What is GST?
GST stands for ‘goods and services tax’. It’s a 15% tax that’s added onto the price of goods and services in New Zealand. GST will impact your business if you are ‘registered for GST’.
As a business that’s registered for GST, you will add GST onto products and services you sell, collect it from your customers, then pass it onto the government when you file a GST return. You can also claim back GST that you have paid when buying goods or services that are related to your line of business.
If you register for GST, you’re obliged to charge an extra 15% on top of your normal prices. So, if you’re a service business that charges $90 an hour, being registered for GST means you’ll have to charge $90 + 15% ($103.50 an hour). And if you’re a manufacturer who makes widgets that sell for $50, you need to add 15% GST. This brings your widget cost to $57.50. To work out the GST, simply multiply your price by 1.15.
Obviously, you can play with pricing components to reach a GST inclusive price that suits your market. For example, if you want an item to cost $99.95, your ex-GST price is $86.91. There are online GST calculators to help with establishing price points.
When you buy something – goods or services – from an individual or company that’s GST registered, you will be paying GST. Everyone in New Zealand pays GST, even if they’re not registered for it.
The benefit of being registered for GST is that you may be able to claim GST back on goods or services you purchased if they are genuine business expenses.
As a GST-registered person or business, you are collecting and paying GST all the time. So it’s really important to keep a precise record of all the GST you collect and all the GST you pay. This is done through bookkeeping, aka accountancy. It also requires you to keep records of all invoices and receipts that show GST charged or paid. If you buy something from a supplier who is not GST registered, the price would not include GST so there’s no GST for you to claim back on that purchase.