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GST (Goods and Services Tax) is a tax that is imposed on the supply of goods in services in New Zealand. GST registered businesses charge GST on their income and claim back GST on purchases and expenses incurred in deriving that income.

GST Registration

A taxpayer is required to register for GST if they are carrying on a taxable activity and their gross turnover was over $60,000 in the last 12 months (60k effective 1/4/09) or is expected to exceed $60,000 in the next 12 months. This equates to average sales of around $5,000 per month. You can choose to register for GST even if your turnover is less that $60,000 per annum, this is termed voluntary registration.

Before you can register for GST you will need to:

• Have an IRD number (You use your IRD number as your GST number).
• Decide on an accounting basis
• Choose a taxable period

Accounting basis

The way in which GST is accounted for i.e how it is claimed and charged is mostly dependent on the business’s annual turnover. If the annual turnover is less than $1.3 million then you can choose the invoice, payments or hybrid basis. If the annual turnover is over $1.3 million then the invoice or hybrid basis are to be adopted.

• Invoice basis – GST is claimed and paid when you receive or issue an invoice and make a payment, which ever comes first.

• Payments basis – GST is only accounted for in the period in which payment is either received or paid

• Hybrid basis – GST is claimed on purchases using the payments basis and GST on income is accounted for using the invoice basis.

Taxable period

The taxable GST periods available are as follows:

• Two monthly – this is the standard taxable period. The two month period ends on the last day of January, March, May, July, September and November for a standard March balance date.
• Monthly- You may wish to file GST returns monthly if you receive GST refunds, this is often the case if you are an exporter, or to aid cash flow management.
• Six monthly – this option is only available to small businesses with sales less than $250,000 per annum.

While GST is a tax that is imposed on the majority of goods and services supplied within New Zealand, there are some exceptions. GST is not charged on goods and services that are included within the definition of ‘zero rated’ or ‘exempt supplies’

Zero Rated Supplies

Zero rated supplies have GST charged at 0%. The majority of zero-rated supplies are in relation to supplies of goods that are being exported or the goods or services are supplied or performed offshore.

Exempt Supplies

These are goods and services which are not subject to GST therefore GST can not be levied or claimed on these in your GST return. For example:

• Bank fees
• Interest on bank loans and overdrafts
• Residential Rents
• Interest and Dividend Receipts
• Currency Dealings

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Markhams are Chartered Accountants and Business Advisors. They’re a New Zealand network of Chartered Accountancy firms located around the country, providing financial and accountancy services to a wide range of clients.

For more information or specific advice, you can contact Sam or Jess, or visit the Markhams website.

Sam Basset: Phone (09) 306 7103 or email sam.bassett@markhams.co.nz

Jess Galyer: (09) 306 7109 or email jess.galyer@markhams.co.nz

All information in this article is to the best of the Author’s knowledge true and accurate. No liability is assumed by the authors, or publishers, for any losses suffered by any person relying directly or indirectly upon this article. It is recommended that clients should consult a senior representative of the firm before acting on this information. The member firms practicing as Markhams are independent and not in partnership.