Whether your business needs to be registered for GST will depend on what industry you are in and how much you are going to earn.
To start with we will look at when you have to register for GST, this is for all types – sole traders, partnerships, companies etc.
You must register for GST when:
- You think you will earn more than $60,000 in 12 months
- Or you add GST to your prices
If you don’t think you are going to earn over $60,000 you can still voluntarily register. This means you may receive a GST refund if your expenses are higher than your income. If you are going to have high equipment purchases in the first year registering could help with your cashflow as you will receive refunds for the GST paid on the purchases. E.g. Heavy haulage trucks etc.
Once you have decided to register for GST you can do this by logging into your companies MYIR and adding a new tax type or if you are registering a company this can be done during the registration process through the Companies office.
You will then need to decide the following:
1. Frequency of filing
b. two monthly
c. six monthly
2. Accounting Basis
a. Payments basis – GST is accounted for on your sales and purchases when you make or receive the payments.
b. Invoice Basis – you account for GST on the invoice date even if you haven’t received the payment yet.
c. Hybrid – this is a combination of the payments and invoice basis.
Two monthly or six monthly filing periods are the most commonly chosen frequencies. If you don’t have a lot of invoices and expenses six monthly filing is an option and can only be chosen if your turnover is less than $500,000. Two monthly filing can make it easier to keep track of and easier on cashflow if you have high invoicing amounts.
You can change the filing frequency or accounting basis later if required. Monthly filing is ideal for commercial properties going through a refit as there are normally high expenses resulting in GST refunds that can assist with cashflow.
Payments basis is the most commonly chosen method for small businesses as the GST is only on the payments received and made during that period. The hybrid method is not often used and is not a method that is available in the settings of most accounting software.
Records of all invoices and expenses must be kept for seven years, this can be done in several different ways which will come up in later articles.
How to register for GST
To register online through myIR. You’ll need:
- your IRD number
- your business industry classification (BIC) code
- to know the filing frequency — either monthly, two-monthly, or six-monthly for small businesses
- to know which accounting basis you want — payments basis, invoice basis, or Hybrid basis.
Once registered you can file and pay your GST through your myIR accounts GST section. For all entities your IRD number will be your GST number.
https://www.businessdescription.co.nz/#/home— Business Industry Classification Code website
IRD has a lot of helpful information about GST and guides on whether you should register for GST. https://www.ird.govt.nz/gst/registering-for-gst