Goods and Services Tax (GST) is an additional tax that is charged on some goods and services in New Zealand.
Here are the most frequently asked questions we get from contractors and freelancers.
How do I know if I need to be registered for GST?
You are required to register for GST if you are an individual or company that is earning over $60,000 in a single financial year.
If you earn less than $60,000 in self-employed income, registering for GST is totally optional. If you do register for GST voluntarily, be aware that this will have impacts on the amount that you charge for your services, and you will also be required to file GST returns on a regular basis.
How does GST work?
If you are registered for GST, you will be required to charge an additional 15% on top of the costs of your services. If you purchase something from a person or company that is GST registered, you will pay an additional 15% on top of their prices.
You will need to keep accurate records of all the GST you have collected and paid throughout a GST period. This is usually done through keeping records of all invoices, receipts and transactions where GST was either collected or paid. You will need all of this supporting information when filing GST returns.
When you file a GST return, you are required to declare to IRD both the total GST you have collected on your sales/income, as well as the total GST you have paid when making business purchases. The balance of the two is then payable to IRD.
In certain circumstances, you may find that within a GST period, you have paid more in GST than you have collected in GST on your sales. In these instances you would receive a GST refund from IRD.
Do I need to be registered as a company to be GST-registered?
No. You can register for GST as an individual contractor, freelancer or sole trader - there is no need to register a company with the Companies Office. As an individual you can raise the same business expenses as a registered company would.
How do I register for GST?
If you need to register for GST, you can log in to MyIR and select the option within your profile to ‘Register for a new tax account’.
From here you can select the option to register for Goods & Services Tax (GST), and you will then be required to submit information about your business, your predicted earnings, how often you expect to file GST, as well as whether you wish to register for GST on a ‘Payments’ or ‘Invoice’ basis.
How do I show GST on my invoices?
If you’re someone who invoices their clients in order to collect payment, and you register for GST, your invoices are then deemed to be ‘Tax Invoices’ and therefore are required by IRD to feature certain things:
- The words ‘Tax Invoice’ in a clear and prominent place
- Your name (or Trading Name)
- Your GST Number
- The date of the invoice
- A description of the goods or services you are selling