**Disclaimer: This blog is intended as a general guide and may not cover all specific situations or reflect the latest legislative changes. For personalised advice that considers your unique circumstances, please consult a qualified tax professional.
What Is GST and When Do You Need to Register?
Goods and Services Tax (GST) is a tax separate from income tax, applied to most goods and services sold in New Zealand. You must register for GST if your business turnover (total sales, not net profit) reaches $60,000 within any 12-month period. Once registered, you’ll need to file GST returns, generally every two or six months.
From the date you exceed this threshold, you’ll start adding 15% GST to your invoices. You can also claim back GST on expenses from other GST-registered NZ businesses, leaving you with a net GST amount to pay—or potentially receive as a refund—at the end of each GST period.
We’ll discuss the specifics of the accounting process shortly, but first, let’s consider the real-life implications of adjusting your prices to include GST and how this might affect your business and customers.
Practical Implications of GST
Goods and Services Tax (GST) is a tax paid by the end consumer. To see how it works, let’s follow the journey of a loaf of bread.
The wheat grower sells their wheat to the bread maker, adding GST to the sale price. The bread maker claims back that GST as a business expense and uses the wheat to make bread. When the bread maker sells the bread to the supermarket, they also add GST, which the supermarket claims back. Finally, the supermarket sells the loaf to you and adds GST to the price, which you, as the end consumer, pay. Point being, GST is a tax that is ultimately paid by the end consumer.
So, how does this impact your business? It depends on where you sit in the supply chain. If you sell goods or services to GST-registered businesses, adding GST doesn’t cost your customers anything—they’ll claim it back. But if you sell directly to end consumers or unregistered businesses, your prices will effectively go up by 15%, which could influence customer decisions.
If most of your customers aren’t GST-registered or are the end consumer, crossing the $60,000 turnover threshold comes with added considerations. For example, if your business operates on a 50% profit margin, registering for GST means paying 7.5% of your total sales in GST. That means turning over $64,500 as a GST-registered business leaves you no better off than staying just under the $60,000 threshold. Plus, you’ll now need to handle GST compliance and filing.
GST doesn’t have to be complicated, but understanding how it affects your business and pricing is crucial for making the right decisions.
How to Account for GST
Now that you’ve determined how GST will impact your business based on your target market, let’s talk about how to manage GST in your day-to-day processes and the options available to you.
From the date of your GST registration, you’ll need to add 15% GST to your prices. If your customers are end consumers, and you think they might not be willing to pay the 15% increase, you could consider adjusting prices accordingly. Your invoices must now state “Tax Invoice,” include your GST registration number (usually the same as your IRD number), and show a separate GST amount. Check out our free [invoice templates] for a ready-made example.
Options for Managing Your GST
- Full-Service GST Filing
We can collect your bank statements and process GST for you throughout the year, ensuring accuracy and ease. This approach is often the most cost-effective because we need to reconcile and review the GST at year-end regardless, helping you avoid potential errors and costly adjustments. - DIY with Support
Alternatively, we can provide training if you prefer to file your own GST. We’ll guide you through the steps, and at year-end, we’ll reconcile your records to ensure everything aligns. - For Xero Users
If you’re on Xero, we can help you integrate GST filing directly through the platform for a streamlined experience.
Ultimately, it’s about finding the best GST solution for your business. We’re here to make the process as simple as possible for you!