GST is an acronym for “Goods and Services Tax“, which is a value added tax which is paid on all goods and services that are liable for the tax in New Zeland. For business GST – the tax is paid to the Inland Revenue Department (of New Zealand) usually on a 1,2 or 6 monthly filing period. For businesses based in New Zealand it is common to fill out a GST Return Form (IRD Form: GST101A).
When running a small business in New Zealand, calculating GST is essential knowledge.
Whenever you issue an invoice, pay suppliers for business related purchases or report your GST return to the IRD (Inland Revenue Department), you’ll need to have a thorough understanding of how to calculate GST.
GST is tax on goods and services. The GST rate is 15%.
GST is tax on goods and services. It’s usually charged at 15%.
Prices shown in shops and online include GST unless they say otherwise — the GST component of what you’ve paid is printed on your receipts.
How to calculate GST in New Zealand
There are a few steps to take if you want to know how to work out GST.
Firstly, the rate of GST for New Zealand is 15%. This simply means that 15% of the sales price of your goods or services is added to the sale to result in a GST inclusive sales price.
- An easy formula to find your GST inclusive price is to multiply the sale price by 1.15.
- For example, if your price is $100, multiply it by 1.15 to give you a $115 GST inclusive price.
How to calculate GST from total price
Many people ask how to calculate GST from the total price. Let’s find out.
If you have a GST inclusive sales price and wish to calculate the 15% GST component of the total price, you can either divide it by 1.15 or follow this formula:
- Multiply the total sales price by 3.
- Divide the result by 23.
- The answer will be your GST component. (Sales price x3/23)
For example, if the total price is $115
- Multiply $115 by 3 to give you $345
- Divide $345 by 23 to give you $15
- $15 is the GST component of the total price.
It may seem simple, but there are many easy mistakes to make when calculating GST from total price. Be sure not to calculate 15% from the total price – this will be incorrect.
How to calculate GST payable
If you need assistance working out GST and the above formulas become hazy, there’s help available online.
Simply Google ‘New Zealand GST calculator’ to discover a host of free small business GST calculators ready to determine the GST payable in any transaction.
How to calculate GST for Small Businesses
As a small business, if you’re turning over more than $60,000 per year and registered for GST, simply add 15% to your intended sales price when making a sale.
You can either use the above formulas or an online small business GST calculator.
If your small business issues invoices in the usual course of your sales process, you’ll need to clearly indicate the GST component of the sale in an itemised manner on any tax invoice you issue.
How do you work out the GST amount of a price?
- Multiply the purchase price by 3
- Divide that number by 23
You purchase a car for $10,000 from a dealer and the price includes GST. To work out the amount of GST you paid:
- multiply $10,000 x 3 = 30,000
- divide 30,000 by 23 = $1,304.34782
- round this amount to the nearest cent = $1,304.35
The actual price of the car was $8,695.65 before GST.
If a price does not include GST, then the full GST-inclusive price can be found by adding 15%:
- $100 GST-exclusive price multiplied by 15% GST rate = $15
- Add $15 of GST to the $100 GST-exclusive price = $115 price including GST.