Kellett Accounting Solutions Limited
Tax specialists for network marketing and home based business professionals
How to register for GST (Goods and Services Tax)
- This page will guide you, question by question, through the process to register online for GST.
- You will need to do this when your total business income exceeds $60,000 per annum. You can also choose to voluntarily register while your income is less than this level if you prefer, and in most cases, I would actually recommend this.
- Before you can register, you'll need a myIR Secure Online services account (which you will also need to file your GST returns online, which I would definitely recommend), the IRD number to be registered and your ACC classification code.
- Go to the GST registration page on the IRD's website, which has links that will take you to a page to allow you to register for a myIR account if you don't already have one and to the page to select your ACC code.
- The IRD number will be the same number that you file your income tax under; so if you're a sole trader (even if you're trading under a business name) it will be your personal IRD number, the partnership number for partnerships, and the company's number if you're trading as a company. If you're not sure about this, please contact me to ask.
- While you're registering for your myIR, you'll be asked for your bank account number. You may feel reluctant to give the IRD your account number, but I would definitely recommend doing it because refunds by cheque can take up to 3 days after processing to be printed, then they're mailed out, and after you've banked the cheque it can take up to 5 days to clear. In contrast, a GST refund paid out electronically can be in your bank account (as cleared funds you can access immediately) the day after you file your return. (It's not always that quick though!)
- Now, I'll go through the questions (which hopefully haven't changed signficantly), with comments and suggestions about your answers. If the questions don't match up, please let me know and I'll both help you figure out your answers and adjust these instructions.
- Do you need to register?
- Last 12 month's turnover less than $60k? You've probably got a fairly good idea of this, if not please ask.
- Do you expect your next 12 month's income to be more than $60,000? There's no wrong answer to this question, and if you perform above or below your expectations, that's not going to cause you any problems. It's just to figure out whether you HAVE to register for GST or whether you're just choosing to.
- Do your prices include GST? For real estate agents, the answer is yes. For network marketers, and people who're reselling products at a recommended retail price from a NZ company, the answer is yes. If you're making or importing goods, or providing a service and setting your own prices, the answer may be no at the moment, but once you've registered for GST you will be adding GST to all your invoices. (There are exceptions to this, mainly sales to people based overseas, residential rent and financial fees / interest... contact me if you're not sure).
- Trade name: If your business is trading under a name that isn't the taxpayer's name, show the trade name here; otherwise leave it blank.
- Physical address (this will be the place they send GST correspondence to if your postal address fails)
- GST mail address: your postal address or my address if you want me to file them on your behalf.
- Phone numbers: they're highly unlikely to contact you, even less so if I'm filing the returns on your behalf, but they need to have this detail in case there's something that needs to be confirmed.
- Email is optional; the IRD's correspondence isn't very exciting, but can sometimes have some useful information. I don't think they send you reminders or things like that by email.
- Bank account; as I mentioned above, this is the best way to receive your refunds (if any) and seems to be a required field.
Registration Details:
- Registration Start Date: The IRD usually won't let you backdate your registration (unless you've received a large amount of GST inclusive income, like a real estate agent who received a commission including GST before they registered), so use the date you're applying or a tidy changeover date (like the first of April).
- Business description code: this is to calculate your ACC liability (if any). This can be changed relatively easily if the nature of your business changes or if you realise a different classification is a better match to your business (for network marketers, the description is usually "network marketing nec" (not elsewhere classified))
- Which filing frequency do you want to use? Most people find GST returns too annoying to do each month, so file two or six monthly. Six monthly returns seem like much more work, but it's only twice a year. Due to the timing of 2-monthly return due dates around Christmas, you may feel like you're doing GST returns constantly in January and February, however there is less to be processed in each two month return. I usually recommend 2 monthly returns for most people as people will find they get into a routine and find them relatively simple after a while, and it means that the payments (or refunds), and associated accounting fees if applicable, are smaller and less of a challenge for cashflow. One more consideration, possibly the most influential, is that if your cashflow is erratic and you are liable to pay provisional tax, if you file GST returns two monthly (or monthly), you can choose to calculate your provisional tax based on your income from your GST returns (so based on your actual income for that GST period) rather than a percentage of last year's income, annualised over the year. This is a big consideration for people who are paid on commission basis whose income can fluctuate quite wildly based on factors outside of their control. (If your income is very high, you may be forced to choose your filing frequency by the amount of expected income).
- Accounting basis: most people will choose payments or invoice basis. With the invoice basis, you pay (and claim) the GST on invoices based on the date of the invoice, regardless of whether it's been paid. With the payments basis, the GST is paid and claimed based on the date of the payment. For many people, it's not an issue, but if there's a time lag between when you invoice a client and when they pay you, under the invoice basis you may have to pay the GST before you've received their payment, which is why in most cases, I would recommend the payments basis. (Again, at high levels of income, you may be forced to choose the invoice basis).
- Importer / Exporter / Making Exempt supplies: the explanations on the side are fairly self explanatory, and these answers are not binding .. if you're not sure, select no.