When you start out in business, you may need to register for goods and services tax – GST. In this video, we’ll give you a quick overview of what you need to know.

GST is a tax added to the sales price of most goods and services sold in New Zealand. In most cases, GST is charged on imported goods and services. If you’re registered, you collect GST from your customers, and pay it to Inland Revenue. You can claim a credit for the GST you pay on most of your business expenses.

In general, GST is charged at a rate of 15%. So, when do you need to register for GST? You must register if your turnover for the last 12 months was more than $60,000 or, if you expect your turnover for the next 12 months to exceed $60,000. You must also be registered if GST is included in the prices you charge, such as being a taxi driver where the meter applies GST. If your turnover is $60,000 or less, you may like to register for GST voluntarily. But before you decide, please give it some thought. Registering has both advantages and disadvantages. By filing regular GST returns, you’ll get regular insights into how your business is doing, and you’ll be able to claim the GST you pay on most of your expenses.

But registering for GST has some disadvantages too. Filing GST returns means extra paperwork. And you may be charged penalties if returns and payments are late. Because you’ll be collecting GST from your customers and paying it to Inland Revenue, you’ll need to allow for GST of 15% when you set your prices. When you register online, we’ll ask you which accounting basis you’d like to use. Your accounting basis determines when you have to pay Inland Revenue the GST on your sales and when you can claim the GST on your expenses. The most commonly used accounting bases are the invoice basis and payments basis. With the invoice basis, you return the GST on your sales when you issue an invoice or receive a payment – whichever comes first. You claim the GST on your expenses when you receive an invoice or make a payment, again, whichever comes first. With the payments basis, you return or claim GST when a payment is made or received. You can only use the payments basis if your turnover has not exceeded $2 million for a 12 month period. Most small businesses use the payments basis.

You also need to decide how often to file your GST returns. You can file monthly, two-monthly, or six-monthly. Monthly returns might be a good choice if you’re likely to get regular GST refunds. However, you’ll have to file 12 returns a year. Large businesses with a turnover of more than $24 million must file monthly returns.

Two-monthly return filing is the standard option, and you may find filing two-monthly helps you keep on top of your paperwork. If you have a turnover of $500,000 or less, you may choose six-monthly returns. You’ll only have to file two returns a year, but you may find it a big job accounting for six months’ worth of trading all in one go. You can change to a frequency you qualify for, at any time. Just send us a secure email through myIR. Please make sure you file your returns and pay any GST by the due date. Filing or paying late could mean you’re charged penalties and interest.