GST Return Filing: A Step-by-Step Guide

Overview of GST Filing and Payment

Goods and Services Tax (GST) is a consumption tax applied to most goods and services in New Zealand at a standard rate of 15%. Every registered business must file a GST return periodically to report and remit collected GST. Here's a breakdown of filing frequency options:

• Monthly: Suitable for businesses with a turnover exceeding NZD 24 million or those choosing this option. Monthly filing may be beneficial for businesses that regularly receive GST refunds, as it allows for quicker refund processing.
• Two-Monthly: The standard option, commonly used by most New Zealand businesses. This provides a balance between administrative work and cash flow management.
• Six-Monthly: Available for businesses with a turnover of less than NZD 500,000. This option reduces the administrative burden but requires managing GST funds over a longer period.

Each business should choose the filing frequency that best aligns with its cash flow, record-keeping abilities, and transaction volume. Your choice can affect how often you need to complete returns and how you manage your GST payments throughout the year.

In addition to choosing a filing frequency, you'll also need to select an accounting basis for your GST:

• Payments Basis: You account for GST when you make or receive payments. This is often simpler for small businesses as it matches your cash flow.
• Invoice Basis: You account for GST when you issue or receive invoices, regardless of when payment occurs. This method requires more rigorous record-keeping but provides a more accurate picture of your GST position.
• Hybrid Basis: A combination where you account for GST on sales on an invoice basis and on purchases on a payments basis. This option is less commonly used.

Your accounting basis affects when you need to report and pay GST, so choose the option that best suits your business model and accounting systems.

Preparing for GST Filing

Organising Your Records

Organised record-keeping is crucial for smooth GST filing:

• Sales Records: Compile all taxable sales and any non-taxable transactions, ensuring each transaction's GST is accurately recorded.
• Purchase Records: Collect invoices and receipts for purchases where GST was paid, as these can be claimed back.

Develop a system that works for your business. This might include:

• Maintaining a dedicated folder (physical or digital) for tax invoices
• Regularly updating your accounting software with sales and purchase information
• Categorising transactions based on their GST status (standard-rated, zero-rated, exempt)
• Reconciling your bank statements with your sales and purchase records

The key is consistency. By maintaining good records throughout your GST period, you'll find the filing process much simpler when the due date approaches.

Tracking Adjustments

It's important to account for GST adjustments, such as:

• Private Use: Only claim the business portion of GST for items used both privately and for business. For example, if you use a vehicle 70% for business and 30% for personal use, you can only claim 70% of the GST paid on expenses related to that vehicle.
• Unpaid Invoices: Adjustments may be needed for unpaid invoices or items taken for personal use. If you're on an invoice basis and have invoices that remain unpaid after 12 months, you may be able to claim a bad debt adjustment.
• Assets Purchased: For significant assets that have both business and private use, you may need to make one-off or ongoing adjustments to reflect the actual use.
• Entertainment Expenses: Some business entertainment expenses have special GST rules, allowing only 50% of the GST to be claimed.

Keep detailed records of any adjustments you make, including the calculation method and reasoning. This will be valuable if Inland Revenue requests additional information or conducts an audit.

Using Accounting Software

Most businesses use accounting software that is easy to use to track GST, categorising taxable and non-taxable items to simplify filing.

Popular accounting software options in New Zealand include:

• Xero: Cloud-based accounting software with strong GST handling capabilities, including automatic GST return preparation.
• Moniaro Books: Next-generation bookkeeping for New Zealand businesses, featuring GST tracking and reporting, smart transaction categorisation, and automatic GST calculation powered by AI-driven rules.
• MYOB: Offers both cloud and desktop solutions with comprehensive GST tracking features.
• QuickBooks: Provides GST calculation and reporting tailored to New Zealand requirements.

These software solutions can:

• Automatically calculate GST on sales and purchases
• Generate GST-compliant invoices
• Track GST collected and paid
• Prepare GST return information in a format that can be easily transferred to your Inland Revenue filing
• Generate reports to help you understand your GST position

Many of these solutions also integrate directly with Inland Revenue's systems, allowing for streamlined filing. The investment in good accounting software typically pays for itself in time saved and reduced risk of errors.

