GST (goods and services tax) is often the most time consuming sole trader tax. But don't worry, this article will take you through what GST is, how it works and how you can use Solo to simplify and master your GST returns.
You can jump to section of this page by using the links below:
What is GST?
GST is a 15% tax added to the price of most products and services. Most things you buy have GST added to the price.
When you sell products or services you might need to add GST to your prices and pass the GST to the IRD when you file your GST returns.
You can claim the GST back on your expenses. When filing your GST return, you work out the difference between the amount of GST you collected on your income and the GST you paid on your expenses. If you collected more GST than you paid, you pay the balance to the IRD when you file your GST return. If you paid more GST than you collected, you can get a GST refund from the IRD.
You can choose to file and pay GST returns monthly (12 per year), 2-monthly (6 per year) or 6-monthly (2 per year).
Do I have to pay GST?
You do not have to register for GST just because you start a business. However, you do need to register for GST if you made over $60,000 in the last 12 months, or if you expect you will make over $60,000 in the next 12 months.
The $60,000 income limit does not include the following income types:
Salary and wages
Benefits, pension and student allowance
Long-term rental income (short-term rental should be included)
NZ interest
How to register for GST
You can register for GST on the IRD website at any time:
Log into myIR
Select the 'I want to...' tab
Select 'Register for new tax accounts'
Select your IRD number
Select 'Goods and services tax (GST)'
Complete all the sections under 'General info' and 'GST registration'
Submit your registration
During the registration process you will be asked to select your 'return filing frequency' and 'accounting basis'.
Filing frequency – Refers to how often you need to file your GST returns. The default is 'Two-monthly – periods ending in odd months' and we recommend this option in most cases. If you'd like to file GST more often you can select monthly, or if you want to file less often select 'Six-monthly'. If you select six-monthly you will also need to select the filing months. The months refer to the last month of the GST periods. We recommend using 'March and September' because it aligns with the financial year.
Accounting basis – Refers to when you account for GST. With the 'Payments basis (cash)' option, GST is calculated on your transactions (when you receive the money). With the 'Invoice basis (accruals)' GST is calculated when you issue the invoice (when you don't yet have the money). Solo only supports the 'Payments (cash)' accounting basis. This prevents you from getting caught out having to pay GST on income that you might not have received yet.
Once registered for GST you need to:
Charge GST to your customers
File GST returns
Pay any GST you owe to the IRD
How do I calculate GST in Solo?
When you enabled GST in Solo, Solo will automatically calculate GST on your income and expenses, remind you when your GST returns are due and provide you with all the figures you need to simply copy and paste into your GST returns.
To enable GST in Solo all you need to do is:
Go the Settings page in the main menu.
Select Yes from the GST registered drop down list.
Select your GST Frequency (and Filing periods if relevant).
Click Save.
More info: How to configure your settings
Once you have enabled GST in your settings, Solo will then automatically calculate GST on your transactions and display your GST periods on the Solo Dashboard and on the Taxes page.
Note: You can override the GST on a transaction at any time.
In the Tax snapshot on the Solo Dashboard you will see all currently active tax periods. These are tax periods that are either due or the period that you are currently in.
When a GST period becomes due (or overdue), go to the Taxes page to file and close the period.
On the Taxes page you will see all your tax periods for the current financial year and any periods that will become due within the next 12 months.
Note: When you first enable GST, all of the GST periods for the current financial year will appear. This might be a bit confusing if you're part-way through the financial year and have already paid some GST. Don't worry, Solo has you covered. For instructions on what to do in this this situation, jump to the section What if I've already paid some GST?
How to file and pay a GST period
When a GST period becomes due:
Go to the Taxes page in the main menu.
Click on the File & Pay button for the due period.
Note: The 'File & Pay' button will only be displayed once the period is due. If a period is currently active, but not yet due, you will see a 'Preview' button instead.
