period.​

There are two exceptions to this. For the period ending 31 March, GST filing and payment are due by 7 May; and for period ending 30 November the deadline is 15 January.​

If you file monthly, every other deadline will follow the 28th rule.​

If you file every two months, your GST periods will run as April/May, June/July, Aug/Sep, Oct/Nov, Dec/Jan, Feb/Mar. Filing and payment dates will be 28 June, 28 Aug, 28 Oct, 15 Jan, 28 Feb, and 7 May.​

If you file 6-monthly, your GST periods will run from 1 April - 30 September (filing and payment due 28th October) and 1 October - 31 March (filing and payment due 7th May).​

Please note, these dates are based on a standard balance date (i.e. your financial year ends on 31 March). Every year some deadlines may be 1-2 days later if the normal due date falls on a weekend or public holiday.​

Late filing or payment can result in penalties and interest being applied by Inland Revenue. It's important to ensure timely submission and payment to avoid unnecessary costs and compliance issues.​

Accounting software like Xero and MYOB can automate much of the GST process, making it easier to track GST on sales and purchases. These tools can help generate GST reports, calculate GST due and ensure you’re on top of your obligations.​

You don’t necessarily need an accountant or tax agent to file your GST returns. However, GST regulations and compliance can be tricky and time-consuming, which can add unnecessary stress. Working with a professional can make the process easier, helping you avoid costly errors and free up your time.​

If you're using Xero to run your business, Beany's team of accounting and tax experts can help with your GST returns. Visit our GST service page to learn more.​