1. Mixing business and personal spending

Using the same bank account or card for both business and personal expenses can make GST preparation unnecessarily difficult.

Where an expense has both business and private use, you generally cannot simply claim all of the GST. Inland Revenue states that GST can only be claimed to the extent a purchase is used in the business.

A separate business bank account and good bookkeeping can make this much easier.

2. Claiming GST without adequate records

Do not assume that seeing a payment on the bank statement automatically means the GST is claimable.

Businesses need sufficient taxable supply information to support GST claims. This information can be contained across invoices, receipts, contracts, bank records and accounting systems rather than necessarily being contained in one traditional “tax invoice”.

Keeping your supporting documents attached to transactions in Xero can make GST reviews much easier.

3. Using the wrong GST period

Your accounting basis affects when sales and expenses are included in your GST return.

Under the payments basis, GST is generally accounted for when money is received or paid. Under the invoice basis, invoices can need to be included even though the customer has not yet paid you.

Make sure your bookkeeping reflects the GST basis your business is actually registered for.

4. Forgetting expenses paid personally

Business owners sometimes pay genuine business expenses using a personal card or personal bank account and then forget about them when the GST return is prepared.

Keep the supporting documentation and make sure these transactions are provided to your accountant or correctly entered into your accounting system.

This is another reason why keeping business and personal finances separate wherever possible is helpful.

5. Treating every bank deposit as a normal GST sale

Not every amount entering your bank account necessarily has the same GST treatment.

Transfers between your own accounts, money introduced by the owner, loans and other transactions need to be correctly identified rather than automatically treated as ordinary business sales.

Likewise, particular types of income can have different GST treatment. If you are unsure what a transaction represents, check it before filing rather than guessing.

6. Leaving GST until the due date

GST returns generally need to be filed, and any GST payable paid, by the 28th of the month following the end of the taxable period. The main exceptions are periods ending 31 March, which are due 7 May, and 30 November, which are due 15 January. See Inland Revenue’s GST filing guidance for more information.

Inland Revenue also requires a GST return for every taxable period, including when the return is nil.

Preparing early gives you time to find missing invoices, review unusual transactions and know how much GST you need to pay.

7. Not reviewing your GST before filing

Before filing, take a few minutes to look at the overall result.

Ask yourself whether the sales figure looks reasonable compared with the business’s actual trading, whether large purchases have supporting documentation, whether any personal transactions have been included, and whether anything unusual happened during the period.

A quick review can identify errors before the return reaches Inland Revenue.

GST Return NZ Small Business: Good Bookkeeping Makes GST Easier

GST compliance does not need to become a last-minute exercise.

Keeping your business and personal finances separate, regularly reconciling your accounts, retaining supporting records and reviewing unusual transactions throughout the year can make each GST return significantly easier to prepare.

If you need help with GST returns, bookkeeping or Xero, Accounting Experts Limited can assist businesses in Rotorua and throughout New Zealand.

This article provides general information only and does not constitute personalised tax advice. GST treatment depends on the particular circumstances of each transaction and business.