GST for Small Business in NZ

You must register for GST once your business turnover hits $60,000 in any 12-month period, or if you expect it to exceed $60,000 in the next 12 months (IRD). The GST rate in New Zealand is 15%. Once registered, you charge GST on your sales, claim GST back on your business expenses, and file regular GST returns with IRD.

If your turnover is under $60,000, registration is optional. But it can still make sense, especially if your customers are other GST-registered businesses or if you have significant business expenses.

What is GST?

GST (Goods and Services Tax) is a consumption tax added to most goods and services sold in New Zealand. It's currently 15% and has been since 1 October 2010 (IRD). As a GST-registered business, you're essentially a tax collector: you add 15% GST to your prices, collect it from your customers, then pass it on to IRD, minus any GST you've paid on your own business expenses.

The difference between what you collect and what you've paid is what you owe (or what IRD owes you). That's the core of a GST return.

The $60,000 threshold: when registration is compulsory

GST registration is compulsory when your total taxable supplies (turnover) exceed $60,000 in any 12-month period, or if you reasonably expect them to exceed $60,000 in the next 12 months (IRD).

The $60,000 is based on GST-inclusive turnover. If you charge $55,000 for your services and collect $8,250 in GST on top, your total taxable supplies are $63,250, which is over the threshold.

Key points about the threshold:

• It's a rolling 12-month test, not just the financial year. If you hit $60,000 in any consecutive 12-month period, you need to register.
• It includes the GST component if you're already registered. If you're not yet registered, it's based on the value of your supplies.
• You must register within 21 days of exceeding the threshold (IRD).
• Once registered, you stay registered even if turnover later drops below $60,000 (though you can apply to deregister if it falls below $60,000 for 12 months).

Voluntary registration: when it makes sense

If your turnover is under $60,000, you can choose to register voluntarily (IRD). This makes sense when:

Your customers are GST-registered businesses. They can claim back the GST you charge, so adding GST to your prices doesn't increase their real cost. If you're not registered, you can't charge GST, and your customers lose nothing, but you also can't claim GST back on your expenses.

You have high business expenses. If you're spending a lot on GST-inclusive supplies (equipment, materials, software subscriptions), registering lets you claim that GST back. On $20,000 of annual expenses, the GST component is about $2,609. That's cash you can claim back from IRD.

You're starting a business with upfront costs. If you're buying equipment, fitting out an office, or investing in stock before you start earning, registering early lets you claim GST on those setup costs.

Voluntary registration doesn't make sense if your customers are mostly individuals (not GST-registered), because they can't claim back GST. Adding 15% to your prices just makes you more expensive. In this case, staying unregistered keeps your prices competitive.

Invoice basis vs payments basis: which to choose

When you register for GST, you choose an accounting basis. This determines when GST is counted, not how much, but when (IRD).

Feature	Invoice basis	Payments basis
When you account for GST on sales	When you issue the invoice	When you receive payment
When you claim GST on expenses	When you receive the invoice	When you make the payment
Cash flow impact	You may owe GST before being paid	GST timing matches actual cash flow
Who can use it	Any GST-registered business	Businesses with turnover under $2 million
Best for	Businesses with quick-paying customers	Businesses with slow-paying customers, contractors, freelancers

Payments basis is usually better for small businesses and sole traders. You only account for GST when money actually changes hands. If a client takes 60 days to pay your invoice, you don't owe GST on that sale until you're actually paid. This is easier to manage and better for cash flow.

Invoice basis means you owe GST as soon as you invoice, even if the customer hasn't paid yet. This can create cash flow pressure if you have slow-paying clients. However, it also means you can claim GST on expenses as soon as you receive the supplier's invoice, even before you've paid it.

Most sole traders and small businesses choose the payments basis. You can switch between bases by notifying IRD, but only once every 12 months.

