5 common mistakes small businesses make with GST
The Goods and Services Tax (GST) is a tricky tax to come to grips with for those who don’t deal with it on a day-to-day basis. As financial advisors and accountants, here are a few of the errors we see frequently made by businesses.
1. Registering for GST too early or too late
For a new or small and growing business, deciding when and whether to register for GST can be tricky. If your customers are private individuals and you register too early, you might be voluntarily giving up thousands of dollars. If, on the other hand, your customers are GST registered, you should register immediately to get the GST back on your outgoings. Register too late, and surprise surprise, the IRD will punish you severely!
2. Claiming GST on overseas transactions and unregistered suppliers
GST cannot be claimed on services and products sourced from overseas suppliers. Often, these types of errors are unintentional and simply overlooked. For instance, goods or services purchased through online companies such as MailChimp, iTunes, Facebook, or Google Apps are from overseas suppliers and cannot be claimed.
To be safe, check your invoices and receipts to see if NZ GST has been charged. Keep in mind as well that many smaller businesses and subcontractors are not registered for GST, which means it cannot be claimed.