GST Calculator: Understanding NZ's Goods And Services Tax

Goods and services tax (GST) is imposed on products in New Zealand, including imports. Most shops, either brick and mortar or online, include this in their prices, unless stated otherwise. The tax is also indicated on the receipts from the store. Currently, the rate in NZ is at 15%.

Who pays for GST?

Everyone who purchases items — be it through goods, products, or services — pay GST on top of the original prices. These taxes are only collected by the sellers but are paid to Inland Revenue. While most products include this tax, there are some things that are exempted from it:

• House or flat rental (although you pay GST on a rental holiday home)
• Airfare for overseas flights
• Mortgage repayments
• Special supplies

Starting last 1 December 2019, every consumer in NZ needs to pay on items valued at or below $1,000 whenever they buy products from overseas. 

GST calculator: How do you compute goods and services tax on your purchases?

If you want to know how much your tax is on the prices of the goods and services you’ve paid, you can use this simple solution:

1. Multiply the price by 3
2. Divide the answer by 23
3. Round up to the nearest cent

For example, you’ve purchased a mobile phone for $2,500, inclusive of tax. You can work it out through:

1. Multiply $2,500 by 3 = 7,500
2. Divide 7,500 by 23 = 326.0869565217391
3. Round up to the nearest cent = $326.09

The GST of your mobile phone is $326.09. To find out the price of the mobile phone before taxes, simply subtract the original price from the GST. In this example, the actual price of the mobile phone is $2,173.91. 

For prices exclusive of Goods and Services Tax

If you’ve purchased an item that excludes GST, you can calculate the full-inclusive price by adding 15% from the original price. If you’ve purchased a car for $8,750, simply multiply the original price by 0.15 or 15%. Then, add the amount to the original price.

1. Multiply 0.15 by $8,750 = 1,275
2. Add 1,275 to 8,750 = $10,000

The price after tax sums up to $10,000. While most businesses already add this calculation to their prices, it’s practical to know this just in case. On the other hand, this may be a lot more useful as a business owner.

How can you register for GST?

If you plan to open a business, taxes are an essential part of your operations. You must register for GST if the following conditions apply to your business:

• You deal with taxable activities
• Your turnover value was at least $60,000 in the last 12 months or expecting a turnover of at least $60,000 within the next 12 months
• You add GST to the prices of goods and services that you sell

When you register, you can choose how often you want to file your GST returns, including how you record it. This is also often referred to as the filing frequency and accounting basis. The filing frequency can be done monthly, 2-monthly, or 6-monthly intervals.

Commonly, there are three different accounting bases: payment basis, invoice basis, or hybrid basis. The most common ones are payment and invoice bases since a hybrid one can be complex for some customers.

• Payment basis: It’s ideal for small businesses with a turnover value of less than $2 million in the last 12 months. It involves accounting for GST on transactions whenever you make or receive payments. This can be tracked using a simple cash book.
• Invoice basis: It’s the default filing basis for businesses or GST customers if they don’t select the basis themselves. It involves accounting for the tax on transactions whenever the invoice is issued. 
• Hybrid basis: Coming from the name itself, it’s a mix of payment and invoice basis. It uses an invoice basis for GST on sales while a payment basis for GSR on purchases. Due to its complexity, not a lot of businesses use this method.

It’s important to pick the right accounting basis and filing frequency for your situation. When you register in IRD, they need to ask several questions to make sure that you find the perfect fit for your needs.

To register online, you need to sort out the following:

• your IRD number
• your business industry classification (BIC) code 
• know which taxable period or filing frequency you want
• know which accounting basis you want

Note: Your GST number is the same as your IRD number — whether you’re a sole trader, or own a partnership or a company. For partnerships and companies, it’s the same as your partnerships or your company’s IRD number.

Once you’re registered...

Once registered, you can manage and pay your taxes online using the myGST page, which will appear as a new section of your myIR service. You also need to:

• Charge GST to your customers
• File for returns
• Pay any taxes that you owe to IRD
• Sort out refunds (if applicable)
• Keep records

Aside from collecting tax from your customers, you also have to pay them to your suppliers whenever you purchase goods and services. When you file for your GST return, you have to compute the difference between the collected and paid Goods and Services Tax.

You have to fulfil the balance in your GST whenever you pay for returns. Consequently, IRD needs to refund you if they collected more than what you’re supposed to pay.

