- How do I know if I need to register?
You need to register for GST if you carry out a taxable activity and if your turnover:
- was over $60,000 for the last 12 months, or
- is expected to go over $60,000 in the next 12 months, or
- was less than $60,000 but GST is included in your prices, eg, taxi drivers who have to include 15% GST in their taxi fares.
If your turnover is $5,000 or more a month and you expect it to stay at that level all year, you'll need to register for GST.
- What are taxable activities and turnover?
A taxable activity is an activity carried out continuously or regularly by a business, trade, manufacturer, professional, association or club.
It includes any activity that supplies, or intends to supply, goods and services to someone else for money or reward of any type.
Your turnover is the total value of taxable supplies made excluding GST for all your taxable activities.
In most businesses the annual turnover will be the total value of your sales and income, including any:
- grants or subsidies received
- barter transactions, and
- imported services.
- Voluntary registration
You can choose to voluntarily register for GST even if your annual turnover is less than $60,000.
Advantages of voluntarily registering for GST include:
- If you purchase goods and services from someone who is GST-registered, you'll be charged GST and you'll be able to claim it back.
- You can also claim GST if you purchase secondhand goods from someone who isn't GST-registered, and you use these goods in your taxable activity.
- Completing regular GST returns helps keeping your records up-to-date and accurate
Disadvantages of voluntarily registering for GST include:
- Complying with GST requirements takes time and you're faced with more compliance work
- Adding GST to your prices can make your products or services uncompetitive in certain cases, particularly if you're competing against non-registered businesses.
If you are not registered for GST, you must not charge GST on your invoices.
It is also important to note that if you have not been charged GST you cannot claim it.
- How do I register?
The easiest way to register for GST is online through myIR Secure Online Services. Applications are processed in real time and in most cases you'll receive immediate confirmation of your GST number and registration process. You will need your IRD number, know your BIC code and have a bank account number for refunds before you can register.
Watch our "Introduction to business: Registering for GST" video for more information.
- Accounting basis
The way you account for GST, i.e., how you claim and charge GST, is called your "accounting basis". You need to choose the accounting basis that best suits your business.
There are three options if your turnover is under $2 million:
- payments basis
- invoice basis
- hybrid basis.
The most commonly used method is the payments basis.
If your turnover is over $2 million you only have two options:
- invoice basis
- hybrid basis.
Find out more:
How it works
You account for GST in the taxable period in which you make or receive payments.
The payments basis is different from the invoice basis as you only pay GST to us after you've received payment from your customers and you only claim GST for the purchases and expenses you've paid for.
The payment basis is suitable for a small business, especially if it currently uses the cash system.
Cash books can easily be used to account for GST.
You usually only account for GST when payment is received from the customer. This is to your benefit if you give a lengthy period of credit to customers.
You may only claim GST on purchases and expenses after making payment to the supplier.
Note: Around 78% of businesses choose the payments basis for their GST accounting basis.
How it works
You claim GST when you receive or issue an invoice or receive and make a payment, whichever comes first.
This means if you've issued or received an invoice during a taxable period then:
- you pay us the amount of GST shown on the invoices you've given to your customers (regardless of whether you've received a payment or not), or
- you pay us the GST included in a payment you've received (even if you haven't raised an invoice), and
- you claim a credit for the amount of GST shown on tax invoices you've received from your suppliers (regardless of whether you've paid your supplier).
You may claim GST on purchases and expenses before making payment to the supplier, except for second hand goods.
You may have to account for GST before receiving payment.
You need to keep a list of debtors and creditors at the end of the tax period to account for items for which you've received or issued an invoice but don't appear in your cashbook.
How it works
You claim GST on your purchases and expenses using the payments basis.
You account for GST on your sales and income using the invoice basis.
No adjustment is needed for creditors.
You need to keep a list of debtors at the end of the tax period to account for items that don't appear in your cashbook.
- Taxable period
A taxable period is how often you file your GST returns, i.e. monthly, two-monthly or six- monthly. This is commonly referred to as your 'filing frequency'.
This is the most common taxable period used. If you didn't make a choice when you registered you will automatically be given a two month taxable period.
You may want to file GST returns every month if you:
- expect to receive regular GST refunds, e.g. as an exporter, or
- find it easier to work out your GST for a shorter period.
You can only use the six-monthly option if your 12 month's turnover is less than $500,000.
However, if your turnover is more than $500,000 we may allow you to remain on a six-monthly taxable period if:
- you filed and paid GST timely and accurately in the past
- you kept all your GST records to a satisfactory level, and
- your turnover is subject to seasonal, low volumes or high value cash flow peaks.
Note: If you want to change your taxable period once you're GST-registered, you need to contact us in writing, e.g. through myIR Secure Online Services.