Owning your own business can be an exciting venture, but there are a few tax obligations that can be tricky to understand. For example, GST is something you’ll need to factor in when it comes to your business. Whether you’ve had your business for a while, or you’re just starting up, here are some considerations to help you figure out your GST responsibilities.
Firstly, what exactly is GST?
If you’re a business owner, you should already have an understanding of GST, but to refresh your memory, Goods & Services Tax (GST) is a tax that’s added to goods and services in New Zealand. The current GST rate is 15%.
When you own your own business, you are collecting GST on your product or service on behalf of the government, which you will then potentially need to pay back when you file a GST return.
Do I need to register for GST?
You are required to register for GST if your turnover was $60,000 or more in the past 12 months, or if you expect it will be at least $60,000 in the next 12 months.
If your turnover is less than this but you are adding GST to the price of your goods or services, then you will also need to be GST-registered.
I’ve registered for GST – now what?
Once you’ve registered for GST, you’ll need to charge GST in the pricing of your goods and services, and keep records of your GST payments and charges.
You’ll also need to file GST returns regularly – you can select how often you would like to do this, the options are monthly, two-monthly, or six-monthly.
Why do I need to file a GST return?
When you are selling your products or services, you are collecting GST, but when you make a business purchase, you are paying GST. When you file a GST return, the difference between how much GST you’ve collected, and how much GST you have paid in expenses is calculated. You may need to pay more or you may receive a refund depending on this difference.
If you collected more GST than you paid, then you need to pay the balance to IRD when you file your GST return. If you paid more GST than you collected, you can get a GST refund from the IRD.
I’ve closed my business down, can I deregister from GST?
You can deregister from GST through the IRD, just head to your myIR page and click on the GST section. You can then choose to cancel your registration.
If you’d like to know more about the GST obligations of your business, get in touch with our expert accounting team today!