Service Fee True Cost Calculator NZ 2026

Rates current for the 2026/27 tax year. Reviewed 5 August 2026.

Quick answer A fee advertised at $1,500 plus GST costs a GST-registered sole trader with $120,000 of profit $1,005.00 a year, not $1,725.00. The GST of $225.00 is reclaimed and the deduction saves a further $495.00. That is $83.75 a month, or 0.84% of profit.
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Nobody pays the advertised price for a business service. Two reliefs sit between the headline and your bank balance, and neither appears on a pricing page. The first is GST. If you are registered, the GST charged on the fee is reclaimed through your GST return, so it costs you nothing at all; if you are not registered, and most operators below the $60,000 turnover threshold are not, it is a genuine 15 percent added to everything. The second is the income tax deduction. A fee incurred in earning your business income reduces your taxable profit, so the tax you pay falls by the fee multiplied by your marginal rate. At 33 percent, a third of what you spend comes back. