To register or not to register?
That is the question and I have the answer: it depends on the circumstances of your business. While it’s true that some businesses absolutely must be GST registered, for others it is optional. But why would you choose to become GST registered if you don’t have to? Doesn’t it just mean you have to pay more tax? Let’s delve deeper and find out…
Do I Have to be GST Registered?
By law, the Inland Revenue Department says you must register within 21 days if you meet one of two reasons:
- You have a taxable activity and your turnover for the past 12 months was $60,000 or more, or will be $60,000 or more for the next 12 months.
- Your prices include GST.
So basically no, you do not have to be GST registered if your annual turnover is less than $60,000, including being a sole trader or starting up a company. But there are some advantages by becoming GST registered on a voluntary basis.
Why Should I Choose to be GST Registered?
Registering voluntarily to collect GST can be an absolute boon to some small businesses and traders, especially when they are just starting up. That’s because:
- You can claim back the GST from the goods and services you brought from someone who is registered, which is great when you are starting up and have to buy everything!
- You can claim back the GST from second hand goods you brought from someone who is not registered.
- Doing regular GST Returns helps you keep your accounting up to date.
- If you sell to other GST registered businesses, they will most probably want you to be registered too so they can claim the GST they’ve paid you.
But now hold your horses people! There are some disadvantages to registering which you need to weigh up too. You will have to:
- Pay 15% of what you receive from selling your goods or services to the IRD.
- Complete regular GST Returns.
- Let the IRD know about all the GST you have received for your goods and services.
- Pay GST back on any assets you keep when you deregister or cancel your GST registration.
How Do I Register for GST?
Regardless of whether you have your hand forced or you want to register voluntarily, the process for becoming GST registered is the same.
- Get or find your IRD number
- Choose the way you want to claim and pay GST – on receiving payment, on invoicing or on a hybrid basis
- Decide on how frequently you want to do your GST returns – each month, two monthly or six monthly
- Work out what your business description and code is
- Register at myIR
I am always here to help you out and that includes with making the decision to become GST registered or not. So give me a call or send me an email and I can help weigh up all the pros and cons for you.