Everything you need to know about GST

GST is one of those topics many business owners don’t think too much about until it suddenly becomes urgent. Often that’s when revenue is growing, cash flow feels tight, or IRD starts asking questions.

Knowing when you must register for GST, and when it might make sense to register earlier, can save a lot of stress (and money) later on.

When are you required to register for GST?

In New Zealand, you must register for GST if your turnover exceeds $60,000 in any rolling 12-month period. This test works in two ways:

• If you have exceeded $60,000 in the past 12 months
• If you expect to exceed $60,000 in the next 12 months

This isn’t based on the financial year and it isn’t based on profit. It’s purely total sales before expenses.

Once you cross this threshold (or expect to), GST should be charged from that point. Waiting too long to register is one of the most common GST mistakes we see.

What happens if you register late?

If you should have been registered but weren’t, IRD can backdate your GST registration. This could mean:

• GST is owed on past sales

• You may not be able to recover GST from customers retrospectively

• The GST comes out of your own pocket

• Interest and penalties may apply

This is why monitoring your rolling turnover is so important, especially during periods of growth.

In reality, we’ve seen the IRD prefer not to backdate but they might require this if a business substantially surpassed revenue thresholds.

Registering early – when does it make sense?

You don’t need to wait until you hit $60,000 to register for GST. In some cases, registering earlier can be a smart move.

Some advantages of registering early include:

• Claiming GST on expenses: If you’re incurring significant start-up or ongoing costs, registering allows you to claim the GST back. This can provide a useful cash flow boost.

• Avoiding a rushed transition: Registering early avoids last-minute changes to pricing, invoicing, and systems when you suddenly cross the threshold.

• Clearer pricing from the outset: If you know you’ll exceed $60,000 anyway, setting pricing with GST in mind from the start can be simpler than adjusting later.

• Perceived credibility: In some industries, being GST registered can signal scale and professionalism, particularly when working with other GST-registered businesses.

When registering early may not be the right move

Early registration isn’t right for every business. Potential downsides include:

• Higher prices for customers who can’t claim GST back

• Additional admin and compliance

• Needing to manage GST cash flow carefully

For businesses selling directly to the public or testing a side hustle, waiting can sometimes make sense.

Choosing your GST filing frequency

Once registered, you’ll also need to choose how often you file GST. This choice can make a big difference to both cash flow and admin.

For most small businesses, it makes sense to register on a two-monthly (odd months) basis. It strikes a good balance between staying on top of GST and not creating unnecessary admin.

Monthly

Monthly filing can be a good option if:

• You struggle with cash flow and want GST settled more regularly

• You’re a developer or have large costs with infrequent sales (as it means you get the GST on your spending back more frequently)

• You only send invoices to overseas customers (so sales are zero-rated) and want the GST back on your expenses, sooner

• You regularly expect GST refunds and want to receive them sooner

Six-monthly

Six-monthly filing can be suitable for smaller, more stable operations with predictable cash flow. While it reduces admin, it can result in larger lump-sum payments, so it’s not ideal for everyone.

Choosing the right filing frequency is about cash flow as much as compliance.

GST basis – payments vs invoice

When you register for GST, you also need to choose how GST is calculated.

We generally recommend the payments basis for small businesses.

Payments basis

GST is paid or claimed when money actually changes hands. This means:
• You don’t pay GST until you’ve been paid by your customer
• You claim GST when you pay your bills

This reduces the risk of paying GST on income you haven’t received, which is especially important if customers are slow to pay.

Invoice basis

Under invoice basis, GST is accounted for based on invoice dates, regardless of when payment happens. This can create cash flow pressure if you issue invoices well before getting paid.

If a businesses income is more than $2m per year, the IRD requires businesses to move to invoice basis, but for most small businesses starting out, payments basis is the most practical and cash-flow-friendly option.

GST and cash flow – a quick reminder

Once you’re GST registered, it’s important to remember that part of every sale you make isn’t yours. GST should be set aside, not spent. Setting GST aside in a separate account (see our tax savings blog for more advice on money habits!) can prevent nasty surprises.

Final thoughts

GST doesn’t need to be scary, but it does need to be planned. The right time to register, the right filing frequency, and the right GST basis all depend on how your business operates and where it’s heading.

Getting this set up properly early can save you cash flow issues, compliance stress, and uncomfortable conversations with IRD later on.

If you’re unsure whether it’s time to register, or want help choosing the right GST setup for your business, get in touch with our team and we’re happy to talk it through.

Disclaimer: This article is intended to provide general information only and does not take into account your specific circumstances. GST rules can vary depending on how your business operates, so this should not be relied on as personalised advice. If you’re unsure what applies to your situation, we recommend seeking advice before making any decisions.