Common GST Mistakes to Avoid
Making mistakes is human and everyone does it. Yet making mistakes with your GST can end you up in hot water with both the IRD and your accountant or bookkeeper. Thankfully it is easy to stay out of trouble by being aware of what is expected of you and your business when it comes to GST. After all, prevention is far better than cure …
GST Mistakes Every Business Owner Needs to Avoid Making
There are five mistakes small businesses often make when it comes to their GST. They are:
- Registering for GST too late or too early.
In NZ, a business is required to register for GST when they earn $60,000 or more per year. Some businesses choose to register early because their clients or customers are GST registered and this is a good idea. If your business sells mostly to the public though, registering early will see you having to pay more tax when you didn’t have to. If a business fails to register when they reach the earning threshold, they face financial penalties from the IRD.
- Incorrect figures and accountancy practices.
It is easy to enter the wrong numbers or miss an invoice out when completing your GST return. However, you may end up paying penalties for this to the IRD – making having your GST return completed by us well worth the investment.
- Asset purchases are often mis-labelled.
If you purchase an asset for your business but are going to use it for some personal use too, then this needs to be identified to the IRD. For instance, if your business buys a car, but you are still going to use it to take the kids to school, you will need to calculate the appropriate amount of GST deduction for it.
- Including invoices and expenses in the wrong GST return.
Once again, we are all human and mistakes do happen. But including an invoice within the wrong GST period, without identifying it as a late invoice, can see you paying unnecessary penalties.
- Not charging GST, especially if you are a low income earning business.
Profit margins are slim at the best of times. With competitive pricing essential to attract customers, our prices can become too low. This means you end up not charging enough to cover GST. If your turnover is low, unless you notify the IRD that you are de-registering, they will expect you to keep collecting and paying GST.