The Goods and Services Tax has been about since 1986, so we Kiwis are used to paying GST on just about everything. But as soon as you go into business, GST becomes a lot more important, and a little more complicated.
Businesses that meet specific criteria must register for GST by law. And even if you aren’t required to, you might still want to opt in voluntarily (believe it or not, there are actually benefits to being GST registered!)
So, when should I register my business for GST?
If your business turned over at least $60,000 in the last 12 months, or you expect it will turn over $60,000 or more in the next 12 months, you must register (unless you are one of the few exceptions selling GST-exempt goods and services).
And if you charge GST you must register, even if your business doesn’t turn-over more than $60,000 per year.
You can choose to register for GST before you are legally obliged to, and this might be a good decision for your business. Come and talk to me about pros and cons of registering for GST early.
How do I register my business for GST?
The good news is, the process of registering is actually relatively simple.
Make sure you have your IRD number at hand when calling IRD, or you can use your myIR online account to complete the process.
You will also need your business industry classification code and business bank account details to complete the setup. Or of course, we can do it for you :)
During registration, you will need to choose how often you will be filing a GST return and how you will account for GST in your accounts.
You can choose to file GST monthly, two-monthly, or six-monthly (these options may not be available to every business). Generally, most small businesses opt for two-monthly filings, because in terms of cash flow it is easier to make 6 smaller payments than it is to plan for 2 large payments. Two-monthly is also the default choice given by the IRD.
As for accounting, you can choose to use a payments basis, an invoice basis, or a hybrid. The option you select dictates when you will owe GST on your sales and will impact your bookkeeping and accounting practices.
So now my business is registered, how do I process a GST Return?
Knowing when to register and actually registering is pretty straightforward, however what comes next is less so. To file a GST return you need to know what you can claim GST on and what you can’t, you need to enter journals and reconcile your GST return to your balance sheet. This requires some time and of course expertise, which is where we come in :)
There are many things about GST you need to be aware of once you are registered.
So, if GST confuses you completely, come in for a chat or give me a call.
