GST is a tax that’s added to most goods and services sold in New Zealand. It was introduced in 1986 at a rate of 10% as part of the “Rogernomics” reforms under Minister of Finance Roger Douglas. The GST rate rose to 12.5% in 1989 and 15% in 2010, where it has remained ever since.
If your business sells goods or services in New Zealand, you may have to charge your customers GST and pay it to the Inland Revenue Department. Below, we’ll look at the circumstances under which you need to be GST registered, and how to do it.
Who needs to register?
Running a small business does not automatically require you to register for GST. You only need to do so if you are an entity carrying out a taxable activity and your turnover was $60,000 or more in the last 12 months, or you expect to turn over $60,000 or more in the coming year.
For the purposes of GST, an entity can be a person, company, incorporated or unincorporated society, club, joint venture, partnership, trustee, trust, estate, public authority, or local authority.
A taxable activity is any regular activity undertaken by a person or business supplying goods or services for money or other rewards. Working for a salary or wages, selling items as a hobby or recreation, or selling odd domestic items are not considered taxable activities.
You must also register for GST if you add GST to your invoices and charge it to your customers. If you’re still not sure whether you need to register, you can find out by filling in this IRD questionnaire.
Even if you are not required to register for GST, you can choose to do so if you wish to claim back the GST you pay on your business expenses, such as office supplies, software, computers, mobile phone plans, and internet connections.
Note that some goods and services are exempt from GST, including donated goods, financial services, renting a residence, and supplying fine metals. You can find the full list on the IRD website.
How do I register for GST?
You can register online on the IRD website. You’ll need to supply the IRD number of the person or organisation that you are registering, a bank account number for any refunds to be paid into, your last 12 months’ turnover, or your expected turnover in the next 12 months, and your business industry classification code (which you can find here).
When you register, you will need to choose your accounting basis and filing frequency. The accounting basis determines whether you file your GST returns based on money actually paid to you within the filing period, or the value of invoices you issued. The filing frequency can be monthly, two-monthly, or six-monthly. If you’re not sure which choice is right for you, the IRD has a tool to help you decide.
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