Filing GST returns: how often and how

Your filing frequency depends on your turnover (IRD):

Annual turnover	Filing frequency	Return due
Under $500,000	6-monthly (default)	28th of the month following the end of the period
$500,000 to $24 million	2-monthly (default)	28th of the month following the end of the period
Over $24 million	Monthly	28th of the month following the end of the period

Most small businesses file either 6-monthly or 2-monthly. You can choose a more frequent filing period than your default if you prefer.

You file GST returns through myIR (myir.ird.govt.nz). Each return reports:

1. GST collected: The total GST you charged on your sales during the period
2. GST paid: The total GST you paid on business expenses during the period
3. GST to pay or refund: The difference between collected and paid

If you collected more GST than you paid, you owe IRD the difference. If you paid more GST than you collected (common in periods with big purchases), IRD owes you a refund.

Worked examples of GST returns

Example 1: Freelance web developer, payments basis, 2-monthly return

During the two-month period, you invoiced and were paid for the following work:

Item	GST-exclusive amount	GST (15%)	GST-inclusive amount
Client A website build	$8,000	$1,200	$9,200
Client B monthly retainer	$3,000	$450	$3,450
Client C small project	$1,500	$225	$1,725
Total sales	$12,500	$1,875	$14,375

Your business expenses during the same period:

Expense	GST-exclusive amount	GST (15%)	GST-inclusive amount
Software subscriptions	$400	$60	$460
Internet and phone	$200	$30	$230
Co-working space	$600	$90	$690
Computer equipment	$1,800	$270	$2,070
Total expenses	$3,000	$450	$3,450

Your GST return:

Line	Amount
GST collected on sales	$1,875
GST paid on expenses	$450
GST to pay to IRD	$1,425

You collected $1,875 in GST from your clients and paid $450 in GST on expenses. You owe IRD the difference: $1,425.

Example 2: Tradie, first quarter with a big equipment purchase

During the two-month period:

Sales	GST-exclusive	GST (15%)	GST-inclusive
Residential jobs	$18,000	$2,700	$20,700
Commercial job	$6,000	$900	$6,900
Total sales	$24,000	$3,600	$27,600

Expenses	GST-exclusive	GST (15%)	GST-inclusive
Materials and supplies	$5,000	$750	$5,750
New work van	$45,000	$6,750	$51,750
Fuel	$800	$120	$920
Insurance	$500	$0 (exempt)	$500
Total expenses	$51,300	$7,620	$58,920

Your GST return:

Line	Amount
GST collected on sales	$3,600
GST paid on expenses	$7,620
GST refund from IRD	$4,020

Because the van purchase included $6,750 in GST, your total GST paid exceeds what you collected. IRD owes you a $4,020 refund. This is one of the biggest advantages of GST registration: claiming back GST on major business purchases.

Note: insurance premiums are generally exempt from GST, so there's no GST to claim on the $500 insurance cost.

GST on expenses: what you can and can't claim

You can claim GST back on expenses that are for your business. The key rule: the expense must be for making taxable supplies (IRD).

You can claim GST on:

• Office supplies and equipment
• Business software and subscriptions
• Vehicle expenses (for business use, or the business portion)
• Materials and stock
• Professional services (accountant, lawyer)
• Advertising and marketing
• Phone and internet (business portion)
• Rent for business premises

You can't claim GST on:

• Personal expenses (even if paid from a business account)
• Financial services (bank fees, interest, insurance premiums, these are GST-exempt)
• Residential rent (exempt from GST)
• Fines and penalties
• Donations
• Expenses without a valid tax invoice

Mixed-use expenses (like a phone used for both business and personal) can only be claimed for the business portion. If your phone is 70% business use, you can claim 70% of the GST on the phone bill.

You need a valid tax invoice to claim GST. For purchases under $50, a simplified invoice is fine (just needs the supplier's name, date, description, and amount). For purchases of $50 or more, you need a full tax invoice with the supplier's GST number (IRD).

Common GST mistakes small businesses make

Mistake 1: Not registering on time. If you hit $60,000 in turnover and don't register within 21 days, you could face penalties. IRD may also backdate your registration, meaning you owe GST on sales you've already made without collecting it from customers.

