Understanding GST
GST means Goods and Services Tax. It is a 15% tax on most goods and services sold in New Zealand. Businesses collect this tax for the government and send it to Inland Revenue. GST is charged on most transactions, including business sales, but some exceptions apply, like financial services and rental income from homes. You need to register for GST if your annual sales are expected to be over NZD $60,000 in a financial year. This applies to all products and services you sell. If you consistently earn less than this amount, you don’t have to register, but you can choose to do so if you want.
If your earnings are below the required amount, voluntary registration has some benefits:
Claim GST on Purchases: Registering lets you claim GST credits on your business costs, which can lower your tax expenses.
Build Credibility: Being GST-registered can make your business seem more reliable, especially to larger companies.
Prepare for Growth: Registering now can ease your transition if you expect to grow quickly and exceed the $60,000 threshold. Once registered, you won’t have to worry about unexpected GST obligations when your income increases.
To decide if you should register for GST in New Zealand, consider these important factors about your business:
Annual Turnover: Register for GST if your annual income hits NZD $60,000. This amount includes all sales revenue from your business. If you expect to reach this limit soon, consider registering now for compliance and easier financial management.
Business Model: Think about your business model. If you often buy goods or services with GST, registering lets you reclaim the GST you paid, helping your cash flow.
Client Base: If your clients are mainly GST-registered businesses, they might want to deal with GST-registered suppliers to recover the GST on their purchases. Being GST-registered can boost your credibility and attract these clients.
Future Growth: If you expect your income to rise soon, registering early can make things easier later. It helps you avoid the trouble of registering in the middle of the year and keeps you compliant as your business grows.
Administrative Considerations: Keep in mind that being registered means you'll need to file regular GST returns, which can require additional time and resources. If your business is small or you operate on a tight budget, consider whether you can manage this added administrative work.
Understanding these GST basics will help you make informed decisions about registering and staying compliant with New Zealand tax laws. For more details, you can check Inland Revenue's guide here.
Assessing these factors can help you determine whether it's time to hire a bookkeeper to ensure your financial health and support your business growth.
By dedicating some time to familiarise yourself with these tools, you can maintain accurate financial records, ensuring a clear picture of your financial health without the need for professional bookkeeping services.
Working with Ako Cash Flow, you will not find traditional bookkeepers but rather a team dedicated to empowering you to become your own bookkeeper. Our approach focuses on providing you with the tools and knowledge necessary to manage your finances confidently and effectively. Through our resources and support, you will learn how to track your income and expenses, understand cash flow management, and make informed financial decisions that align with your goals. We believe that by equipping you with these essential skills, you can take control of your financial journey and foster long-term success in your personal or business finances.
