The One Piece of GST Arithmetic Everyone Gets Wrong
New Zealand's GST is 15%, and adding it is trivial: multiply by 1.15. Taking it back out of a total is where invoices go wrong, because the instinct is to subtract 15%, and that gives the wrong answer every time.
If a GST-inclusive price is $115, subtracting 15% gives $97.75. The correct exclusive price is $100. The error is small on one line and compounds across a whole return.
Why subtracting doesn't work
The 15% was calculated on the smaller number, the exclusive price, but you are applying it to the larger one. To reverse the operation you have to divide rather than subtract:
- Adding GST: exclusive ร 1.15 = inclusive. So $100 ร 1.15 = $115.
- Removing GST: inclusive รท 1.15 = exclusive. So $115 รท 1.15 = $100.
- The GST portion directly: inclusive ร 3 รท 23. So $115 ร 3 รท 23 = $15.
That last one is the shortcut New Zealand accountants use, and it is worth knowing because it works in one step. It comes straight from the rate: 15% of the exclusive price is 3/20, and expressed as a fraction of the inclusive price that becomes 3/23. If you only remember one formula, remember three twenty-thirds.
| GST-exclusive | GST at 15% | GST-inclusive |
|---|---|---|
| $100.00 | $15.00 | $115.00 |
| $250.00 | $37.50 | $287.50 |
| $434.78 | $65.22 | $500.00 |
| $869.57 | $130.43 | $1,000.00 |
| $4,347.83 | $652.17 | $5,000.00 |
The bottom three rows are the ones worth studying: they start from a round inclusive figure, which is how prices are usually quoted to consumers, and show the untidy exclusive amount underneath.
Who Has to Register
Registration becomes compulsory once turnover passes $60,000 in any twelve-month period, and that includes a forward-looking test, so if you expect to cross it in the coming twelve months you must register now rather than waiting for it to happen.
Below the threshold registration is optional, and the decision is not obvious. Registering lets you claim back the GST on business purchases, which suits a business with heavy equipment or stock costs. It also adds 15% to what your customers pay, which matters if they are consumers who cannot claim it back, and it commits you to filing returns on a schedule.
What Falls Outside the 15%
New Zealand's GST is unusually broad, it applies to almost everything, with far fewer exemptions than comparable taxes elsewhere. The exceptions divide into two kinds that behave differently:
Zero-rated supplies are taxed at 0%, and the supplier can still claim GST credits on related costs. Exported goods and services fall here, as do sales of a going concern and most land transactions between registered parties.
Exempt supplies carry no GST and no right to claim credits on associated costs. Residential rent, most financial services, and the sale of donated goods by a non-profit are the main categories.
The distinction matters more than the labels suggest: an exporter zero-rating a sale recovers the GST on everything they bought to make it, while a residential landlord recovers nothing.
Filing and Imports
Returns are filed monthly, two-monthly or six-monthly depending on turnover, with two-monthly the most common. You pay the GST collected on sales, less the GST paid on business purchases, and if the second exceeds the first Inland Revenue refunds the difference.
Imported goods attract GST at the border, collected by Customs before release. Since 2019, overseas suppliers selling low-value goods to New Zealand consumers have been required to register and charge GST at the point of sale once their sales here exceed the threshold, which closed the gap that made offshore purchases cheaper than domestic ones.
This page is general information rather than tax advice, and rates and thresholds change. Inland Revenue's own guidance or an accountant is the right source where the figure has consequences.