Step-by-Step Guide to Filing Your GST Return

Logging into myIR and Accessing Your GST Account

1. Login: Start by logging into your myIR account at ird.govt.nz. If you don't have a myIR account, you'll need to set one up first by registering on the Inland Revenue website.
2. Access GST Account: Navigate to the GST section within myIR to begin your filing process. This is typically found under the "Accounts" tab, where you'll see "GST" listed among your tax types.

Make sure you have your IRD number and password handy. If you've forgotten your password, use the password recovery option on the login page. For security reasons, Inland Revenue may require additional verification steps, especially if you're logging in from a new device.

Completing the GST Return Form Online

In myIR, follow these steps:

1. Select the Period: Choose the GST period you're filing for. This will be based on your filing frequency (monthly, two-monthly, or six-monthly).
2. Enter Sales Information: Enter your total sales and income on which GST was collected (output tax). This includes:
   • Standard-rated supplies (Box 5)
   • Zero-rated supplies (Box 6)
3. Enter Purchase Information: Report the GST paid on business expenses (input tax) in Box 11. This is the GST you can claim back on business-related purchases and expenses.
4. Enter Adjustments: Make any necessary adjustments, such as for private use or unpaid invoices, in the appropriate boxes.

The form will guide you through each box that needs to be completed. Here's a more detailed breakdown of what each box typically requires:

• Box 5: Total sales and income (including GST) for standard-rated supplies
• Box 6: Total sales and income for zero-rated supplies (like exports)
• Box 7: The sum of Box 5 and Box 6
• Box 8: GST collected on sales and income (calculated as Box 5 ├ù 3 ├À 23, which is equivalent to the GST component of the inclusive amount)
• Box 9: Purchases and expenses (including GST) on which you've paid GST
• Box 10: Purchases and expenses (excluding GST) for which GST hasn't been charged
• Box 11: GST paid on purchases and expenses (calculated as Box 9 ├ù 3 ├À 23)
• Box 12: Adjustments from your calculation sheet (if any)
• Box 13: GST to pay or refund due (Box 8 minus the sum of Box 11 and Box 12)

The system will calculate many of these values automatically based on your entries, reducing the risk of calculation errors.

Reviewing Your Entries

Ensure total sales, purchases, and adjustments are accurate to avoid errors and the need for corrections or amended returns later.

Take time to double-check:

• That all sales for the period are included
• That all eligible purchases with GST have been accounted for
• That the correct GST rates have been applied
• That any adjustments are correctly calculated and entered
• That the final GST amount to pay or be refunded seems reasonable compared to previous periods

If something doesn't look right, review your records before submitting. It's much easier to correct an error before filing than to amend a return later.

Submitting Your Return

Once you have reviewed and confirmed your entries, submit the return through myIR. You'll receive a confirmation with the GST amount due or refundable.

The submission process typically involves:

1. A final review page showing all your entries
2. A confirmation button to submit the return
3. A confirmation screen or email acknowledging that your return has been received

After submission, make note of:

• The confirmation number for your submission
• The amount to pay or be refunded
• The due date for payment (if applicable)

Keep a copy of your submitted return and the confirmation for your records. Most accounting software allows you to mark the return as "filed" once you've completed this step.

Making GST Payments

GST Payment Methods

• Direct Debit: Set up a direct debit through myIR for automatic payments. This is convenient and ensures you never miss a payment due date. You can set this up as a one-time payment for each return or as a recurring arrangement.
• Internet Banking: Transfer the amount directly to Inland Revenue using specified reference codes. When making a payment via internet banking, ensure you use your IRD number followed by the tax type code (e.g., "GST") as the reference to ensure the payment is correctly allocated.
• Debit/Credit Card: Payment can be made online via credit card, though transaction fees may apply. This option is available through the myIR portal.
• Cheque: Still accepted but increasingly rare, with limited use cases. Note that Inland Revenue is phasing out cheque payments, so check their website for the latest information on this payment method.

Each payment method has different processing times. Electronic methods like direct debit and internet banking are typically processed faster than cheques. Consider these timeframes when choosing your payment method, especially if you're paying close to the due date.

Due Dates and Timelines

GST returns and payments are due by the 28th of the month following the end of your taxable period, except for the period ending 30 November, which is due by 15 January.

