Once you are GST-registered, managing GST becomes a regular part of running your business. Filing returns on time, invoicing correctly, and claiming back GST on expenses all affect your cash flow. This guide covers the practical aspects of GST for NZ small businesses.
GST-registered businesses charge 15% on sales (output tax), claim 15% back on business purchases (input tax), and pay IRD the difference. File your GST return by the 28th of the month following each period. If output tax exceeds input tax, you pay IRD. If input exceeds output (e.g., you bought expensive equipment), you receive a refund. Keep valid tax invoices for all claims over $50.
How GST Works in Practice
GST is collected on behalf of IRD — you are essentially a tax collector:
- Output tax: GST you charge customers on your sales
- Input tax credits: GST included in your business purchases (claimable back)
- GST to pay or refund: Output tax − Input tax credits
If output > input: You pay IRD the difference If input > output: IRD refunds the difference to you
Example:
- Invoiced clients: $10,000 + $1,500 GST = $11,500
- Paid for business expenses: $3,000 + $450 GST = $3,450
- GST to pay IRD: $1,500 − $450 = $1,050
Pricing Your Services with GST
When you become GST-registered, you need to decide how to handle your pricing:
Option 1: Add GST on top Your price + 15% = invoice total. If you charged $100 before registration, you now charge $115. Clients who are GST-registered do not care — they claim the $15 back. Consumers pay 15% more.
Option 2: Include GST in your price (GST-inclusive) If price is $115 GST-inclusive, the GST component is $115 × 3/23 = $15. You remit $15 to IRD and keep $100.
Displaying prices:
- Always show the GST-inclusive price to consumers
- You may show prices either way (exc. GST or inc. GST) to business clients, but must be clear
Filing Your GST Return
File through myIR:
- Log in → GST → File a return
- Enter total sales (GST-inclusive or exclusive — the form calculates)
- Enter total purchases (GST-inclusive)
- Review the calculated GST to pay/refund
- Submit and pay any amount owed
Due dates: 28th of the month following the period end.
| Period ending | Return and payment due |
|---|---|
| 31 January | 28 February |
| 31 March | 7 May (extended) |
| 31 May | 28 June |
| 31 July | 28 August |
| 30 September | 28 October |
| 30 November | 15 January (extended) |
IRD extends some due dates that fall near public holidays — check ird.govt.nz.
Issuing Tax Invoices
You must issue a tax invoice for any supply over $50 (exc. GST). Tax invoices must include:
| Required detail | Notes |
|---|---|
| “Tax Invoice” header | Must use these words |
| Your name and GST number | GST number is your IRD number |
| Date of supply | When the goods/services were provided |
| Description of goods/services | Clear description |
| Amount of GST charged | Show GST separately, or note “includes GST of $X” |
| Total amount payable | GST-inclusive |
For supplies under $1,000, you can issue a simplified tax invoice (fewer requirements).
Claiming GST Back on Purchases
You can claim the GST portion of any business purchase as an input tax credit. Requirements:
- The purchase must be for your business (not personal)
- You must hold a valid tax invoice from the supplier
- The supplier must be GST-registered
If a purchase is partly personal and partly business, claim only the business proportion.
You cannot claim GST back on:
- Private or personal expenses
- Purchases from non-GST-registered suppliers
- Purchases where you do not hold a tax invoice (for amounts over $50)
- Second-hand goods bought from private sellers (special rules apply)
- Residential rent paid (exempt supply — no GST content)
Accounting Basis (Payments vs Invoice)
You choose your accounting basis when registering:
Payments basis: Account for GST when cash changes hands (money received from customers, money paid to suppliers). Simpler; better for cash flow.
Invoice basis: Account for GST when invoices are issued (regardless of when paid). Required if turnover exceeds $2 million.
Most small businesses use the payments basis — you only pay GST when you have received the cash from your customer.
Late Filing and Payment
If you miss the GST due date:
- Late filing penalty: $250 (if return is not filed on time)
- Late payment penalty: 1% of unpaid tax immediately, then 4% after 7 days, then 1% per month thereafter
- Use-of-money interest: Accrues daily on unpaid amounts
File on time even if you cannot pay — the late filing penalty adds insult to injury. If you cannot pay, contact IRD before the due date to arrange a payment plan.
Common GST Mistakes
- Not separating GST in your accounting — mixing GST-inclusive and GST-exclusive figures
- Claiming GST on private expenses — claiming food, personal travel, or private purchases
- Not holding valid tax invoices — cannot claim input tax without a proper invoice
- Forgetting to include all income — all taxable supplies must be included; omitting invoices is common
- Charging GST on exempt supplies — residential rent is exempt; you should not charge GST on it
- Wrong registration date — registration starts from when you first exceed $60,000, not when you applied
Frequently Asked Questions
Do I charge GST on overseas clients?
Services exported to overseas clients are generally zero-rated (0% GST). You charge 0% GST rather than 15%. This means you still file the supply in your GST return but at 0%. You still claim input tax on expenses. Export rules can be complex — seek advice if you have significant overseas clients.
I made a mistake on my GST return. What do I do?
File an amended return through myIR. IRD allows corrections. If you discover a significant error, voluntary disclosure reduces penalties. Small errors (under $1,000) can often be corrected in the next return.
Can I claim GST on a vehicle?
Yes, for business use proportion. If you use a vehicle 60% for business, claim 60% of the GST on purchase and running costs. Keep a logbook to support the business percentage.