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What GST is

Importantly, if your business’ total sales exceed the $2 million threshold, you may still be able to use the payment basis. If you do not choose a taxable period when you register, the IRD will automatically assign you the two-monthly period that matches your balance date. This is the last day of an accounting year which, for most New Zealand businesses, is 31 March. The New Zealand changes come at a time of growing obligations such as DAC7 quickbooks online advanced fathom being placed on platforms globally, emerging information reporting in other countries, and, for some platforms, the impact of payment processing reporting. In relation to VAT/GST, it is vital for regulators to ensure that there is global consistency with any VAT/GST rules relating to the gig and sharing economy. A new bill proposes significant changes to the goods and services tax treatment of the gig and sharing economy in New Zealand.

  1. You might struggle to see where you sit with GST if you sell by auction or lay-by, sell secondhand goods, or lease goods.
  2. TSI needs to include the date of the invoice, or if invoice is not issued, the “time of supply”.
  3. You can use SCI to correct many errors, such as an incorrect description of the supply, an incorrect amount charged, or an incorrect GST rate and a cancellation of the supply.

Officials estimate that the New Zealand gig economy is close to NZ$2 billion (regulatory impact statement, finalized May 25, 2022) so the new measure is likely to add significant new GST revenue. GST is a tax added to the price of most goods and services, including imports. You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the content provided. © 2024 KPMG, a New Zealand Partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. B) If your tax invoice does not show the GST amount, you need to ensure GST is calculated at 15% of the gross amount. If GST is not calculated at 15%, you must show the GST exclusive amount, the GST amount, as well as the gross amount.

This would apply if you primarily sell goods to consumers and don’t want to differentiate between businesses and consumers. If you choose this route, you must supply your customer with a full-tax-invoice, which is discussed in more detail later in this article, or be willing to issue a refund after the sale to GST-registered businesses. GST is a consumption tax that New Zealand applies to most goods imported into its country. The main focus of this article is on the GST changes relating to the gig and sharing economy. 2.27 To deal with the issues outlined in this chapter, the Government intends to implement an offshore supplier registration system for collecting GST on low-value imported goods.

New Zealand also has agreements with some foreign tax authorities allowing them to collect unpaid GST on New Zealand’s behalf. Inland Revenue and Customs will also share information and work together to help identify instances of non-compliance. If you choose to refund the GST to the purchaser, be sure to withhold this amount from the GST you remit at the end of the quarter.

What is GST in New Zealand?

If no information is provided on the invoice, customs officials will default to collecting GST on all products when the combined value is over 1,000 NZD, which may result in double taxation. Collecting GST at checkout on all goods will be the most reasonable method for most ecommerce merchants. This will allow for a more straightforward calculation that will be easier to understand for both the merchant and consumer. To calculate the amount of GST to collect, apply 15% to the selling price of the goods and any shipping, insurance, and service costs.

You can choose to issue a single document that qualifies as both a receipt and a full tax invoice as long as the document fulfills the requirement for both. This can simplify business processes and may be the preferred option for many businesses. If you choose to only collect GST on low-value goods, then the information must be itemized so the customs officials know to collect GST on high-value goods at the border.

Register for GST

[5] Certain supplies are levied at a rate of zero percent (see sections 11 and 11A of the Goods and Services Tax Act 1985). You can carry on using the apportionment method if you choose not to use the principal purpose method. You may need to keep an eye on the ongoing use of the goods and services. If the amount of use changes, you may need to make further adjustments if it’s different to your first estimate.

How to fulfill your order and provide a proper receipt to your customer

Registration for New Zealand GST is a simple process that can be completed online. The registration must be completed by the person who will be responsible for filing the GST returns. It is a three-step process with the following instructions provided by the New Zealand Inland Revenue website. New Zealand has passed new legislation that impacts overseas businesses selling goods directly to New Zealand consumers. This new law went into effect on December 1st, 2019, and is very similar to the low-value goods law enacted by Australia in 2018.

For example, if you are in the start-up or growth phase and you have large expenses but not as much income, you can get a GST refund when you file your return. Even though registering means extra work for your business, it has some advantages. You will generally only account for GST on your sales in your GST returns. New Zealand is not alone in considering VAT/GST and the gig economy. You might struggle to see where you sit with GST if you sell by auction or lay-by, sell secondhand goods, or lease goods. In these cases, it’s worth checking out the IRD page on special supplies.

Eugen Trombitas of PwC NZ looks at the details and some practical issues to note. Because businesses claim back their input GST, the GST inclusive price is usually irrelevant for business purchasing decisions, other than in relation to cash flow issues. Consequently, wholesalers often state prices exclusive of GST, but must collect the full, GST-inclusive price when they make the sale and account to the IRD for the GST so collected.

If you cannot submit your return, or pay on time penalties and interest may apply. Our handy online tool will help you decide on the records you need to keep when you buy or sell goods or services. The amount of GST you claim (input tax) is subtracted from the amount of GST you charge (output tax) to calculate your tax to pay or GST refund.

2.10 In general, the increasing ability to easily purchase goods and services online has benefited New Zealand. It has given consumers greater access to a wider range of goods and services from around the world, and increased competition in the domestic retail market. Increased competition tends to encourage the efficient use of resources, which can result in lower prices, greater innovation, and better quality goods and services for consumers. 2.7 Historically, the majority of imported goods have been imported by commercial entities in consignments above the de minimis. When GST was introduced in 1986, very few final consumers imported goods below the de minimis. Therefore, the compliance and administrative costs involved in taxing imported goods below the de minimis was considered to outweigh the benefits of taxation at that time.

Market forces will dictate how underlying sellers will make supplies in the future and the impact of prices on account of the new rules. Persons or entities with annual revenue less than $60,000 do not have to register for GST.[6] This threshold has increased three times since the introduction of GST in 1986. GST was introduced in conjunction with compensating changes to personal income tax rates and removal of many excise taxes on imported goods. Financial services, residential rent, and donated goods sold by non-profits fall into this category. While you don’t collect any GST when the rate is 0%, you do need to report the sales on your return.

Chapters 3 to 5 of this discussion document outline the proposed design features of the offshore supplier registration system. The Government is keen to ensure that the design of the rules is workable in practice so that compliance costs are kept to a minimum. The proposed rules, therefore, are broadly in line with New Zealand’s current rules for collecting GST on cross-border services and intangibles, and the recently enacted rules for low-value imported goods in Australia. Melissa later purchases a pair of running shoes from the same offshore website with a value of $300 (inclusive of shipping). This means the total duty owing on Melissa’s running shoes is $79.50 (the 10% tariff of $30 plus GST of $49.50 ($330 x 15%)). Melissa is required to pay GST and tariff duty on the running shoes.

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