Sole trader GST: how and when to register

In this guide, we get to the bottom of all your GST-related questions — uncovering what GST is, how and when to register for GST and how to charge it.

What is GST?

GST (Goods and Services Tax) is a tax added to the price of most goods and services. You're probably used to seeing GST charges as you go about your daily life — it appears on everything from the receipt for your morning coffee to your purchase of the latest iPhone. GST is paid by the purchaser and collected by the seller on behalf of the government. 

If you're a business registered for GST, every time you charge a customer, you'll need to add 15% to your fee — this is money you're collecting on behalf of the government. In New Zealand, GST is a flat tax of 15%. This means it doesn't change based on your income — unlike income tax.

When do you need to register for GST if you're self-employed?

If you work for yourself, you'll need to register for GST only when: 

You're carrying out a taxable activity

According to the IRD, a taxable activity is anything that involves the continuous or regular supply of goods or services to someone else for money, compensation or reward. Most businesses fall into this category.

You earn over a certain amount 

As a sole trader, if you think you'll earn $60,000 or more over 12 months, you must register for GST. It's important to note that the $60,000 threshold applies to any 12 months in a row, not a single financial year.

In some cases, even if you don't have to register for GST, you might want to anyway. Like other kinds of tax deductions, if you're GST registered, you can claim back the GST you pay on things you buy for your business. If you have a lot of expenses but not much income, you might be eligible for a GST refund when you file your return.

How to calculate GST turnover as a sole trader

To calculate GST turnover for a sole trader, take your total business income (not your profit) and deduct the GST you've added to your prices. Here's the calculation: 

Total business income – GST Included in sales = GST Turnover

Registering for GST as a sole trader

Registering for GST as a sole trader is easy to do online through the IRD website. Here’s how:

Check if you are required to register for GST

Start by checking if you're required to register for GST. Even if you've started a business, you might not need to. If you're not sure, this handy tool from the IRD walks you through it.

Ensure you have your IRD number and BIC code

Ensure you have your IRD number and Business Industry Classification (BIC) code ready. If you've registered as a business, you'll have a specific IRD number. Otherwise, you'll use your personal IRD number. 

Your BIC code classifies your business type and is important for calculating your Accident Compensation Corporation (ACC) levies and for Inland Revenue statistical analysis. Find your BIC code here. 

Login to the myIR portal 

Log into the IRD services portal, myIR, and navigate to the 'I want to' menu and select 'register for new tax accounts'. 

Complete the GST registration process

Complete the GST registration process by filling in all the relevant details, and then review and submit your GST registration. The IRD will typically process your request within ten working days, and your new GST account will show up under your myIR login once confirmed.  

How to charge and collect GST 

To charge and collect GST from your clients, simply add it to your charges or invoices. Remember, this is a tax on your customers, not on you, which means you'll need to add 15% to your prices – don't absorb this yourself. 

To calculate your new GST-inclusive price, all you need to do is multiply your current sale price by 1.15. For example, if you're selling shoes for $200, the new GST-inclusive price will be 200 x 1.15 = $230.00

Sole trader GST FAQs

Can I claim back GST as a sole trader?

You can usually claim back GST on things you buy for your business if you're a GST-registered sole trader. You'll need to keep valid tax invoices and ensure the purchase is eligible for claim — some purchases are exempt.

Is GST based on turnover or profit?

GST is based on turnover, not profit. It's applied to the goods or services you sell, regardless of your bottom-line profit. 

What is exempt from GST in New Zealand? 

The IRD has a full list of goods and services that don't have GST added. These include donated goods or services sold by a non-profit, renting a residential dwelling, and certain financial services. 

End the sole trader GST guessing game

GST is no walk in the park, and as a sole trader, you've probably got enough going on in your head. If you want to stay on top of GST the easy way, MYOB accounting software will track your income and calculate your GST when it needs to be on your invoices. Get started today.

Disclaimer: Information provided in this article is of a general nature and does not consider your personal situation. It does not constitute legal, financial, or other professional advice and should not be relied upon as a statement of law, policy or advice. You should consider whether this information is appropriate to your needs and, if necessary, seek independent advice. This information is only accurate at the time of publication. Although every effort has been made to verify the accuracy of the information contained on this webpage, MYOB disclaims, to the extent permitted by law, all liability for the information contained on this webpage or any loss or damage suffered by any person directly or indirectly through relying on this information.

MYOB is not a registered entity pursuant to the Tax Administration Act 1994 and therefore cannot provide taxation advice to clients. If you have a query concerning taxation including filing your GST returns or annual tax statements, then you should consult with your accountant or other registered tax adviser.