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Using accounting software is recommended for any small business that needs help automating their GST calculations.
Understanding the goods and services tax (GST) is essential when running a small business in New Zealand. GST is a value-added tax levied on most goods and services sold for domestic consumption.
Whenever you issue an invoice, pay suppliers for business-related purchases, or report your GST return to the IRD (Inland Revenue Department), you’ll need to understand how to calculate GST thoroughly.
How to calculate GST in New Zealand
If you want to know how to calculate GST, there are a few steps to take.
Firstly, the GST rate for New Zealand is 15%. This means that 15% of the sales price of your goods or services is added to the sale to result in a GST-inclusive sales price.
- An easy formula to find your GST-inclusive price is multiplying the sale price by 1.15.
- This GST calculation formula is a standard method for calculating GST.
- For example, if your price is $100, multiply it by 1.15 to get a $115 GST-inclusive price.
How to calculate GST from the total price
Many people ask how to calculate the GST amount from the total price. Let’s find out.
If you have a GST-inclusive sales price and wish to calculate the 15% GST component of the total price, you can either divide it by 1.15 or follow this formula:
- Multiply the total sales price by 3.
- Divide the result by 23.
- The answer will be your GST component.
For example, if the total price is $115:
- Multiply $115 by 3 to give you $345.
- Divide $345 by 23 to give you $15.
- $15 is the GST component of the total price.
The GST-exclusive amount is the product’s value after subtracting the GST amount from the total price.
It may seem simple, but there are many easy mistakes to make when calculating GST from the total price. Be sure not to calculate 15% of the total price – this will be incorrect.
How to calculate GST payable
If you need assistance working out GST and the above formulas become hazy, help is available online. Simply Google ‘New Zealand GST calculator’ or use an online GST calculator to discover a host of free small business GST calculators ready to determine the GST payable in any transaction.
How to calculate GST for NZ Small Businesses
As a small business, if you’re turning over more than $60,000 per year and GST registered, simply add 15% to your intended sales price when making a sale. You can use the above formulas or an online small business GST calculator.
If your small business issues invoices in the usual course of your sales process, you’ll need to indicate the GST component of the sale in an itemised manner on any tax invoice you issue.
GST applies to various goods and services, so ensure you include GST in transactions involving taxable goods and services.