What is GST
Goods and Services Tax (GST) is New Zealand's broad-based consumption tax, introduced on 1 October 1986 at 10%, raised to 12.5% in 1989 and to its current 15% rate on 1 October 2010. It applies to almost every good and service supplied in New Zealand by GST-registered businesses.
Unlike many countries' VAT systems, NZ GST has very few exemptions. There are no reduced rates for groceries, medicines, books or children's items — the rate is a flat 15% almost everywhere. This simplicity is a deliberate design choice that keeps the system cheap to administer and hard to game.
How GST is added or extracted
There are two everyday operations:
- Add GST: a B2B supplier quotes a net price and adds 15%. inclusive = net × 1.15.
- Extract GST: a retail receipt shows a gross price and you need the GST component. The shortcut is GST = gross × 3 ÷ 23, which is exact (because 0.15 ÷ 1.15 = 3/23). The net (GST-exclusive) price is gross × 20/23.
GST = inclusive × 3 ÷ 23 · net = inclusive × 20 ÷ 23GST registration in New Zealand
A business must register for GST when annual turnover exceeds NZ$60,000 in any 12-month period (rolling, not financial year). Below that you may register voluntarily if it suits — useful when most of your customers are GST-registered businesses, because they can claim back the GST you charge.
Once registered, you charge 15% GST on supplies, claim back the GST on business purchases, and file a GST return monthly, two-monthly or six-monthly depending on size. Registration is per-entity, not per-person — sole traders register under their IRD number; companies under their company IRD number.
Worked examples
Three common scenarios:
| Scenario | Net (excl GST) | GST (15%) | Total (incl GST) |
|---|---|---|---|
| Tradie quote | $1,000 | $150 | $1,150 |
| Receipt for groceries | $86.96 | $13.04 | $100.00 |
| Service invoice | $2,500 | $375 | $2,875 |
| Online subscription | $10.43 | $1.57 | $12.00 |
GST on imports and digital services
Goods imported into NZ are subject to GST (collected by NZ Customs). Since December 2019 the threshold for low-value goods was removed — even a NZ$30 import has GST applied at the border or by the offshore retailer.
Offshore digital services (Netflix, Spotify, Adobe, AWS) charge NZ GST since October 2016. Look for "incl. GST" on your invoice — international suppliers above NZ$60,000 of NZ revenue must register and charge it.
NZ exports are zero-rated for GST. You charge 0% but can still claim back the GST on your business inputs.
Zero-rated and exempt supplies
Two narrow categories sit outside the standard rate:
• Zero-rated: exports, going concerns, financial services to non-residents, sales of land between GST-registered persons. Charged at 0% but the supplier can claim input credits.
• Exempt: financial services (interest, life insurance), residential rent, donated goods/services. No GST charged, no input credits.
For practical retail and service businesses, zero-rating and exemption are exotic. Most everyday transactions are simply 15% standard-rated.
Common mistakes
- Multiplying gross by 15% to extract GST. That gives you 17.25% of the gross. The correct shortcut is gross × 3 ÷ 23, which gives 13.04%.
- Forgetting that B2B prices are usually quoted GST-exclusive. A "$1,000 + GST" tradie quote is $1,150. Always confirm.
- Not registering when turnover crosses $60k. IRD will back-date registration and charge interest on unpaid GST.
- Claiming GST on personal items put through the business. IRD audits look for this.