Should You Register for GST Voluntarily in NZ?

In New Zealand, you must register for GST once your annual taxable turnover reaches $60,000. But you can choose to register voluntarily at any time — even from day one of your business. For many businesses and contractors, voluntary registration is the smarter financial move. For others, it adds unnecessary complexity. Here’s how to decide.

GST Basics

GST (Goods and Services Tax) is a 15% consumption tax charged on most goods and services in NZ. If you are GST-registered:

You charge 15% GST on your sales (output tax)
You claim back the 15% GST on your business purchases (input tax credits)
You pay the difference to IRD each filing period (or receive a refund if your input credits exceed output tax)

If you are not GST-registered, you charge no GST on sales, but you also cannot reclaim the GST you pay on business expenses.

The $60,000 Threshold

GST registration is compulsory once your annual taxable turnover reaches $60,000. This is total sales before GST, not profit. Once you hit this threshold, you must register within 21 days.

Failing to register on time means IRD can assess you for the GST you should have collected, even if you didn’t charge it to customers — effectively paying it from your own pocket.

Why Voluntary Registration Can Be Beneficial

1. Reclaiming Input Tax on Business Expenses

This is the most compelling reason to register voluntarily. Every time you purchase a business expense, 15% GST is embedded in the price. If you are not registered, that cost is simply absorbed.

Example: Freelance designer, $40,000/year revenue

Annual business expenses:

Software subscriptions: $1,500 (incl. $196 GST)
Computer equipment: $3,000 (incl. $391 GST)
Phone plan (80% business): $960 (incl. $100 GST)
Marketing and advertising: $2,000 (incl. $261 GST)
Office supplies: $500 (incl. $65 GST)
Total claimable GST: ~$1,013/year

That $1,013 in recovered GST is money you’d otherwise lose. At $40,000 revenue, it’s a 2.5% boost to your effective income.

2. Cash Flow on Startup

New businesses often have high upfront costs (equipment, fit-out, stock) before significant revenue arrives. Registering for GST immediately means you can reclaim the GST on these startup costs, potentially generating an immediate GST refund.

Example: A tradesperson spends $25,000 on tools and a work vehicle before doing any work. They can claim $3,261 in GST (25,000 / 1.15 × 0.15) as a refund — real cash back.

3. Appearing More Professional

Registered businesses typically have a GST number and can provide tax invoices. This can be important for B2B relationships, where business clients want to reclaim the GST on what they pay you.

The Drawbacks of Voluntary Registration

1. Compliance Cost

GST compliance isn’t free. Costs include:

Time to file GST returns (2-monthly is most common, requiring an accurate reconciliation)
Accounting software costs (Xero, MYOB, etc. — $30–$80/month)
Bookkeeping or accountant fees if you outsource
Risk of errors, penalties, and interest for late or inaccurate filing

For a small operator spending 15–20 hours a year on GST compliance, this is a real hidden cost.

2. Pricing Impact on Consumer Customers

If you sell to consumers (non-GST-registered buyers), adding GST increases your effective price by 15%. You have two choices:

Increase prices: Quote $115 inclusive of GST where you previously charged $100 — some customers may balk
Absorb GST: Keep your prices at $100 inclusive, meaning your effective fee is $87 before GST — a real pay cut

For consumer-facing businesses (personal trainers, tutors, tradespeople working for homeowners), the pricing impact on customers matters. For B2B businesses (consultants, designers, agencies serving businesses), all clients are GST-registered themselves and can claim it back — pricing impact is neutral.

3. Filing Obligations

Once registered, you must file GST returns — typically every 2 months (or monthly or 6-monthly if elected). Missing a return results in late filing penalties. You’re locked into this compliance cycle indefinitely unless you deregister.

Who Should Register Voluntarily?

Strong case for voluntary registration:

B2B contractors and consultants (clients reclaim GST, no pricing impact)
Businesses with significant upfront investment (tools, equipment, vehicles)
Anyone with high ongoing business expenses relative to revenue
Businesses expecting to cross $60,000 within 12 months anyway

Weaker case for voluntary registration:

Consumer-facing businesses (retail, personal services) with price-sensitive customers
Very new businesses with minimal expenses and few customers
Sole traders working under $30,000/year with low business costs

Partial Deductibility for Mixed-Use Businesses

If you use something partly for business and partly personally, you can only claim the business proportion of GST. Keep records of your business use percentage for assets like vehicles and phones.

The Filing Periods

GST returns are filed:

2-monthly (most common): 6 returns per year
6-monthly: Available if your turnover is below $500,000 — less frequent but requires a larger cash float
Monthly: Available for any business, useful if you regularly receive GST refunds (e.g., exporters)

Deregistering

If your taxable turnover drops below $60,000 and you want to deregister, you can apply to IRD. However, deregistration requires a final return and you must account for GST on any business assets you retain.

Making the Decision

Ask yourself:

Who are my customers? — Businesses (register, no pricing issue) or consumers (consider pricing impact)
How much GST do I pay on business expenses? — Calculate it and compare to compliance cost
Am I starting with high capital expenditure? — Voluntary registration pays off quickly
What’s my expected turnover? — If you’ll hit $60,000 within a year, register now rather than later

Use our GST Calculator to see GST at 15% on your revenue and expenses.