How does GST work for small businesses?

You’ve come to the right place if you’re after information about GST for small business owners. Because if you intend to trade as a small business in New Zealand, we’ve got the answers to your question: “how does GST work for small businesses?”

The goods and services tax (GST) is a 15% tax applied to most goods and services bought and sold in New Zealand.

A small business in New Zealand must register for GST if they either turn over more than $60,000 per annum through taxable activity or if they charge GST in their prices. If you want to know more about what is the GST threshold for small business, we dive deeper into that a little further on.

If you’re required to add GST to your goods or services, you must include and clearly indicate GST in your sales price.

When you lodge your GST return with the Inland Revenue Department (IRD), you can claim back GST credits on the goods you purchased from suppliers that were used as business expenses in the creation or supply of your businesses’ goods and/or services.

Do I need a GST number for my small business?

In New Zealand, small businesses required to register for GST will need their IRD number as well as personal and business details.

Once registered for GST you’ll receive a GST number. This GST number may be the same as your IRD number. 

GST and IRD numbers alongside a host of related data can be accessed through your myIR account. You can register for myIR here.

What is the GST threshold for small businesses?

The GST threshold is $60,000 per year.

This means if you currently turn over more than $60,000 per year in taxable activity or you predict to earn over $60,000 per year, you must register your business for GST. 

Once registered for GST, you must include 15% GST in the price of your applicable goods and services. Be sure to include this on any invoices you issue.

Some New Zealand sole traders and businesses, such as those operating taxis or ride share services, must register for GST regardless of income or threshold, as the services they provide must include GST.

Small business not registered for GST

There are circumstances where your New Zealand small business will not be registered for GST. The primary reason is operating under the GST threshold.

A small business not registered for GST in New Zealand is generally turning over less than $60,000 per year, or not predicting they’ll reach that threshold by the end of the year. 

To be sure you register for GST if your earnings go over the threshold, it’s important to keep an eye on expected revenue and taxable activity

Even if you’re not required to register for GST as a small business, you may still choose to do so.

GST return for small business

If you’re registered for and charging GST, you’ll need to file GST returns with the IRD. This is known as a GST return and can be submitted either every two months or every six months. This choice is up to the individual business.

When you submit a GST return, you’ll end up either owing GST to the IRD or you’ll receive a GST refund, depending on whether you paid or received more GST in your taxable activity.

Please note there are taxable supplies that are exempt from GST in New Zealand, which you may want to consider when submitting a GST return for your business.

Dealing with GST in your small business accounting software

Luckily, the legwork of charging, recording, and reporting your GST is done easily with your small business accounting software. 

Cloud accounting apps such as Reckon One will deal with most GST concerns automatically, leaving more time for you to run your business.