Mistake 2: Forgetting that the threshold is GST-inclusive. If you're already registered, the $60,000 includes the GST component of your sales.

Mistake 3: Claiming GST on exempt supplies. Financial services (bank fees, insurance) are GST-exempt. There's no GST on these, so there's nothing to claim back. Similarly, residential rent is exempt.

Mistake 4: Not keeping tax invoices. You can't claim GST without a valid tax invoice. A bank statement alone isn't enough. Keep invoices and receipts for all business purchases, especially those over $50 (IRD).

Mistake 5: Mixing personal and business expenses. If you claim GST on a personal expense, you're making a false claim. Use a separate business bank account and only claim GST on genuine business costs.

Mistake 6: Filing late. Late GST returns attract penalties and use-of-money interest. Set reminders for your filing dates.

Common questions

Do I need to register for GST if my turnover is under $60,000?

No. GST registration is only compulsory when your turnover exceeds $60,000 in any 12-month period. Below that, registration is voluntary. It may make sense if you have high business expenses or your customers are mostly GST-registered businesses (IRD).

How do I register for GST?

You can register through myIR (myir.ird.govt.nz) or by completing an IR360 form. You'll need your IRD number, an estimate of your annual turnover, your preferred accounting basis (invoice or payments), and your preferred filing frequency (IRD).

Can I charge GST before I'm registered?

No. You can only charge GST if you're registered. If you charge GST without being registered, you'll need to pass that money to IRD and register promptly. Conversely, if you're registered, you must charge GST on all taxable supplies (IRD).

What's the difference between GST-inclusive and GST-exclusive pricing?

GST-inclusive means the price includes 15% GST. GST-exclusive means GST is added on top. A $100 GST-exclusive price becomes $115 GST-inclusive. To calculate the GST portion of a GST-inclusive price, multiply by 3/23 (or divide by 1.15 and subtract). For example, $115 GST-inclusive contains $15 of GST (IRD).

How do I calculate GST on a price?

To add GST: multiply the GST-exclusive amount by 1.15. To find the GST in a GST-inclusive amount: multiply by 3/23 (which equals 15/115). For example, $230 GST-inclusive contains $30 of GST ($230 x 3/23 = $30) (IRD).

What happens if I file my GST return late?

Late filing attracts an initial late filing penalty of $50 if you're a small business, plus 1% of the unpaid tax after the due date. Further penalties of 4% accrue if the amount remains unpaid after certain intervals. Use-of-money interest also applies on overdue amounts (IRD).

Can I claim GST on a vehicle I use for both business and personal?

Yes, but only the business-use portion. If you use your vehicle 60% for business, you can claim 60% of the GST on the purchase and running costs. You need to keep a logbook for at least three months to establish the business-use percentage, and this needs to be reviewed every three years (IRD).

Do I charge GST on exports?

Exports of goods and services are generally zero-rated (0% GST). You still include them in your GST return, but the GST rate is 0%. This means you don't charge GST to overseas customers but can still claim GST back on the expenses you incur to make those exports (IRD).

What records do I need to keep for GST?

You must keep records of all sales and purchases, including tax invoices, for at least seven years. This includes invoices you issue, invoices you receive, bank statements, and any other documentation supporting your GST claims. IRD can audit your GST returns and will ask for these records (IRD).

Is GST charged on residential rent?

No. Residential rental income is exempt from GST. If you rent out a residential property, you don't charge GST on the rent and you can't claim GST on expenses related to that property (unless it's also used for a taxable activity). Commercial rent, however, is subject to GST at 15% (IRD).

What to do next

• Calculate your take-home pay to see your income tax alongside business income
• Understand NZ tax brackets for your personal income tax rates
• Read the contractor vs employee tax guide if you're unsure about your employment status
• See the NZ income tax guide for a full overview of how income tax works in NZ

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Last updated: 1 March 2026. Sources: IRD (ird.govt.nz). This is financial information, not financial advice.