Goods and Services Tax (GST) is a crucial aspect of business operations in New Zealand. Understanding GST registration, filing requirements, and compliance ensures smooth financial management and adherence to Inland Revenue Department (IRD) regulations.
GST Registration
To register for GST, a business must engage in an activity on a continuous and regular basis in exchange for consideration (payment). Charities providing goods or services may also charge GST.
In most cases, a business's GST number is the same as its IRD number. Businesses with an annual turnover of less than $60,000 are not required to register but may choose to do so for benefits such as:
- Potential GST refunds in some cases.
- A more professional appearance by being inside the tax system.
GST Basis Options
Businesses can choose from three GST basis options:
- Payments Basis – GST is calculated based on actual cash payments and receipts.
- Invoice Basis – GST is calculated based on the earlier of invoice date or payment date. This allows GST claims before payment but may be disadvantageous if a customer delays payment.
- Hybrid Basis – A mix of both methods, typically used for specific business needs.
GST Filing Frequency
Businesses must file GST returns based on one of the following schedules:
- Monthly – Required for large businesses but optional for others.
- Two-Monthly – Recommended for most businesses.
- Six-Monthly – Suitable for businesses with good record-keeping and budgeting practices.
Types of Supplies and GST Treatment
Different types of supplies impact GST calculations:
- Taxable Supplies – Most goods and services, including labor and time.
- Exempt Supplies – Do not enter the GST system (e.g., financial services, private property rentals).
- Zero-Rated Supplies – GST applies at 0% (e.g., exported goods, selling a business as a going concern).
- Special GST Rates – Apply to specific cases (e.g., hire purchase agreements).
Tax Invoice Requirements
Keeping the correct tax invoices is essential for GST compliance:
- Under $50 – No special tax invoice required; a simple receipt is sufficient.
- $50.01 to $1,000 – A simplified tax invoice must include the supplier's name, GST number, and a statement confirming GST inclusion.
- Over $1,000 – The invoice must also include the recipient’s name, address, and quantity of supply.
- If a tax invoice is not held for a supply over $50, GST cannot be claimed.
- Credit or debit notes should be issued for price adjustments or corrections.
- Sales invoices must be provided upon request to the purchasing entity.
GST and Home Office Expenses
GST for home office expenses can be claimed on March 31 alongside income tax filing. However, if using the square meter rate method for home office and personal vehicles, GST cannot be claimed, as these costs shift to the income tax return.
GST itself is not an expense and should be ignored in the income tax return.
Correcting GST Filing Mistakes
Errors up to $1,000 can be corrected in the next GST return.
Larger mistakes require notifying the IRD with details of the incorrect line item and the necessary adjustment.