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Tax Tips - GST Insights. Part One

Do I need to register for GST?

One of the most popular questions often asked from people starting a business is, 'do I need to register for GST?' This article will answer that question.

GST is a tax on consumption, on goods and services supplied in New Zealand. This is different from income tax which is a tax on profit.

Who must register for GST?

You must register for GST if you carry out a taxable activity and:

  • your turnover was $60,000 or more in the last 12 months or will be $60,000 or more in the next 12 months, or
  • your prices include GST.
As soon as any of these apply, you must register for GST within 21 days.

Who doesn't have to register for GST:

You don't have to register for GST simply because you start a company, have an IRD number, or because you're in business or trading.

What is voluntary GST registration?

You can choose to voluntarily register for GST even if your annual turnover is less than $60,000.

Advantages of voluntarily registering for GST include:

  • GST can be claimed back when purchasing goods and services from someone who is GST-registered.
  • GST can be claimed when purchasing second-hand goods from someone who isn't GST-registered.
  • Completing regular GST returns can help ensure business records are kept up-to-date

Disadvantages of voluntary GST registration include:

  • Complying with GST requirements may take time
  • Adding GST to prices can make products or services uncompetitive, particularly if you're competing against non-registered businesses or providing personal services. For example; for a massage therapist, personal trainer or beautician an additional 15% increase in price may result in your services being uncompetitive.

Important points:

  • If you are not registered for GST, you must not charge GST on your invoices.
  • If you have not been charged GST you cannot claim it back (for example, services provided by someone who is not GST registered themselves)
For more information about the GST registration criteria please don't hesitate to contact us or view the IRD guidelines.

Once you are registered for GST you then need to decided what GST basis to choose and how frequently to file your GST returns. Keep an eye on next week's article which will cover the different options available.



This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.






 

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