GST for NZ Sole Traders and Contractors: Registration, Invoices, Filing and Cash Flow

GST is the first tax most New Zealand sole traders have to actively manage, and it is the one that causes the most confusion because it is a tax you collect for the government rather than pay from your own income. Here is how it works in practice for a contractor, tradesperson, freelancer or side-business owner.

Do you have to register?

You must register for GST if your turnover from a taxable activity was $60,000 or more in the last 12 months, or you expect it to reach $60,000 in the next 12 months. Turnover means your total sales before expenses, not your profit. You must also register if you are already adding GST to your prices, regardless of turnover.

Below $60,000, registration is voluntary. It is often worth registering early if your customers are GST-registered businesses (they can claim the GST back, so it costs them nothing) and you have significant expenses with GST on them. It is often worth staying unregistered if your customers are private individuals, because registering effectively raises your prices by 15% or cuts your margin by the same.

The rate and the arithmetic

GST is 15%. To add GST to an exclusive price, multiply by 1.15. To find the GST inside an inclusive price, multiply by 3 and divide by 23 — so a $230 inclusive invoice contains $30 of GST, and $200 is yours. The "divide by 23" trick is exact and worth memorising. Our free GST calculator does both directions.

Tax invoices: what must be on them

Since 2023 the rules are called "taxable supply information", but customers still call them tax invoices. For a sale over $1,000 the document must show: the words "tax invoice" or equivalent, your name and GST number, the date, a description of what was supplied, the customer's name and address (or other identifying details), and either the GST-inclusive total with a statement that GST is included, or the exclusive amount, the GST and the total shown separately. For sales between $200 and $1,000 the customer details can be omitted; below $200 a simpler receipt is acceptable. Get this right from your first invoice, because a customer's accountant will bounce a non-compliant one and delay your payment.

Filing frequency

Most sole traders file two-monthly. If your turnover is under $500,000 you can choose six-monthly filing, which means less admin but a larger bill twice a year. Monthly filing is compulsory above $24 million and optional below that; it suits businesses that regularly receive refunds. Returns and payment are due on the 28th of the month after the period ends, with the exceptions of the March period (due 7 May) and the November period (due 15 January).

Accounting basis

With turnover under $2 million you can use the payments basis: you account for GST when money actually changes hands. This is the right choice for almost every sole trader because you never pay GST on an invoice a customer has not yet paid. The invoice basis (accounting when invoices are issued) is the default for larger businesses.

What you can claim

You claim the GST on business purchases from GST-registered suppliers — tools, materials, software, accounting fees, fuel, the business share of your phone and internet. You need the supplier's taxable supply information for purchases over $50. You cannot claim GST on wages, bank fees, interest, residential rent, or purchases from unregistered suppliers (many overseas services, second-hand goods from private sellers). Vehicle and home-office costs need to be apportioned to the business share, and the same percentage should be used for income tax.

Separating GST from your money

The most common cash-flow mistake is treating the GST-inclusive payment as income. The GST portion was never yours. A simple discipline: every time a customer pays, transfer 3/23 of it to a separate account and do not touch it. Your GST return will then be a formality — usually a payment from that account, sometimes smaller than what is in it because of the GST you claimed back.

The year-end connection

Your income tax return (IR3) is prepared on GST-exclusive figures. If your bookkeeping records every sale and expense with the GST split out, the year-end numbers fall out of the same spreadsheet. If it does not, you or your accountant will spend hours backing GST out of totals. Design the ledger with three columns from day one: exclusive amount, GST, inclusive amount.

A minimum viable system

1. A separate business bank account.
2. A numbered invoice template with every required field.
3. A ledger with one row per transaction and exclusive/GST/inclusive columns.
4. A GST holding account topped up on every customer payment.
5. A mileage log if you use a vehicle.
6. Calendar reminders for the 28th of each filing month.

The NZ Sole Trader and Contractor Pack is this system as a set of linked Excel and Google Sheets — invoice template, ledger, GST return summary and mileage log — but the structure above works just as well in a blank spreadsheet if you are disciplined about it.

General information, not tax advice. Thresholds and due dates are as published by Inland Revenue at the time of writing; confirm at ird.govt.nz before relying on them.