One of the first tax decisions almost every new business owner in New Zealand faces is: do I need to register for GST, and if I don’t have to yet, should I anyway?
It sounds like a simple $60,000 question. In practice, there are a couple of nuances worth understanding properly, because getting the timing wrong in either direction has real costs, whether that’s a backdated GST bill you didn’t budget for, or unnecessary compliance admin you didn’t need to take on yet.
When registration is compulsory
Under Inland Revenue’s rules, you must register for GST if you’re an entity carrying out a taxable activity, and either of the following applies:
- your turnover was at least $60,000 in the last 12 months, or you expect it will be at least $60,000 in the next 12 months, or
- you carry out a taxable activity and you’re already adding GST to your prices.
That second trigger surprises a lot of business owners. It means registration isn’t purely a turnover test: if you’ve been charging GST on your invoices without being registered, that alone creates an obligation to register, regardless of your turnover.
On the turnover side, a few details matter:
- It’s a rolling 12-month test, not a tax year. You need to look back over any trailing 12 months, and also look forward, if you can reasonably expect to cross $60,000 in the year ahead (for example, because you’ve just landed a large contract), you’re required to register even if your historical turnover is well under the threshold.
- It’s based on turnover, not profit. Gross sales from your taxable activity are what count, not what’s left after expenses.
- You don’t have to register just because you start a business. Plenty of small or part-time operations sit under $60,000 indefinitely and are never required to register.
When registration is voluntary, and when it’s worth doing
If your turnover is under $60,000, IRD is explicit that you can still choose to register voluntarily. According to IRD, the advantages of voluntary registration include that it helps you stay on top of your paperwork and see how your business is performing, it lets you claim GST back on your business expenses, and it can make dealing with your suppliers easier.
In practice, this tends to make sense in a few common situations:
- Your customers are mostly GST-registered businesses. If you invoice other businesses rather than the public, adding 15% GST doesn’t really cost them anything. They claim it back on their own return. Meanwhile, you get to claim GST back on your own expenses.
- You have significant upfront costs. Buying equipment, stock, a website build, or tools before you’ve generated much revenue means you’re likely paying a fair amount of GST on the way in. Registering lets you claim that back, sometimes resulting in a net refund in your early returns.
- You want the credibility of a GST number. In some industries, being GST-registered is read as a signal of scale or seriousness, though this cuts both ways and isn’t a reason on its own.
IRD is equally clear about the trade-offs. The disadvantages include having to add GST to your prices, needing to file returns regularly, and being liable for penalties if returns or payments are late. If most of your customers are members of the public rather than GST-registered businesses, adding 15% to your prices is a real cost they can’t claim back, so voluntary registration isn’t automatically the right call. It genuinely depends on who’s paying, and what you’re spending.
What changes once you’re registered
Registering isn’t just flicking a switch. It comes with ongoing obligations. Once registered, you need to:
- charge GST on your taxable supplies
- file GST returns on a regular cycle
- pay any GST owing, or claim a refund if you’ve paid more GST than you’ve collected
- keep proper GST records.
You’ll also need to choose two things when you register: an accounting basis and a filing frequency.
Accounting basis determines when you account for GST: on the payments basis (most common for small businesses, available if your turnover is $2 million or less), you return GST based on when money actually changes hands. On the invoice basis (open to anyone), you return GST when you invoice or are invoiced, even before payment is received. There’s also a hybrid method, though IRD notes it’s not commonly used by small businesses because of the cashflow mismatch it can create.
Filing frequency is how often you file returns:
- Monthly: available to anyone, and compulsory once your sales exceed $24 million in any 12-month period
- Two-monthly: available to anyone under $24 million; a common middle ground
- Six-monthly: available if your sales are under $500,000; fewer filings, but a bigger job each time
It’s also worth aligning your GST filing periods with your income tax balance date (31 March for most businesses). IRD’s guidance recommends this, and getting it wrong can mean extra admin later reconciling the two.
What if you’ve been trading without registering?
If you should have registered earlier, for example, you’ve already been adding GST to your prices, or you clearly crossed the threshold some months back, get in touch with IRD or your accountant promptly. In exceptional circumstances, IRD can backdate a GST registration start date, but the further behind you get, the more complicated (and potentially costly) it becomes to unwind.
The bottom line
The $60,000 threshold is simple in theory, but the decision of when to register, and whether to do it before you’re required to, is genuinely a judgement call that depends on your customer base, your cost structure, and how much admin capacity you have. Get it right early and it’s a non-event. Get it wrong and it can mean a backdated bill you weren’t expecting, or unnecessary compliance overhead before your business needed it.
If you’re not sure whether voluntary registration makes sense for where your business is right now, it’s worth a conversation before you make the call. This is exactly the kind of decision that’s easy to get right upfront and expensive to unwind later.
This article is general information only and doesn’t take into account your personal circumstances. Speak to us for advice specific to your situation.