Note: When setting your prices, always include GST on the products and indicate that they’re GST-inclusive. Otherwise, you have to pay the GST out of your own pocket. Once you charge customers products exclusive of this, you can’t go back and recharge them.

For overseas businesses...

If you’re a non-resident that carries business activities within New Zealand, you may be required to register for GST under NZ laws. Supplying goods and services is often considered a taxable activity. 

However, this may still depend on the type of taxable supplies you import in NZ. Contact IRD by phone or email, or contact your tax agent to recheck whether you need to pay GST. Nonetheless, here are the different GST registrations for non-resident businesses.

• Supplying goods and services in NZ: As mentioned, most goods and services imported from overseas may be generally required to pay 15% tax. You have to account for the tax on your sales and business expenses in your returns.
• Supplying remote services in NZ: Overseas businesses that supply remote services to remote communities in NZ may be required to put in GST. This may mean that you generally have to account for sales in your returns.
• Supplying low-value imported goods into NZ: From 1 December 2019, overseas businesses that sell low-value goods to customers are required to register and file a GST return.

Note: You may be able to claim back the GST charges for your business expenses, given that you meet the specific conditions imposed by IRD.

How can you complete your GST return?

After you register your business, you have to file returns according to the accounting basis and filing frequency set in your IRD. To complete your return, you have to take into account the following:

• Your total sales and income
• Your total spending amount, including purchases and expenses
• The total amount of goods and services tax that you’ve charged to your customers

When it comes to zero-rated goods and services, make sure to keep the invoices separate from other invoices. This is accounted for in a different section of your GST return, so it’s much easier to keep them separate. Zero-rated goods and services include exports and land transactions.

Keep track of due dates, payments, refunds, and returns. You may be penalised for late payments. You can nominate to direct debit the payments in your account, so you won’t have to worry about missing a deadline.

Note: All businesses registered for GST must pay the taxes. Whether your business is sole ownership, partnership, company, or importer, you must settle your GST returns, or otherwise pay penalties.

If you’ve made a mistake…

If you’ve input any mistakes on your returns after you’ve submitted them, you can fix them without worries. Simply log in to your myIR account and edit them anytime. This includes correcting your contact details, bank account, and income information.

Aside from logging into your myIR account, you can use your accounting software (if it has the functionality) to send the file directly to IRD. If you can’t access or don’t have a myIR account, IRD can send you paper returns and file them later on. Nonetheless, you can also download the paper returns directly from the IRD.

Note: You can also utilise the disputes process of my IR if you disapprove of their assessment for whatever reason. 

When should you file your GST return?

You have to file your return for every table period, even during nil. No extensions are guaranteed, so you should file them on time. The return is due by the 28th of the month after the end of your taxable period.

For example, if the GST return for the taxable period is 30 June, the due date is by 28 July. This applies to almost every GST return, except when:

• The return for the taxable period ending 31 March is due by 7 May
• The return for the taxable period ending 30 November is due by 15 January

Note: If your business is affected by COVID-19, check the IRD’s support information. They offer several options and arrangements so you can pay your GST returns.

How can you pay your GST return?

You can make your payments through several methods including internet banking, debit or credit card, my IR account, or from overseas. Whatever method you choose, make sure to keep your IRD number as a reference.

• Paying online: Internet or mobile banking using Visa or Mastercard is a convenient way to pay your GST return. As mentioned, you can set up direct debit payments in your myIR account to avoid late payments.
• Paying overseas: If you’re from overseas, you can also set up and make direct debit payments in your myIR account or set up international money transfers with online services or through your bank.
• Paying by instalments: Instalments can help you pay your returns, especially during hard times when it can be difficult to settle them. You can propose the best instalment arrangement for you and discuss it with IRD.
• Paying at Westpac: You can either settle your payments through cash or EFTPOS at any Westpac branch or Westpac Smart ATM. Simply bring your return or statement barcode, or you can choose to create your own.

What should your business account for GST?

Depending on your business type, you have to account for business purchases on top of sales. This means that running costs like vehicles, laptops, phones, electricity, broadband, among other expenses. This way, you won’t empty out your pockets just to settle your GST.

The original price of the products and services is the biggest determinant of how expensive your GST is. That’s why you have to choose wisely when it comes to your business expenses and find the best deal that still ticks all the right boxes.

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