GST basics for tradies in New Zealand (and Australia)

GST is one of those things most tradies learn by getting it slightly wrong first. A quote that didn’t say whether GST was included, an invoice missing a GST number, a bill for a pile of materials that never got claimed. None of these is complicated to fix once you know the basics.

This guide covers GST in New Zealand, with a short section on Australia at the end. It is general information. Tax rules change, so check the current rules with Inland Revenue (IRD) or the Australian Taxation Office (ATO), or with your accountant.

When you have to register in New Zealand

You must register for GST if your turnover from your business was at least $60,000 in the last 12 months, or you expect it to be at least $60,000 in the next 12 months.

Turnover here means your total sales, not your profit. A sole trader earning a modest wage can pass $60,000 in sales quite quickly once materials are included in the price.

You can also register voluntarily if you’re under the threshold. Some tradies do, so they can claim back GST on tools, a vehicle and materials. The trade-off is that you must then add GST to your prices and file returns.

The rate, and how to work it out

GST in New Zealand is 15% on most goods and services.

• To add GST to a price: multiply by 1.15. A $1,000 job becomes $1,150.
• To find the GST inside a GST-inclusive price: multiply by 3 and divide by 23. On $1,150, the GST is $150.

Don’t work out GST by taking 15% off a GST-inclusive price. That gives the wrong answer, and it’s a common slip.

GST-inclusive or exclusive on quotes

Homeowners usually think in GST-inclusive terms. If you quote $10,000 and mean “plus GST”, the client may be expecting to pay $10,000, not $11,500. That’s an argument you don’t want at the final invoice.

• Say it on every quote. Show the price excluding GST, the GST amount and the total, or state clearly that the price includes GST.
• Be consistent. Don’t price some lines including GST and others excluding it.
• Commercial clients and builders often work in GST-exclusive figures. That’s fine, as long as the quote says so.

What your invoices need to show

Since 1 April 2023, New Zealand no longer requires a document called a “tax invoice”. Instead, you must keep and provide taxable supply information. In practice most tradies still send an invoice, but what it needs to contain depends on the value of the sale.

Sale value (including GST)	What must be shown
$200 or less	Your name or trading name, the date, a description of the work or goods, and the amount paid
More than $200 up to $1,000	All of the above, plus your GST number, and either the GST-exclusive amount, GST amount and total, or the total with a statement that it includes GST
More than $1,000	All of the above, plus, if the buyer is GST-registered, their name and at least one other identifier such as an address, phone number, email or NZBN

If a GST-registered customer asks for this information on a sale over $200, you must give it to them within 28 days, unless you agree another date.

The simplest approach is to put everything on every invoice: your GST number, the client’s name and contact details, a clear description, and the GST shown separately. Then you never have to think about which band a job falls in.

Filing your GST returns

When you register, you choose how often to file. In New Zealand:

• Six-monthly: available if your sales are under $500,000 in any 12-month period
• Two-monthly: available if your sales are under $24 million
• Monthly: required if your sales are over $24 million, and an option for anyone else

Monthly or two-monthly returns mean more paperwork but smaller bills each time, and refunds come back sooner if you’ve had a big month of purchases. Six-monthly is less admin, but the GST bill can be large, so you need the discipline to put the money aside.

You’ll also choose an accounting basis. The payments basis (GST counted when money actually comes in and goes out) is available if your sales are $2 million or less. The invoice basis (GST counted when invoices are issued and received) is open to anyone. Many small trade businesses find the payments basis easier on cash flow, because you don’t pay GST on invoices clients haven’t paid yet.

Claiming GST on materials and expenses

Once registered, you can claim back the GST you pay on things you buy for the business: materials, tools, fuel, vehicle costs, phone, software, protective gear and subcontractors who are GST-registered.

• Keep the paperwork. You need the supplier’s taxable supply information to claim, so keep receipts and invoices, ideally as photos in your accounting software the day you get them.
• Only claim the business share. If your ute or phone is also used privately, only the business portion can be claimed.
• Materials you on-sell to the client: you claim the GST when you buy them and charge GST when you invoice them. Both sides go in your return.
• Unregistered subbies don’t charge GST, so there’s nothing to claim on their invoices.

Common mistakes

• Not tracking turnover, and passing $60,000 without registering
• Quotes that don’t say whether GST is included
• Taking 15% off an inclusive price instead of using 3/23
• Missing GST numbers or client details on invoices
• Spending the GST you’ve collected, then being short when the return is due
• Losing receipts, so GST on materials never gets claimed
• Claiming GST on personal purchases

A simple habit helps with the cash side: every time a client pays, move the GST portion into a separate bank account. When the return is due, the money is already there.

A short note for Australia

The idea is the same in Australia, but the numbers differ:

• Registration: required once your GST turnover reaches $75,000. You have 21 days to register after you go over it.
• Rate: 10% on most goods and services. To find the GST in a GST-inclusive price, divide by 11.
• Tax invoices: Australia still uses tax invoices. For sales under $1,000 they must show that the document is a tax invoice, your identity and ABN, the date, a description, the GST amount (or that the total includes GST) and the extent each sale is taxable. Sales of $1,000 or more must also show the buyer’s identity or ABN. You must provide one within 28 days if asked, unless the sale is $82.50 or less including GST.
• Claiming credits: you need a tax invoice to claim GST on purchases over $82.50 including GST.
• Reporting: most small businesses report quarterly on their business activity statement (BAS). Monthly reporting is required at a GST turnover of $20 million or more. Annual reporting is an option if you are voluntarily registered with turnover under $75,000.

Keep it simple

Set up your quote and invoice templates once, with your GST number and GST shown separately, and most of the work is done for you. In TradeFlow you set your tax rate once and it is applied to every quote and invoice, which saves checking the maths each time. Whatever you use, a good accountant who knows trade businesses is worth the fee, especially in your first year of registration.