What you need to know about GST
Goods and Services Tax (GST) is a significant part of running a business in New Zealand. Understanding how GST works is crucial for ensuring compliance and managing your business's financial health. At Affinity Accounting, our Wellington accountants are here to guide you through the essentials of all things Tax, including GST, so you can meet your obligations without the stress.
What is GST?
GST is a consumption tax added to the price of most goods and services sold in New Zealand. The standard GST rate is 15%, and it applies to a wide range of transactions, including the sale of goods and services, imports, and certain financial services.
Do You Need to Register for GST?
You must register for GST if:
Your business turnover exceeds $60,000 per year.
You expect your business turnover to exceed $60,000 within the next 12 months.
Even if your turnover is below this threshold, you can choose to register voluntarily. Registering for GST allows you to claim back the GST on business expenses.
How to Register for GST
Registering for GST is a straightforward process. You can complete your registration online through the Inland Revenue Department (IRD) website. You'll need to provide details such as your business name, IRD number, and estimated turnover.
GST Returns and Payments
Once registered, you are required to file regular GST returns and make payments to the IRD. There are three filing frequency options:
Monthly: For businesses with a turnover of more than $24 million.
Two-monthly: The most common option for small businesses.
Six-monthly: For businesses with an annual turnover below $500,000.
Your GST return will detail the GST you've collected from sales and the GST you've paid on business expenses. The difference between these amounts determines whether you owe money to the IRD or are entitled to a refund.
Claiming GST on Expenses
One of the benefits of being registered for GST is the ability to claim back the GST paid on business-related expenses. To do this, you must keep detailed records of all your transactions, including invoices and receipts that show the GST component.
Common Mistakes to Avoid
To avoid potential pitfalls, keep these common GST mistakes in mind:
Failing to Register: Ensure you register for GST as soon as you meet the threshold.
Incorrect Calculations: Double-check your GST calculations to avoid errors.
Poor Record Keeping: Maintain accurate records to support your GST claims.
Late Filings: Submit your GST returns on time to avoid penalties.
Seeking Professional Advice
Navigating GST can be complex, especially as your business grows. Seeking advice from experienced accountants, like our Wellington based team at Affinity Accounting, ensures you're meeting your obligations and maximising the benefits of GST registration.
Final thoughts
Understanding and managing GST is essential for the success and compliance of your small business in New Zealand.
At Affinity Accounting, our team of Wellington accountants is dedicated to providing expert guidance on all tax matters. Contact us today if you have any questions at all. It’s such an important part of running a business so it’s crucial that you get sound advice. We are here to help!