GST: when you must register, and when it’s worth registering early

When registration is compulsory

You must register for GST when your turnover from taxable activity was more than $60,000 in the last 12 months, or you expect it to pass $60,000 in the next 12 months. Turnover means sales before expenses, not profit. Once you cross the line you have 21 days to register, and IRD can backdate a late registration, which means paying GST you never charged your customers.

When registering early is worth it

Below the threshold, registration is optional. It is usually worth it when most of your customers are GST-registered businesses, because they claim the GST back and your price is effectively 15% lower to them. It also helps when you are buying expensive equipment or a vehicle, since you claim the GST on the purchase. It is usually not worth it when your customers are households, your costs are small, and you would rather keep filing off your calendar.

Choosing a filing cycle

• Two-monthly is the default and suits most small businesses. Six returns a year keeps each payment manageable.
• Six-monthly is available if your turnover is under $500,000. Fewer returns, but a bigger bill each time.
• Monthly suits businesses that regularly receive refunds, such as exporters, or very large turnovers.

You also choose an accounting basis. Most small businesses use the payments basis, available up to $2 million turnover, so GST is accounted for when money changes hands rather than when invoices are issued.

The dates

Returns and payments are due on the 28th of the month after your period ends, with two exceptions: a period ending in November is due on 15 January, and a period ending in March is due on 7 May. Dates on a weekend or public holiday move to the next working day.

What you can and can’t claim

• GST on business purchases, as long as you keep the taxable supply information. For purchases over $1,000 that means the supplier’s name and GST number, the date, a description and the amount.
• Nothing on wages, interest, bank fees or residential rent, which carry no GST.
• Only the business share of mixed-use costs such as a phone or a vehicle.

Mistakes we see most

• Registering late and having to fund GST that was never added to prices.
• Forgetting that selling a business asset, or taking one for private use, has GST consequences.
• Missing the January and May date changes.
• Treating a GST refund as income rather than money passing through.

General information only. Talk to us about your own situation before acting on it.