Bookkeeping and GST – Saving You Money with Easy Record Keeping – Part 1
Getting your taxes right can be a complex task with many confusing rules and exceptions that’s why it’s best to have A + BAC deal with these for you. If you’ve chosen to complete your own books and GST returns here are a few things to watch out for. If in doubt, it’s always best to check with us.
Overseas Transactions & Non-GST Registered Suppliers
GST cannot be claimed on goods and services sourced from overseas. Often, overseas transactions may occur unintentionally – for instance when goods are purchased online e.g. Google Apps, MailChimp, iTunes or Facebook and in addition, it’s more common to use Aussie suppliers these days. It’s always best to check your invoices to see if NZ GST has been charged. Remember, many sub-contractors and smaller NZ businesses are not GST registered, which means the GST cannot be claimed.
Cash and Non-Business Bank Transactions
You are liable for GST on nearly all your sales of goods and services (see below), even “cashies”. You can also claim the GST on business purchases made with cash or from a private bank account. But because these transactions are not on your business bank statements you will need to record these in your accounting software or books in a special way. We can help you identify the best way to account for these transactions to ensure they’re not missed.
Hire Purchase and Vehicle Finance
When a motor vehicle or other item is purchased using a financing arrangement in many cases the GST on the entire purchase price is claimable at the outset of the agreement and not on the individual repayments. Sometimes, however, the GST is claimable on each repayment, so if in doubt ask us.
To GST or Not To GST… That is the Question
- Things like bank or merchant fees, interest, staff wages, drawings, private purchases, residential rent, fines and FBT. These expenses are not subject to GST.
- Second-Hand Goods. When you purchase a second-hand item for business use from a vendor who is not GST registered you can claim the GST unless you’re the vendor or it’s a related party where there are complex rules so check with us beforehand. To calculate the GST multiply by 3 and divide by 23.
- Imports, Exports and Customs Levies. When a sale of a goods or services is made overseas the sale is NORMALLY classed as zero rated, in which no GST is charged to the customer. Similarly, when you purchase an item overseas and import it into NZ, you are typically required to pay the GST content to New Zealand Customs. The GST component of this payment to NZ Customs will reduce your GST liability to the IRD and needs to be included on your GST return. Be careful too as sometimes these invoices are 100% GST.
- Insurance claims that compensate for lost, stolen or damaged assets. These are treated as income and subject to GST but don’t worry you can claim when you purchase a replacement asset.
- Sale of fixed assets e.g. plant, equipment or vehicles. The sale of these items is subject to GST, even if you were not GST registered when you acquired them. Land and buildings can often be sold free of GST but this is a very complex area SO ALWAYS seek our advice first before embarking on land transactions.
- Grants and subsidies (including wage subsidies) from the Crown or a public authority e.g. WINZ. Also treated as income and subject to GST, even if they are used to subsidise a non-GST expense.
- Business assets and goods removed from the business and used privately. If this is a stock item, it is treated as if a sale has occurred and GST is payable on the full market value of the item. If the item is an asset e.g. an old computer or a car, GST is also payable, based on a realistic market value.
- A private asset is transferred to the business for business use? In many instances you will be able to claim a portion of GST, but talk to us first.