GST 101 with SBA
What is GST?
GST stands for Goods and Services Tax. It is included in the price of most products and services sold in New Zealand. You can generally claim the cost back when submitting a GST return.
Does my business need to be GST registered?
If your business total sales income received exceeds $60,000 per annum (or $5,000 per month), you will have to register for GST with the IRD.
If you are registered that means:
- You will need to add 15% GST to your selling price.
- You are required to submit a GST return regularly
- You can deduct GST from a range of business expenses. This will reduce how much GST you need to pay to the IRD.
Check out the IRD’s GST registration guide for more information.
What is a GST Return?
If you are a GST-registered business, you’ll need to let the government know how much you’ve collected and how much you’ve paid. You do this by filing a GST return. If you have collected more than you have paid – you will have to pay the difference to IRD. If you have paid more than you have collected – you can get a GST refund from IRD.
Depending on your business size and structure, your GST returns will be due either monthly, two monthly or six monthly and needs to be paid on or before the GST submission date (GST return date).
GST Returns: Payment
If your return says that you owe GST, you’re generally required to make that payment by the day the return is due. You can pay via credit card, debit card, internet banking, or direct debit.
With direct debit, you authorise the IRD to withdraw the GST you owe directly from your business bank account when it’s due. That way you don’t have to worry about missing a deadline.
Once your business is GST registered, you will be able to deduct GST from legitimate business expenses. Legitimate business expenses are costs required for running your business. You can deduct your business expenses from your income, resulting in less taxable income.
How to calculate GST
GST in New Zealand is 15% for most goods and services. GST rate for exports, and for land that is sold between GST-registered businesses is 0%.
To calculate how much GST should be charged on your selling price multiply the selling price by 0.15.
For example: $300 is the GST exclusive selling price
$300 x 0.15 = $45
($45 is the amount of GST for $300)
The price including GST is: $45+$300=$345
To calculate how much GST is included in a price containing GST, multiply the number by 3 then divide it by 23.
For example: $345 is the price containing GST
The amount of GST that was included: $345×3÷23=$45
You can use this handy GST calculator from SBA to calculate GST on prices.
Why do I need an accountant to calculate my GST?
There are many rules and laws that need to be applied correctly when calculating your GST return. The amounts that need to be included or excluded from your GST return can get complicated. Mistakes with these calculations can be expensive, as incorrect or late filings will result in penalties and interest.
It’s best to find an experienced accountant to help you with these calculations to save you time and money. If you want to calculate GST by yourself, it is strongly advised to use accounting software.
Your GST payment is due on the same day as your GST return. This is the usually the 28th of the month following the end of your taxable period with some exceptions due to public holidays.
For example, the GST period ending 31 May will be due for submission and payment on 28 June.
Enquire with your local SBA to ensure all your tax compliance needs are met with quality, professionalism and at an affordable price.
Is there GST on online services such as dropbox?
Since October 2016, New Zealand made it mandatory for offshore electronic services to charge 15% GST on e-services to New Zealanders.
So, GST is included in services such as dropbox. If you are a registered company, you will be able to claim that GST back if your dropbox is used solely for business purposes.
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