Do You Need to Register for GST? Find Out Here

Wondering if your business needs to register for GST in New Zealand? Here's a quick guide to help you determine if and when to register.

GST Registration Threshold

In New Zealand, businesses with an annual turnover of over NZD 60,000 must register for GST. If you make less than this amount, registration is optional.

The $60,000 threshold applies to any consecutive 12-month period, not just the financial year. This means you need to monitor your rolling annual turnover continuously. You should register when:

• Your turnover for the past 12 months exceeds $60,000, or
• You expect your turnover for the next 12 months to exceed $60,000

Turnover includes all your business income before expenses and GST. This includes:

• Sales of goods and services
• Fees, commissions, and other business income
• Regular sales of business assets

It doesn't include:

• Wages or salary you earn as an employee
• Interest or dividends unless you're in the business of financial services
• Private sales of personal items
• One-off transactions that aren't part of your business

If you exceed the threshold, you must register within 21 days. Failing to register when required can result in penalties, including having to pay GST on past sales even though you didn't collect it from customers.

Who Needs to Register for GST?

The registration requirement applies to all types of business entities operating in New Zealand:

• Sole traders: Individuals running their own business
• Companies: Registered businesses with shareholders
• Partnerships: Multiple people running a business together
• Trusts: When engaged in business activities
• Non-profit organisations: When their taxable activities exceed the threshold

It also applies to non-residents who carry on a taxable activity in New Zealand, including selling goods or services online to New Zealand customers.

If you operate multiple businesses, the $60,000 threshold applies to the combined turnover of all your taxable activities.

Benefits of Registering Early

Even if your business earns less, registering allows you to claim GST on business expenses. This can be beneficial for startups or businesses with high expenses.

Here are some situations where voluntary registration might be advantageous:

High Setup or Operating Costs

If you're starting a business with significant initial investments in equipment, inventory, or other GST-inclusive expenses, registering allows you to claim back the GST on these purchases, improving your cash flow during the startup phase.

Business-to-Business Sales

If your customers are mainly GST-registered businesses, they can claim back any GST you charge them. This means adding GST to your prices won't make your products or services more expensive for these customers.

Business Credibility

Having a GST number on your invoices can enhance your professional image, particularly when dealing with larger businesses that expect suppliers to be GST-registered.

Planning for Growth

If you expect to exceed the threshold soon, registering early can help you establish good GST habits and systems before it becomes mandatory.

Drawbacks of Voluntary Registration

While there are benefits, voluntary registration also has some potential downsides:

Administrative Requirements

Once registered, you must comply with all GST obligations, including:

• Charging GST on your sales
• Keeping adequate records
• Filing regular GST returns
• Making GST payments to Inland Revenue

Impact on Pricing

If your customers are mainly non-GST registered (like individual consumers), adding GST will effectively increase your prices by 15%. This could affect your competitiveness if price is a key factor in your market.

Cash Flow Considerations

You'll need to manage the GST you collect from customers and ensure these funds are available when it's time to pay Inland Revenue.

How to Register

If you need to register, you can do it online through Inland Revenue's website. Have your IRD number and business details ready.

The registration process involves:

1. Logging into myIR on the Inland Revenue website (or creating an account if you don't have one)
2. Selecting the option to register for GST
3. Providing details about your business, including:
   • Business structure (sole trader, company, partnership, etc.)
   • Business activity description
   • Contact information
   • Expected turnover
4. Choosing your filing frequency (monthly, two-monthly, or six-monthly)
5. Selecting your accounting basis (payments, invoice, or hybrid)
6. Specifying your GST registration date

After submitting your application, Inland Revenue will process it and send confirmation of your registration, including your GST number.

Key Decisions When Registering

When registering for GST, you'll need to make several important choices:

Filing Frequency

• Monthly: For businesses with annual turnover over $24 million (mandatory) or those who prefer more frequent filing
• Two-monthly: The standard option for most businesses
• Six-monthly: Available for businesses with annual turnover under $500,000

Accounting Basis

• Payments basis: Account for GST when you make or receive payments (simpler for small businesses)
• Invoice basis: Account for GST when you issue or receive invoices (better for tracking receivables and payables)
• Hybrid basis: Account for sales on an invoice basis and purchases on a payments basis

Registration Date

If registration is mandatory, this should be the date you exceeded the threshold. If voluntary, you can choose a date that works for your business, such as the start of a financial quarter.

After Registration: Next Steps

Once registered for GST, you'll need to:

1. Update your invoicing system to include your GST number and comply with tax invoice requirements
2. Adjust your pricing to include GST (if necessary)
3. Set up systems to track GST on sales and purchases
4. Plan for regular GST filing and payment
5. Consider whether you need to backdate any GST charges or claims

Many businesses find it helpful to consult with an accountant after registration to ensure their systems are correctly set up for GST compliance.

Conclusion

Understanding whether you need to register for GST is an important part of running a business in New Zealand. By monitoring your turnover and considering the pros and cons of voluntary registration, you can make an informed decision that best supports your business goals.

If you're approaching the $60,000 threshold, start preparing for registration early to ensure a smooth transition. If you're well below the threshold, regularly reassess whether voluntary registration might benefit your specific situation.

Remember that GST registration is not just a compliance requirement├ö├ç├Âit's also an opportunity to formalize your business processes and potentially improve your cash flow through input tax credits.