Here's a breakdown of the standard due dates:

• Monthly filers: The 28th of the following month (e.g., January's return is due by February 28th)
• Two-monthly filers: The 28th of the month following the two-month period
• Six-monthly filers: The 28th of the month following the six-month period

Special rules apply to the November/December period due to the holiday season:

• For periods ending November 30th, returns and payments are due by January 15th
• For periods ending December 31st, returns and payments are due by January 28th

If the due date falls on a weekend or public holiday, you have until the next working day to file and pay.

Tips for Timely Payment

Setting reminders and opting for direct debit can help ensure timely payments, avoiding late penalties and interest charges.

Consider these strategies to stay on top of your GST obligations:

• Set up calendar reminders at least a week before the due date to give yourself time to prepare
• Use accounting software that sends automatic reminders for upcoming GST deadlines
• Set aside GST funds in a separate account as you collect them, so the money is readily available when payment is due
• Consider setting up a direct debit arrangement with Inland Revenue to automate payments
• File your return early, even if you plan to pay closer to the due date
• If you anticipate cash flow issues, contact Inland Revenue before the due date to discuss possible payment arrangements

Remember that the filing due date and payment due date are the same. Both your return and payment must be received by Inland Revenue by the due date to avoid penalties.

Troubleshooting, Penalties, and Common Questions

Troubleshooting Common Filing and Payment Issues

If you miss a filing deadline, file and pay as soon as possible to reduce penalties. Minor errors can be corrected in the next return, but contact Inland Revenue for significant issues.

Here are solutions to common problems:

• Login Issues: If you can't access myIR, use the password reset function or contact Inland Revenue's support line for assistance.
• Missing Information: If you're missing some information needed to complete your return, file using your best estimate and make an adjustment in your next return when the correct information becomes available.
• Payment Didn't Go Through: If your payment fails or is rejected, try an alternative payment method immediately and keep proof of your attempt to pay on time.
• Technical Issues with myIR: If you encounter technical problems with the online system, take screenshots of any error messages and contact Inland Revenue to explain the situation.
• Errors After Filing: If you discover a mistake after filing, the correction method depends on the size of the error:
  • Small errors (under $1,000) can usually be corrected in your next GST return
  • Larger errors require filing an amended return or contacting Inland Revenue

Always document your attempts to comply with GST requirements, especially if you encounter issues that prevent timely filing or payment. This documentation may help if you need to request a penalty remission later.

Penalties and Interest

• Late Filing Penalties: Penalties apply immediately after the due date and increase over time. The initial late filing penalty is $250 for monthly filers, $250 for two-monthly filers, and $50 for six-monthly filers.
• Interest on Overdue Payments: Inland Revenue charges interest daily on unpaid GST balances. The interest rate is set by Inland Revenue and can change over time.
• Late Payment Penalties: In addition to interest, late payment penalties may apply. These typically include an initial penalty of 1% applied the day after the due date, with an additional 4% if the tax remains unpaid after a week.
• Remission Requests: In cases of genuine hardship, businesses can apply for penalty or interest remissions. You'll need to explain the circumstances that prevented compliance and show that you've taken reasonable steps to meet your obligations.

The penalties and interest can accumulate quickly, so it's always best to file and pay on time. If you know you'll have difficulty meeting a deadline, contact Inland Revenue proactively to discuss your options.

FAQs

What should I do if I overpay GST?

Overpayments can be claimed as a credit in the next return or refunded upon request. To request a refund, you can contact Inland Revenue directly or indicate this preference in your myIR account.

What if I need to make changes to a filed return?

For minor errors (under $1,000), you can make adjustments in your next GST return. For larger errors, you should file an amended return through myIR or contact Inland Revenue for guidance.

What happens if I miss a payment?

Inland Revenue may issue a reminder or penalty notice. Prompt payment and communication with IR can help mitigate additional costs. If you know you'll miss a payment, contact them before the due date to discuss possible arrangements.

Can I change my filing frequency?

Yes, you can request to change your filing frequency through myIR or by contacting Inland Revenue. Changes are typically approved if your business meets the criteria for the requested frequency.

What if my business is experiencing financial hardship?

Contact Inland Revenue to discuss your situation. They may be able to arrange an installment plan or, in cases of serious hardship, consider writing off some penalties or interest.

Do I need to file a return if I had no activity during the period?

