The GST registration threshold

The $60,000 turnover rule

The headline rule is simple: you must register for GST once your taxable turnover is more than $60,000 in any 12-month period, or once you reasonably expect it to be. This isn't a calendar-year test. It's a rolling, look-back-and-look-forward test, so it can be triggered at any point in the year.

The word that trips people up is turnover, not profit. The $60,000 is your total taxable sales, before expenses. A sole trader invoicing $65,000 and spending $40,000 on costs has turnover of $65,000, so they're over the line even though their profit is only $25,000.

If either applies, registration is compulsory. The forward-looking limb matters: if you sign a contract or land a client that you know will push you over, you're expected to register ahead, not wait until the money has actually arrived.

Compulsory vs voluntary registration

There are two ways onto the GST register: because you have to, and because you choose to.

• Compulsory registration kicks in at the $60,000 threshold. Once you're over, registering isn't optional, and leaving it late has consequences (see below).
• Voluntary registration is available even if your turnover is well under $60,000. You can register from the start of trading if it suits you.

Why would anyone volunteer to charge GST before they have to? A few good reasons:

• You have significant start-up or equipment costs and want to claim back the GST on them.
• Your customers are mostly GST-registered businesses, who simply claim the 15% back and don't care that you charge it.
• You want your pricing and admin set up the "grown-up" way from day one, so crossing the threshold later isn't a disruption.

Voluntary registration is less attractive if you sell mainly to the public, since adding 15% either lifts your price or eats into your margin. We weigh it up for each client rather than applying a blanket rule. Our do I need to register for GST guide runs through the decision.

What counts as turnover

Because the threshold is a turnover test, knowing what's in and what's out matters. Broadly, turnover is the total value of your taxable supplies, the goods and services you sell as part of your activity.

Generally counted toward the $60,000:

• Sales of your goods and services
• Fees for work you invoice
• Short-stay accommodation income (such as Airbnb), which is a taxable activity

Generally not counted:

• Exempt supplies, such as residential rent and certain financial services
• One-off sales of capital assets, in some cases
• GST itself

This is where people get caught out. A landlord with only long-term residential rent is making exempt supplies, so that rent doesn't push them toward GST registration. But add short-stay accommodation, and that income is taxable and counts. Mixing activity types is exactly when it pays to check rather than assume. This is general information; confirm your situation with us or check ird.govt.nz.

Filing frequency once registered

Once registered, you file GST returns on a regular cycle. The frequency depends partly on your turnover and partly on choice:

You'll also pick an accounting basis: the payments (cash) basis, where you account for GST when money actually moves, which is gentler on cash flow; or the invoice basis, where you account for GST when invoices are issued or received, which is often required above a turnover limit.

Most small operators land on two-monthly returns on the payments basis, but the best fit depends on your cash flow and how often you'd see refunds. We set the frequency and basis that suit you and, ideally, configure your accounting software so each return all but prepares itself.

Pros and cons of registering early

If you're under the threshold and deciding whether to register voluntarily, here's the honest balance sheet.

In favour:

• Claim back GST on start-up costs, equipment, and ongoing purchases
• Look established to business customers, who reclaim the GST anyway
• Avoid a disruptive pricing change later when you cross $60,000
• Cleaner records from day one

Against:

• Adding 15% can make you dearer to the public, or eat your margin
• More admin: returns to file on a cycle
• You're handling and remitting money that isn't yours

The deciding question is usually who your customers are. Selling to businesses, registering early is often a no-brainer. Selling to consumers on tight margins, it can wait until you're required. There's no universal right answer, which is precisely why a quick conversation beats a rule of thumb. See registering GST now vs later for a fuller weigh-up.

Common mistakes

A handful of GST-threshold mistakes come up again and again, and they're all avoidable.

• Registering late. The most expensive one. Once you've passed $60,000 you're meant to be registered, and IRD can backdate your registration, leaving you owing GST on past sales whether or not you charged it. Watch the rolling 12-month figure.
• Confusing turnover with profit. The test is total sales, not what's left after costs, so people think they're safely under when they're already over.
• Forgetting the forward-looking limb. Landing a big contract obliges you to register ahead, not after the money lands.
• Missing mixed-activity income. Adding short-stay accommodation to otherwise-exempt residential rent can quietly tip you over.
• Deregistering carelessly. Cancelling GST registration can trigger a deemed sale of business assets, with GST to pay, so it needs handling, not just switching off.

We keep an eye on your rolling turnover so registration happens at the right moment, never late, and never accidentally.

This page is general information only, not personalised tax advice. Your situation may differ, so book a free review to talk it through. In plain English: cross $60,000 of turnover (not profit) in any 12 months and GST registration is compulsory, so watch the rolling figure and register on time to avoid a backdated bill.