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