The GST rate in New Zealand is 15%. That’s the headline here. But there’s more to know about GST, so stick around and let’s chat flat-rate consumption taxes.
What is GST?
GST = Goods and Services Tax. A pretty reasonable way of referring to a tax on goods and services.
GST is a consumption tax. It’s levied on goods and services that we consume. Not necessarily consumption in the sense of eating stuff, it’s more like using something up. But if you want to have a go at eating a service, then go for it. That’d be metaphysically interesting.
GST is also a flat rate tax, meaning when it’s charged it’s always at exactly 15% – it won’t fluctuate. This differs from our old friend income tax, which is a progressive tax in Aotearoa, where each individual’s level of income affects the income tax rate they’re subject to.
Who charges GST, and who pays it?
Depending on their situation, businesses selling goods and services may be required to register for and charge GST.
There are also GST-exempt goods and services. Residential rent and financial services are GST-exempt, for example, as are donated goods sold by non-profits. Products or services sold to overseas clients/customers are generally zero-rated for GST, meaning GST is charged at a rate of 0%
As it’s a consumption tax, the point is that the consumer of goods and services will be paying the GST, having been charged it by the supplier. You may have seen GST itemised on your supermarket or fuel receipts – that bit of your bill goes entirely to the IRD.
Do I need to charge GST as a sole trader?
Depends on how much you earn, and what you do. We’ve put together a fairly expansive guide, but if you don’t have a lot of time on your hands, focus on the big question:
Are you earning (or likely to earn) $60,000 of self-employed income in a 12-month period?
YES - Okay, you need to charge GST, yes. If you’re already doing that, nice! If not, you’ll need to register and charge GST ASAP.
Or, if you’re a Hnry user, we can register for GST on your behalf.
NO - It isn’t mandatory, but it is possible to be registered if you’re below this threshold. We’ve listed some of the pros and cons in that aforementioned big GST guide, as it’s essentially a business decision for you to make. Follow your vibe.
I need to register for GST and add it to my prices – how?
Definitely register ASAP, don’t go rogue and start adding GST – the IRD should be able to process your application within 10 working days, and you’ll have to pick a filing period to determine how regularly you want to submit GST returns.
Once you’re registered, you’ll need to add GST to your prices so that you collect GST from consumers of your goods and services. This means itemising it on invoices and informing your clients.
You’ll need to make sure you’re actually adding it. If you’ve been charging $50 for your handcrafted origami grapefruits before you registered for GST, you’d need to add GST to your total once you’re GST registered, meaning you should be charging $57.50 (as the GST amount is 15%, remember, equalling $7.50) in order to get that same $50 in your pocket.
You can use our GST calculator to add GST to your prices.
Who has time to do so much calculator admin?
We do! Hnry sorts your GST on your behalf, automatically calculating the 15% GST portion so that we can itemise GST on your invoices and payslips, and then pass it on directly to the IRD on your behalf. We also complete and file your GST returns, whenever they’re due. Join Hnry today!