Next, follow the instructions that are shown when you click the 'File & Pay' button:
1. File your GST return
When your GST return becomes due you need to login to your myIR account and file your GST return using the figures that Solo has calculated.
To file your GST return:
Log in to myIR.
Click Returns and transactions under 'GST' in your summary.
Click File return for the due period.
Select GST components (you can also use 'Total sales and purchases').
Enter the Total GST collected and Zero-rated supplies figures generated by Solo and click Next (you shouldn't need to enter any debit adjustments, Solo has automatically included adjustments in its calculations).
Enter the Total GST paid figure generated by Solo and click Next (you shouldn't need to enter any credit adjustments, Solo has automatically included adjustments in its calculations).
You should now see a Total GST to pay or a Total GST refund figure that matches the calculation in Solo. Check the declaration box and click Next.
Adding attachments/receipts is optional, click Next.
Select if you would like to make payment (generally it's easier to make payment now rather than later). If you select yes, then follow the steps to make payment.
Click Submit.
2. Pay the amount due to the IRD
Use the payment options provided when completing your return to pay the due amount to the IRD. Or visit your online banking and use the 'pay tax' function to make payment.
Note: Solo doesn't handle any tax payments to the IRD. Tax payments need to be made outside of Solo directly from your bank to the IRD.
How Solo calculates GST
When you enable GST Solo will automatically calculate GST on your transactions, assets and invoices. You can manually disable GST on a transaction, asset or invoice.
To see exactly how much GST has been calculated on each transaction you can either click on the down arrow at the end of a transaction, or use the 'Export Data' feature in the main menu.
If you have your IRD feed connected and earn schedular payment income Solo will automatically calculate the GST on this income.
GST accounting basis
Solo uses the 'Payments (cash)' accounting basis for GST, rather than the 'Invoice (accruals) basis. With the payments basis GST is calculated on your transactions (when you have the money) rather than when an invoice is created (when you don't yet have the money). This prevents you from getting caught out having to pay GST on income that you might not have received yet.
What if I register for GST part-way through the year?
Solo currently does not have the functionality to begin calculating GST part-way through the financial year. However this feature will be available soon. In the meantime use the following workaround:
Firstly, enable GST in Solo's settings. Then manually disable GST on transactions that you categorised before your GST registration date.
For income transactions, change recategorise 'Self-employed Income' transactions as 'Zero-rated Income'. This will ignore the GST on those transactions. You can do this in bulk by using the 'Categorise all' feature.
For expense transactions, disable GST for each transaction. To do this click on the drop down arrow at the end of a transaction, toggle 'Calculate GST' off and then save the transaction.
What if I've already paid some GST?
When you first enable GST, all of the GST periods for the current financial year will appear. This might be a bit confusing if you're part-way through the financial year and have already paid some GST.
In this situation all you need to do is close/complete any GST periods that have already been paid. Closing these periods will not effect any other calculations in Solo and you can reopen a closed period at any time by going to the Taxes page and clicking on the History tab.
When you first categorise your income and expenses in Solo you might notice that you've overpaid a previous GST period. It is possible to amend a previous filed GST return, here's how:
Log in to myIR.
Click Returns and transactions under 'GST' in your summary.
Click on the GST period you want to change.
Click View return.
Click Amend return under the 'I want to...' menu.
How to override the GST on a transaction
Sometimes you might need to manually disable the GST on an expense transaction. For example, when you pay a subscription to an overseas company that does not charge GST.
To adjust the GST on a transaction:
Click the down arrow at the end of the transaction
Toggle the Calculate GST switch to off/grey
Click Save.
Note: The GST switch is not displayed for income transactions. The GST switch will automatically be disabled on some transactions if the expense category is exempt from GST. Such as Bank Fees.
What if I have Schedular payment income?
When you're GST registered and earn Schedular payment income, you need to pay GST on this income.
If GST is enabled and your IRD feed is connected, Solo will automatically calculate the GST on your Schedular payment income and include it in your GST return figures.
