GST is the tax that most often catches small businesses out — not because it’s complicated, but because the money passes through your account weeks before it’s due. By the time the return arrives, that cash has often been spent on wages, stock or rent. Choosing the right filing setup and building a set-aside habit fixes most of the problem.
The basics
- Rate: 15% on most goods and services supplied in New Zealand.
- The 3/23 rule: the GST inside a GST-inclusive price is 3/23 of the total. $2,300 including GST contains $300 of GST.
- Registration: compulsory once you expect turnover to exceed $60,000 in 12 months. You can register voluntarily below that.
- What you pay: GST collected on sales minus GST paid on claimable business purchases.
Filing frequencies
| Frequency | Who can use it | Cash-flow effect |
|---|---|---|
| Monthly | Anyone; compulsory if turnover is over $24 million | Small, frequent payments; more admin |
| Two-monthly | Turnover under $24 million (the default for many) | Balanced |
| Six-monthly | Turnover under $500,000 | Two large payments a year; easy to under-save |
Six-monthly filing is tempting — less admin — but it creates two big bills a year. If you don’t have a disciplined set-aside habit, those bills can hurt. Many owners find two-monthly or monthly easier to manage.
Due dates
GST returns and payments are due on the 28th of the month after the end of your taxable period, with two exceptions:
- periods ending in March are due 7 May;
- periods ending in November are due 15 January.
Inland Revenue is clear: you can’t get an extension to file a GST return, and you must file for every period — even a nil return.
Accounting basis: when GST “happens”
| Basis | GST is accounted for when… | Available to |
|---|---|---|
| Payments | Money is received from customers or paid to suppliers | Generally businesses with turnover under $2 million |
| Invoice | Invoices are issued or received | Any registered business |
| Hybrid | Sales on invoice basis, purchases on payments basis (or similar) | Specific circumstances |
Why it matters for cash: on the payments basis, you only owe GST on money you’ve actually received. If customers pay slowly, you’re not paying IRD GST on invoices that haven’t been paid yet. On the invoice basis, you can owe GST on sales you haven’t been paid for — a real risk if your debtor days are long.
Businesses with slow-paying customers often find the payments basis kinder to cash flow. Your accountant can confirm what suits you.
How much to set aside
A simple weekly habit beats any clever strategy:
Weekly set-aside ≈ (GST on sales − GST on claimable purchases) for the period ÷ weeks in the period
Or more simply, move 3/23 of each week’s GST-inclusive takings into a separate tax account, and move back the GST on purchases when you pay suppliers. The GST & provisional tax planner works this out for your filing frequency and combines it with provisional tax.
Example
A Napier electrician files two-monthly. In a typical period:
- Sales including GST: $92,000 → GST collected $12,000
- Claimable purchases including GST: $34,500 → GST paid $4,500
- GST to pay: $7,500
- Weeks in a two-monthly period: about 8.7
- Weekly set-aside: about $865
Common GST cash traps
- Big one-off sales. A large equipment sale or property transaction can create a large GST bill in one period.
- Import GST. GST on imported goods is collected at the border and claimed back later — a timing cost.
- Growth. Higher sales mean higher GST before the extra profit arrives.
- Six-monthly filing plus weak discipline. Two big bills with nothing saved.
- Spending refunds. A GST refund in a big-purchase period isn’t extra profit.
If a GST bill is bigger than your bank balance
Don’t ignore it — file the return on time anyway. Late filing and late payment each carry penalties, and interest builds. Options:
- Ask IRD for an instalment arrangement. See dealing with IRD debt.
- Use a line of credit for a one-off timing gap — see business line of credit.
- Clear it with a property-secured loan, where IRD debt can be refinanced or paid out — see IRD tax debt funding.
GST and your business structure
GST registration sits with the entity that makes the supplies. A sole trader registers personally; a company, partnership or trust registers in its own name. If you run more than one entity, each may need its own registration — or, in some cases, a GST group. Keep tax accounts separate by entity so each one’s set-aside is clear, and make sure lenders see the right account when you apply.
The one-page GST plan
- Choose the filing frequency that suits your discipline, not just your admin preference.
- Confirm your accounting basis with your accountant.
- Open a separate tax account.
- Automate a weekly transfer based on the planner.
- Put every due date in your calendar with a reminder a week early.
If you’re already behind, send a 60-second enquiry — a Loanster lending specialist can talk through the options. It won’t affect your credit score.