Chapter 5

Working out your GST refund or payment

Working out GST is simple maths. Keeping track of all your transactions is the tricky part. Let’s learn the process.

A person on their phone calculating GST

GST is a simple formula

You work out GST by comparing the amount you paid on purchases to the amount you collected on sales.

An illustration of the GST formula

GST collected - GST paid = GST payment or refund

If you get a positive number, you need to pay that amount to the IRD. If it’s a negative number, you’ll be refunded that amount.

You may need to make adjustments for assets, such as a car or computer, that is shared between your business and family. Visit the IRD page on claiming mixed-use assets for more information.

How to work out GST in four steps

1. Make a note of the GST paid on your business purchases

A GST form indicating GST paid, and a delivery moped

2. Make a note of the GST collected on sales

A GST form indicating GST collected, and some bakery foods

3. Add both types of GST

Calculations for filing a GST return

4. Run the GST formula

How to calculate GST owed

Avoid nasty surprises with smart bookkeeping

Like any business, you’ll aim to sell more than you buy. If you succeed in doing that, you’ll most likely end up with GST to pay. Run the four-step GST equation regularly so you can:

  • work out how big your GST payment is shaping up to be
  • transfer cash to a separate bank account to cover the GST you’ll need to pay

Automate your GST calculations

You can use online accounting software like Xero to stay on top of GST. It automatically records GST collected and paid, and does the maths for you.

The software keeps a running count of your GST situation so you always know where you stand. When your GST return is due, you just connect to the IRD and submit it online. All the information is ready to go.

How accounting software tracks GST owed and collected

Disclaimer: Xero does not provide accounting, tax, business or legal advice. This guide has been provided for information purposes only. You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the provided content.

Guide to GST

Making a start with GST? Don’t worry. It’s a little extra admin, but follow our guide and you’ll soon be on top of it.

Download the guide to GST

Get your small business tax sorted. Fill in your details to get our full GST guide as a PDF.

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