TAX • 18 FEBRUARY 2021 • 3 MIN READ

How and when to register for GST

SECTIONS

First up – how does GST work?

What are taxable goods and services?

When should I register for GST?

How to register for GST

GST obligations

When to deregister from GST

Who are Beany?

If you're in the early days of your business or looking to start a business in New Zealand, you may be wondering about GST registration and when (and if) you should register. In this article, we cover all those questions.

First up – how does GST work?

GST is a tax added to the price of 'taxable' goods and services sold in New Zealand, at a rate of 15% (except if the supplier is not registered for GST, if the goods and services are zero-rated, or if the goods and services are exempt).

Businesses collect GST on behalf of the government and pass it onto the IRD when they file GST returns.

If you’d like a deep dive into understanding GST, check out our article, GST basics.

What are taxable goods and services?

Taxable goods and services are the goods and/or services that you supply and receive in return for a consideration (money, compensation or reward), irrespective of whether you're producing a profit or not.

Goods include all types of personal and real property except money. Think of it as tangible items like products at a supermarket or any other retailer.

Services cover everything else besides goods and money. Think of it as intangible items like a consultation with a legal advisor or having your car repaired by a mechanic.

Taxable goods and services doesn’t include:

Goods and services supplied by businesses that aren’t registered for GST (unless you’re purchasing a second-hand asset for your business), along with exempt supplies such as:

Letting or renting a dwelling for use as a private home
Interest you receive and pay
Donated goods and services sold by a non-profit body
Certain financial services
Bank fees
Penalties
Salaries and wages

When should I register for GST?

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), or
Was less than $60,000, but you include GST in your prices e.g. taxi drivers who have GST included in their fares

If you’re charging 0% GST on some of your sales (typically when you’re selling overseas), these sales still count towards that $60,000 threshold.

Voluntary registration

Even if your annual turnover is under $60,000, you can choose to register for GST.

It can be useful in a few situations – like when you’d like to purchase a large asset (and you're sure your sales will be over $60,000 in the next twelve months), or when the majority of your sales are at 0% GST.

How to register for GST

The easiest way to register for GST is through a myIR login on the Inland Revenue website.

Follow these instructions from the IRD, which outline the steps.

Alternatively, if you're working with an accountant, they can do the GST registration for you.

As part of the registration process, you'll need to select a filing frequency AND accounting basis.

Your GST basis

This is how and when GST is reported/recorded on your GST return.

Your GST basis can be either:

Payments basis – your GST return calculation is based on whenever cash is received into or paid from your bank account
Invoice basis – your GST return calculation is based on the dates on invoices you send and receive, rather than what goes through your bank account
A hybrid basis – this is rarely used but follows the payments basis for the bills you pay, and an invoice basis for the bills you send

Example: if you invoice a client on 28 March and their payment hits your bank account on 1 April, the GST will be reported in different GST reporting periods depending on which GST basis your business is using.

Your GST filing frequency

When you first register for GST, you can choose any filing frequency - six-monthly, two-monthly or monthly.

If you are likely to have minimal sales and purchases, then six-monthly filing is fine. It can be a big job if you don't stay on top of your paperwork and document/record information as you go, so it's important to keep good records.

If you'd find it easier to keep on top of paperwork by filing more often, then two-monthly is a good option so that you're only accounting for 2 months worth of trading in one go as opposed to six months worth.

Eligibility for GST basis and filing frequencies

Although you can choose any GST basis and frequency when you first start your business, the IRD has eligibility requirements once you hit certain annual sales figures.

Annual sales under $500,000 – choose any GST basis and frequency
Annual sales between $500,000 and $2 million – you can choose any basis, but must file GST returns monthly or every two months
Annual sales over $2 million (and below $24 million) – you must use the invoice basis and can only file GST returns monthly or every two months
Annual sales over $24 million – you must use the invoice basis and file monthly GST returns

Your GST number

Once registered for GST, you'll have a GST number.

If you’re a sole trader, your GST number is the same as your personal IRD number.

If you’ve formed a company, the GST number will be the same as the company's IRD number.

GST obligations

After you've registered for GST, your business has additional compliance obligations.

We won't dive into this too much here as our GST Basics article covers all the essentials (such as how it works, charging and claiming GST, filing details and best practices for managing GST).

A quick overview of your obligations includes:

Charging GST to your customers on taxable goods/services
Filing GST returns (based on GST basis and frequency)
Paying the IRD any GST owed
Keeping GST records

When to deregister from GST

There are two scenarios where you can deregister from GST.

If you stop your taxable activity, you must cancel your GST registration.
You can deregister from a voluntary registration at any time, as long as your sales are under $60,000 and expected to stay there.*

*It's important to note that if you're continuing your taxable activity but cancelling your GST registration, you can no longer charge GST on your sales or claim GST on your expenses.

Obligations prior to deregistering

Before you deregister from GST, there are a few things you must do.

If you haven’t yet sold your business assets, GST must be declared on their market value. This also applise to any assets that you are keeping for private use (e.g. a laptop).
You need to indicate your final GST period and include your income and expenses up to that date. (Your final returns covers the entire period, even if you stopped trading partway through).
You must include any GST adjustments identified by your accountant
All GST debt must be paid

How to deregister from GST

Login to your myIR account and click on the GST section. Select 'more' and then 'cancel account registration'. The IRD will send a confirmation once it has been actioned.

Who are Beany?

Beany are accountants for ambitious businesses, delivering big firm expertise without the big cost. We handle everything accounting-related (such as annual compliance, bookkeeping, financial insights and strategy), and help business owners make smarter decisions for their business and lifestyle through our responsive, friendly expertise. Book a call or get in touch to disucss how we can help your business.