NZ Goods and Services Tax explained and how to calculate GST
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GST is a day-to-day basis topic for small business owners. In general, GST is a tax added to the price of most goods and services, including imports. It is a tax for people who buy and sell goods and services with the rate charge at 15% in New Zealand.
So, let’s start with this part of our topic today: New Zealand goods and services tax and how to calculate it.
When do I need to register GST?
No matter if you are trading as a sole trader, partnership, or company, you must (Goods and Services Tax Act 1985) 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.
*Any entity that carrying on taxable activities can voluntarily register for GST, even if they do not reach the $60,000 threshold.
How it works?
When you register GST, you will need select from three accounting basis options below:
– Payments (cash)basis: you will need to account for GST in the taxable period in which you’ve made or received a payment (Recommended for most small businesses).
– Invoice basis: you will need to account for GST in the taxable period when you’ve sent or received an invoice.
– Hybrid method: it is a combination of payment basis and invoice basis methods.
Also, you need to select your GST filling frequency based on your sales
Filing frequency | Who is eligible |
Monthly | Anyone can choose to file GST return monthly, and you must file monthly if your sales are over $24 million in any 12-month period. |
Two Monthly | Anyone with sales under $24 million in any 12-month period. |
Six-Monthly | Anyone with sales under $500,000 in any 12-month period. |
How to calculate GST?
There are different ways to calculate GST,
Please using the equations below that can help you work out GST:
GST exclusive amount × 15% (or 0.15, or 3/20) = GST.
GST exclusive amount × 115% (or 0.15, 23/20) = GST-inclusive amount.
GST-inclusive amount × 3/23 = GST.
GST-inclusive amount × 20/23 = GST-exclusive amount.
Examples:
You sell goods for $100 Plus GST:
GST exclusive amount = $100
GST = $100 × 15% = $15
GST inclusive amount = $115
You sell goods for $100 GST inclusive:
GST inclusive amount = $100
GST = $100 × 3/23 = $13.04
GST exclusive amount = $86.96
Contact us for GST advice
- Free initial no obligation consultation
- Accounting package $125 per month including service that covers your GST returns