Goods and Services Tax (GST) is an essential part of running a business in New Zealand, and filing GST returns can sometimes feel overwhelming, especially for small businesses. To simplify the process, we’ve broken down the steps for filing your GST and provided tips to make the process easier.
What is GST?
GST is a 15% tax on most goods and services in New Zealand. If your business earns more than $60,000 in any 12-month period, you must register for GST with Inland Revenue (IRD).
Step-by-Step Guide to GST Filing:
1. Register for GST: If your annual turnover exceeds $60,000, you need to register for GST through the IRD. You can register online by creating a myIR account.
2. Choose Your Filing Method: You can choose to file GST returns either on a monthly, two-monthly, or six-monthly basis depending on the size of your business.
Two-Monthly Filing: This is the most common option.
Monthly Filing: Suitable for businesses with large turnovers.
Six-Monthly Filing: Ideal for smaller businesses with lower annual income.
3. Use the Right Accounting Basis:
– There are two accounting methods for GST:
Invoice Basis: GST is calculated on invoices issued and received.
Payments Basis: GST is calculated on the payments made and received.
Hybrid Basis: A combination of the invoice and payments basis.
The payments basis is usually more suitable for small businesses, as you only pay GST on the income received and deduct GST on expenses when they’re paid.
4. Calculate Your GST: You will need to calculate the total GST collected on sales (output tax) and the GST paid on business purchases (input tax). The difference between the two is what you will either pay or claim as a refund.
5. File Your GST Return: Once you’ve calculated your GST, log into your myIR account and follow the steps to submit your GST return. Make sure to file before the due date to avoid penalties.
6. Pay Your GST: If your output tax exceeds your input tax, you will need to pay the difference to IRD. Payment can be made online via your bank or directly through your myIR account.
7. Claim GST Refunds: If your input tax exceeds your output tax, you can claim a GST refund from the IRD. Ensure that all your receipts and invoices are well-documented to support your claim.
Challenges and Tips:
Record-Keeping: One of the biggest challenges is keeping accurate records of GST on all sales and purchases. Use accounting software to track GST and generate GST reports easily.
Missed Deadlines: Missing a GST filing deadline can lead to penalties and interest charges. Set reminders or use an accountant to ensure you file on time.
GST on Imports: If you import goods, be sure to account for the GST on these imports in your GST return. The customs department will usually provide a GST invoice.
Regular Reviews: Review your GST obligations regularly. As your business grows, you may need to change your GST filing frequency or switch accounting methods.
Conclusion:
Filing GST doesn’t have to be complicated. By following these steps and keeping accurate records, small business owners in New Zealand can file their GST returns with ease. If you find the process challenging, consider using accounting software or hiring a professional accountant to assist with the filings.