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Dangers And Facts Of GST (For Owners)

The Dangers And Facts Of Goods & Services Tax (GST) 2018

FACTS AND DANGERS OF GST ALL BUSINESS OWNERS SHOULD KNOW

 

Your business may be generating good cashflow at the moment, but is it a profit to you? Maybe. Maybe not. Those two are not synonymous. Yes, you need to have cashflow to make a profit, and yet, it is entirely possible to still be in danger with IRD. Particularly if you are a company director - you can be held "personally" liable to the IRD, for GST owed by your company.

But how? GST is a priority liability, an indirect tax, which most people forget or overlook. This means that your company, as a vendor or supplier, have already charged GST which you received from your buyer. As a result, this ultimately means that you, the person responsible for accounting to IRD for your GST, have the money.

Therefore, directors, company owners, should be careful when companies are incurring GST liabilities. If for any reason, your company is not going to be able to meet the GST liability, then you ought to take some time and think about it - the merits of the transaction, the possibilities, the options available, and anything else that could help.


Here at Accounting4Me, GST is a topic we understand like a book. We offer you accurate, efficient, and on-time assistance with your GST filing and returns. Of which, these include, but are not limited to:

 ☑   GST registration queries.

 ☑   Preparation of GST returns.

 ☑   Filing and adjusting GST returns.

 ☑   IRD audit assistance involving GST.

 ☑   Specialist GST situations, such as the purchase of a property.

 

Below, we shall tell you how to make the most of GST and view our top five unused GST facts to your advantage. But first, here are some informative GST matters that may be relevant to your business. If you have any questions, go on and talk to us!

 

GST RATES:

 ⟹    NZ's standard rate: 15%

 ⟹    Exported goods and services: 0% (requires proof)

 ⟹    Transactions involving land between GST registered persons: 0%

 

GST DUE DATES:

The GST return filing and payment due dates are:

 ✔    The 28th of the month following the end of the taxable period for those months other than March and November.

 ✔    15th January for the taxable period that ends in November.

 ✔    7th May for the taxable period that ends in March.

If the due date falls on a weekend or public holiday, IRD will accept GST payments and returns on the next business day.

 

GST FACTS:

 ⟹    On January 2018, 86% New Zealanders agree that GST should be removed from fresh produce.

 ⟹    The 1% incremental monthly penalty is no longer being charged on amounts that remain unpaid for GST return periods ending 31st March 2017 onwards.

 ⟹    Late filing penalties will apply to GST returns with $250 invoice/hybrid, $50 payments basis, if filed late after warning for initial breach.

 ⟹    Sales to employees are subject to GST. But often, sales made via payroll can be crossed off the GST return.

 ⟹    According to Stats NZ, the price of fruit and vegetables increased 4.5% in the year to December 2017 and latest reports suggest that further increases are expected in the coming weeks and months.

 
Pie Graph on New Zealand's Source of Taxation Revenue — 2018
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NZ SOURCE OF TAXATION REVENUE — UPTIL 2017 

As seen in the NZ Stats Counter image above, New Zealand amasses a large share of revenue from three major tax bases: Personal Income Tax, Company Income Tax, and Goods and Services Tax (GST).

More than 90% of NZ's tax revenue is collected from these or similar taxes (including Resident and Non-resident Withholding Taxes and Fringe Benefit Tax). But, unlike other countries, Kiwis here are not taxed on transactions or turnovers such as stamp duty and cheque duty, which international tax reviews have identified as being inefficient.

NZ Source of Taxation Revenue (until 2017)

Individual Tax Income

40.4%

GST (Including Customs GST)

31.9%

Company Income Tax

14.8%

Excise Taxes & Duties

6.4%

Resident Witholding Tax

2.9%

Non-Resident Witholding Tax

0.9%
Fringe Benefit Tax 0.6%
Others 2.1%

Data Source: IRD & NZ Treasury

Generally, for most business owners, GST is pretty straightforward, but there is still a wide range of confusing obstacles that can be handled by our experienced business accountants. So talk to us if you are unsure. Our accountants will prepare and check your GST returns - leaving you with peace of mind and space to focus on your business!

 


THE TOP 5 SELDOM KNOWN GST FACTS (INFOGRAPHIC)
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Top 5 Seldom Known Facts About Your GST
THE TOP 5 SELDOM KNOWN GST FACTS (IN TEXT)

You know the basics about Goods & Services Tax (GST), such as its rate is 15%. Here are five useful facts about GST which can help your business.

 1.   For most second-hand goods, you can claim GST credit.

You can claim GST on most of New Zealand's second-hand goods you've purchased for business – even if the vendor isn’t GST-registered. You will require documents and receipts from both sides as proof and evidence.

 2.   Overseas purchases don't require GST payment.

For now, New Zealand does not charge GST on overseas purchases of under NZ $400. This is mainly because charging GST on overseas goods is complicated. Although, online services such as iTunes and Netflix will be charged soon.

 3.   Certain supplies are taxed at 0% for GST.

Some supplies are taxed at the 0% rate, rather than at the standard 15% rate in NZ. Some of these include - duty-free goods, exported goods, imported services, internet sales, some financial services, some land transactions, and more.

 4.   It is not necessary to register for GST, yet.

If your business overturn is lower than $60,000 per year, you can still choose whether to register for GST or not. If voluntarily registered, your benefit is that you might be able to claim a GST refund.

 5.   Electronic GST records and data are accepted by IRD.

Keeping documented GST records in a paper for 7 years can be a real hassle and risky. Besides filing your GST, we can help you store them electronically - all safely and confidentially stored in our cloud accounting.

 

More about NZ Goods & Services Tax (GST)

 ✔  Understanding Goods and Services Tax (GST)

 ✔  5 THINGS TO AVOID WHEN FILING GST WITH IRD

 ✔  How To Manually Calculate Goods & Services Tax (GST)

 ✔  8 TIPS ON HOW TO AVOID GST DELAYS (AND PENALTIES)

 

About The Author

Accounting4Me

This blog post was made and written by our panel of IRD Registered Chartered Accountants. Like this post? Please share with your fellow Kiwi so we can help them out!

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