GST for sole traders and contractors in NZ

If you're a sole trader, contractor or freelancer in New Zealand, GST is one of those things that's simple once it clicks, and stressful when it doesn't. This guide covers when you need to register, how to charge and calculate 15% GST, and the one habit that keeps GST from biting you at return time.

What is GST?

GST (Goods and Services Tax) is a flat 15% added to most goods and services in New Zealand. If you're GST-registered, you charge it on top of your prices, collect it from customers, and pass it to Inland Revenue (IRD), minus the GST you've paid on business expenses. The key mental model: GST you collect isn't your income. It's IRD's money, sitting in your account.

Do I need to register for GST?

You must register for GST if your turnover is over $60,000 in any 12-month period (past or expected). Under that, registration is optional.

Registering voluntarily can make sense if you buy a lot of GST-inclusive gear (you can claim that GST back), or if your clients are themselves GST-registered businesses that don't mind. It adds admin, though: returns every two or six months, so weigh it up. Check the current rules at ird.govt.nz.

How to add GST to a price

Adding GST is the easy direction: multiply your GST-exclusive price by 1.15.

• $100 excluding GST becomes $115 including GST ($15 GST).

So if you quote "$100 + GST", the invoice total is $115. Our GST calculator does this instantly in either direction.

How to work out the GST inside a price (the 3/23 rule)

This is where people slip up. The GST inside a GST-inclusive price is 3/23 of it, not 15% of it. Why? Because the 15% was added to the exclusive amount, so it's only 15/115 (which simplifies to 3/23) of the inclusive total.

• $115 inclusive: GST is 3/23 × $115 = $15 (and the exclusive price is $100).
• Taking 15% of $115 gives $17.25, which is wrong, and a common GST-return error.

The GST calculator handles this reverse calc for you, so you never have to remember the fraction.

Filing GST returns

Once registered, you file GST returns (usually two-monthly or six-monthly). On each return you report:

• the GST you collected on sales, minus
• the GST you paid on business expenses (your input credits).

You pay IRD the difference (or get a refund if you paid more than you collected). Keep your invoices and receipts; GST-registered customers and IRD both expect a valid tax invoice.

The one habit that saves you: set the GST aside

The biggest GST mistake isn't a maths error. It's spending the GST you collected and scrambling at return time. The fix is simple: every time you get paid, move the GST portion into a separate account.

Our contractor take-home calculator shows the GST to set aside alongside your income tax and ACC, so you can see your real take-home. And KeaBudget, a free NZ budget app, lets you track that set-aside as its own pot, so the money's there when IRD comes calling.

Quick recap

• GST is 15%; register once turnover tops $60,000/year.
• Add GST: × 1.15. Find GST inside a price: × 3/23.
• Treat collected GST as IRD's money, and set it aside the moment you're paid.

This guide is general information, not tax advice. GST rules and thresholds change, so confirm the current details with IRD or your accountant.