Yes, you still need to file a "nil return" even if you had no GST to pay or claim during the period. This confirms to Inland Revenue that your business is still operating but had no GST activity.

What if I receive a GST refund?

If your input tax (GST on purchases) exceeds your output tax (GST on sales), Inland Revenue will process a refund. Refunds are typically processed within 15 working days but may take longer if your return is selected for review.

If you have specific questions about your GST obligations, it's best to consult with a tax professional or contact Inland Revenue directly for authoritative guidance.

Advanced GST Filing Considerations

Special Situations and Their GST Treatment

Mixed-Use Assets

For assets used for both business and private purposes (like vehicles or home offices), special rules apply for claiming GST. You'll need to calculate the business-use percentage and only claim that portion of the GST. Keep detailed records of how you determined the business-use percentage, as Inland Revenue may request this information.

Capital Asset Purchases

When purchasing significant capital assets (like property or expensive equipment), the GST implications can be substantial. You can generally claim the full GST input tax in the period of purchase, even if you're paying for the asset over time. However, subsequent adjustments may be needed if the business-use percentage changes.

Bad Debts

If you've included GST on an invoice in a previous return but haven't received payment, you may be able to claim a GST adjustment for the bad debt. This typically applies when the debt has been written off or remains unpaid after 12 months. Document your efforts to collect the debt, as Inland Revenue may request this evidence.

Imported Goods

GST on imported goods is typically collected by New Zealand Customs at the border. You can claim this GST as an input tax credit in your GST return, but you'll need to keep the Customs import documentation as evidence of the GST paid.

Record-Keeping Requirements

Inland Revenue requires businesses to keep GST records for at least 7 years. These records should include:

• Copies of all tax invoices issued and received
• Documentation for zero-rated and exempt supplies
• Records of adjustments made for private use or other reasons
• Bank statements and other financial records
• Evidence supporting bad debt write-offs
• Calculations used to determine business-use percentages

Good record-keeping not only ensures compliance but also makes the GST filing process much smoother. Consider using cloud-based storage solutions that back up your records and make them accessible when needed.

Preparing for a GST Audit

Inland Revenue conducts regular audits to ensure GST compliance. To be prepared:

• Maintain organized and complete records
• Ensure your business practices align with your GST accounting basis
• Document unusual transactions or special GST treatments
• Regularly reconcile your GST returns with your accounting records
• Address any discrepancies or errors promptly

If you're selected for an audit, remain cooperative and professional. Consider engaging a tax professional to assist you through the audit process if you're uncertain about any aspects of your GST compliance.

Final Tips for Successful GST Filing

Developing a GST Routine

Create a regular routine for managing your GST obligations:

• Set aside time each week to update your GST records
• Reconcile your accounts monthly to catch any discrepancies early
• Begin preparing your GST return at least a week before the due date
• Schedule payment in advance to ensure it's processed on time
• Review your GST position quarterly to identify any trends or issues

Using Professional Help

Consider engaging a bookkeeper or accountant to assist with your GST obligations, especially if:

• Your business has complex GST situations (like mixed supplies or international transactions)
• You're unsure about the correct GST treatment for certain transactions
• You don't have time to manage GST compliance yourself
• You've had issues with GST compliance in the past

The cost of professional assistance is often outweighed by the time saved and the reduced risk of errors or penalties.

Staying Updated on GST Changes

GST rules and procedures can change over time. Stay informed by:

• Subscribing to Inland Revenue's business updates
• Following tax news sources or professional associations
• Regularly checking the Inland Revenue website for announcements
• Discussing updates with your accountant or bookkeeper

Being aware of changes ensures your GST practices remain compliant and may help you identify new opportunities for simplifying your GST processes.

Conclusion

Filing GST returns is a fundamental obligation for GST-registered businesses in New Zealand. While it may seem daunting at first, establishing good systems and routines can make the process manageable and efficient.

Remember these key points:

• Maintain organized records throughout each GST period
• Understand your filing frequency and accounting basis
• Use accounting software to simplify GST tracking and calculations
• File and pay on time to avoid penalties and interest
• Seek professional help if you're unsure about any aspect of GST

With good practices in place, GST compliance becomes a routine part of business administration rather than a stressful obligation. By understanding the process and meeting your obligations consistently, you'll contribute to your business's financial health and compliance standing.