Goods and Services Tax, or GST, is New Zealand's broad-based consumption tax. It applies to most goods and services sold in the country and is a critical part of running any business here. Whether you are a sole trader, a company director, or a freelancer whose income is growing, understanding GST is essential to staying on the right side of Inland Revenue.
In this guide, we will walk through who needs to register for GST, how to file returns, what you can and cannot claim, and the most common mistakes that trip people up.
What Is GST?
GST is a 15% tax added to the price of most goods and services in New Zealand. It is charged by businesses that are registered for GST and paid to Inland Revenue. The current rate of 15% has been in place since 1 October 2010.
Unlike income tax, GST is a tax on consumption rather than earnings. The end consumer ultimately bears the cost, but it is the business's responsibility to collect it and pass it on to IRD.
When Do You Need to Register for GST?
You must register for GST if your business turnover (total revenue, not profit) is over $60,000 in any 12-month period, or if you expect it to exceed $60,000 in the next 12 months. This is a rolling 12-month test, not based on the tax year.
You can also voluntarily register for GST even if your turnover is under $60,000. Many small businesses choose to do this because it allows them to claim back the GST on their business expenses (input tax credits). However, voluntary registration means you also need to charge GST on your sales and file regular returns, so it adds compliance work.
If you are an employee, you do not need to register for GST on your salary. GST only applies to business activities — selling goods or services as a self-employed person, contractor, or through a company.
How to Register
You can register for GST through your myIR account online. You will need your IRD number, business details, and an estimate of your expected turnover. The process is straightforward and usually takes effect from the date you specify.
When you register, you choose your filing frequency and accounting basis:
- Filing frequency — monthly, two-monthly, or six-monthly. Most small businesses file two-monthly. If your turnover is over $24 million, you must file monthly.
- Accounting basis — invoice basis (you account for GST when you issue or receive an invoice) or payments basis (you account for GST when you actually receive or make payment). The payments basis can be better for cash flow because you do not have to pay GST on invoices that have not been paid yet.
Charging GST
Once registered, you must charge GST at 15% on all taxable supplies (goods and services) you provide. The GST is included in the price you charge your customers. For example, if your service fee is $100 plus GST, the total charged to the customer is $115.
Some supplies are GST-exempt, meaning you do not charge GST on them. The main exemptions include:
- Financial services — such as interest, life insurance premiums, and foreign exchange transactions.
- Residential rental income — rent on residential properties is exempt from GST.
- Donated goods and services — by non-profit organisations.
- Exported goods and services — these are zero-rated (charged at 0% GST) rather than exempt, which means you can still claim input tax credits on the expenses related to them.
Claiming GST Back (Input Tax Credits)
One of the main benefits of being GST-registered is that you can claim back the GST you pay on business expenses. These are called input tax credits. If you buy a $230 piece of equipment for your business (which includes $30 of GST), you can claim back that $30 from IRD.
To claim an input tax credit, you need a valid tax invoice from the supplier. For purchases under $50, a simplified invoice is acceptable. For purchases of $50 to $1,000, the invoice must include the supplier's name, GST number, the date, a description of the goods or services, and the amount of GST charged. For purchases over $1,000, the buyer's name and address must also be included.
You cannot claim GST on expenses that are not related to your business, or on exempt supplies. If an expense is partly business and partly personal (like a phone bill), you can only claim the business portion.
Filing GST Returns
GST returns are filed through myIR. Each return covers a specific period (monthly, two-monthly, or six-monthly) and is due by the 28th of the month following the end of the period. For example, a two-monthly return covering January and February is due by 28 March.
On your GST return, you report:
- Output tax — the GST you have charged on your sales.
- Input tax — the GST you have paid on your business purchases.
- The difference — if you have charged more GST than you have paid, you owe the difference to IRD. If you have paid more GST than you have charged (common for new businesses with high setup costs), IRD refunds the difference to you.
It is important to file your returns on time, even if you cannot pay the full amount. Late filing attracts penalties, and late payment incurs interest. If you are struggling to pay, contact IRD early to arrange a payment plan.
Common GST Mistakes to Avoid
Not registering when you should. If your turnover exceeds $60,000 and you are not registered, you are technically still liable for GST on your sales — but you will not have been charging it. This means you owe IRD 15% of your sales out of your own pocket, with no ability to pass it on to customers.
Claiming GST on personal expenses. IRD audits GST claims, and claiming personal expenses as business ones is a common red flag. Keep clear records and only claim expenses that are genuinely for business purposes.
Not keeping proper invoices. You need valid tax invoices to support your input tax claims. If you cannot produce an invoice during an audit, IRD can disallow the claim.
Mixing up GST-inclusive and GST-exclusive prices. When quoting prices, be clear about whether GST is included. In New Zealand, prices displayed to consumers must be GST-inclusive, but business-to-business quotes are often GST-exclusive. Confusion here can lead to under-charging or disagreements with customers.
Forgetting about private use adjustments. If you buy something for your business but also use it personally (like a vehicle), you need to make an adjustment to reflect the private use portion. You can only claim the business percentage of the GST.
GST and Property
GST on property transactions in New Zealand can be complex. Residential rental income is exempt from GST, but commercial property transactions are generally subject to GST. If you are buying or selling commercial property, or converting residential property to commercial use, get professional advice on the GST implications.
Final Thoughts
GST is a straightforward tax in principle — 15% on most goods and services — but the compliance requirements can catch out small business owners who are not prepared. Register when you need to, keep good records, file your returns on time, and only claim legitimate business expenses. If in doubt, talk to an accountant or contact IRD directly.
For help understanding how your total income is taxed (including GST obligations alongside personal income tax), use our New Zealand salary calculator to get a complete picture of your financial position.