Tax rules and rates change. This page explains how the system works so you know what to ask about; it is not tax advice for your situation. Confirm current rates and thresholds at ird.govt.nz, and talk to a chartered accountant before making decisions.
The $60,000 threshold
GST registration is compulsory once your taxable turnover exceeds $60,000 in any 12-month period, or as soon as you reasonably expect that it will over the next 12 months.
This trips people up constantly. If you invoice $75,000 and your costs are $30,000, your profit is $45,000 but your turnover is $75,000. You must register.
What “rolling twelve months” actually means
It is not the tax year, and it is not the calendar year. It is any consecutive twelve months, which means you should be checking at the end of every month.
There are two tests, and either one triggers registration:
- Looking back: did turnover exceed $60,000 in the last 12 months?
- Looking forward: do you reasonably expect it will in the next 12 months?
The forward-looking test catches people out. Sign a $40,000 contract when you are already at $35,000 for the year and you may need to register now, not when the money actually lands.
If IRD determines you should have registered six months ago, they can backdate the registration and assess 15% GST on all sales in that period. You never charged your customers that GST, so it comes out of your margin. On $60,000 of sales that is roughly $7,800 you did not budget for.
Should you register voluntarily?
Below the threshold it is your call. The right answer depends almost entirely on who your customers are.
Register early if
- Your clients are GST-registered businesses: they claim it back, so your price effectively does not change for them
- You have big startup costs (van, tools, equipment) and want to claim the GST on them
- You are clearly heading past $60,000 anyway and want one clean system from day one
- You want the credibility of a GST number on your invoices
Hold off if
- You sell to the public, who cannot claim it back: you either put prices up 15% or absorb it
- Your costs are low, so there is little input GST to reclaim
- You are testing an idea and want minimal admin
- Your income is genuinely well below the threshold and staying there
Try the numbers both ways with our GST calculator before deciding.
What changes once you are registered
- You add 15% to your prices, or absorb it, which is a 13% cut to your revenue. Decide deliberately, and be explicit in every quote about whether prices include GST.
- You claim GST back on business purchases: tools, fuel, software, materials, and the business portion of mixed-use costs.
- You file returns: usually every two months.
- Your invoices must meet requirements: your GST number, the words “tax invoice” historically, and the GST amount. See the invoicing guide.
- The GST you collect is not your money: you are holding it for IRD.
GST arrives in your account looking exactly like income. Two months later it has to go to IRD. If it has been spent, you are funding the return out of next month's work, and you never quite catch up. Move it into a separate account the day it lands.
Filing frequency and dates
| Frequency | Who it suits |
|---|---|
| Monthly | High volume, or businesses regularly in a refund position |
| Two-monthly | The default and most common choice for sole traders |
| Six-monthly | Available under a turnover limit: less admin, but a much larger bill each time |
You also choose an accounting basis: payments (account for GST when money actually moves), invoice (when the invoice is issued), or hybrid. Payments basis is usually kinder on cash flow for small operators, because you are not paying GST on invoices your clients have not settled yet.
Common mistakes
- Registering late. Check your rolling total monthly.
- Being vague about whether prices include GST. Put “plus GST” or “GST inclusive” on every quote, every time. Ambiguity costs you 15% when a client disputes it.
- Claiming GST on things you cannot. Private expenses, and purchases from unregistered suppliers with no GST in them.
- Claiming 100% on mixed-use items. Your phone and vehicle are part business, part personal. Claim the business share and be able to justify it.
- Spending the GST. Covered above, and worth repeating.
- Forgetting zero-rated sales count. Exports are zero rated but still count toward the $60,000 threshold.