We’re back with more hard-hitting tax insight! Today we’re diving into a topic every NZ business owner needs to understand: GST (Goods and Services Tax) and should you register for GST.
Note: This article was originally written here.
If you’re unsure how GST works or whether GST registration is necessary for your business, this guide will break it all down.
Is GST Registration Mandatory in New Zealand?
In New Zealand, GST registration is compulsory if:
- You earned more than $60,000 NZD in sales over the past 12 months
- You expect to earn more than $60,000 NZD in the next 12 months
This threshold applies to GST-taxable activities, this includes most NZ business operations except for:
- Residential rental income
- Boarding income
- Investment income (interest, dividends, funds, etc.)
Remember:
The $60,000 threshold is based on SALES, not PROFIT.
Sales = what you bill customers.
Profit = sales minus expenses.
If you’re already over (or about to cross) the threshold, stop reading and go register for GST! It’s mandatory.
Does Your Sector Expect GST Registration?
Some industries routinely require contractors to be GST registered. For example:
- Hospitals
- Private medical clinics
- Agencies using contractor-based labour
If these organisations insist on GST-inclusive invoices, you must register for GST to work with them. Once GST registered, you must charge GST to ALL clients, you can’t pick and choose.
Do You Need GST Registration to Access Funding or Support?
Some NZ business grants and support programmes such as the Regional Business Partner Network funding requires that businesses be GST registered. Even if they have sales of less than $60,000 a year. If you are looking to apply for this funding (which we are a service provider for!) you must be GST registered. No exceptions!
Are You a Pre-Revenue Firm?
Startups and research-led businesses often spend heavily before generating revenue. Examples include costs for:
- Fixed assets
- Upfront licensing
- R&D expenses
- Specialist equipment
If this sounds like you, GST registration may be beneficial because you can claim GST refunds on expenses during loss-making phases. This benefit reduces once you become profitable but at the early stage, it can significantly ease cash strain.
If you are a small NZ business earning under $60,000 and don’t fall into any mandatory or strategic GST categories, the professional advice is simple: Do not register for GST.
Common Myths About GST Registration (Debunked)
Myth #1: “Being GST Registered Means I’ll Get Big GST Refunds”
Reality check:
You only get a refund if your expenses exceed your sales for that GST period.
If you always get refunds, it typically means:
- Your clients are mostly overseas,
- Your business is failing, or
- You’re committing tax fraud.
Most healthy NZ businesses pay GST, not receive it. Refunds are normal only during start-up or high-investment phases, not as an ongoing expectation.
Myth #2: “GST Registration Improves Cash Flow”
Relying on GST refunds for cash flow is a dangerous business strategy. The IRD issuing refunds is not a substitute for:
- Strong sales
- Solid pricing
- Effective cash flow management
If your cash plan depends on government refunds, you have bigger problems to solve.
So…TLDR
Don’t Register for GST if:
- You’re earning under $60,000 annually
- You don’t need GST registration for industry or funding
Register for GST if:
- You exceed the $60,000 threshold (mandatory)
- Your clients require GST-inclusive invoices
- You want access to funding that requires GST registration
- You are a pre-revenue, high-investment startup
Otherwise, there’s no meaningful tax or financial advantage. Plus, managing GST returns adds extra compliance work and some accountants even charge more for GST (not us at SH Advisory though!)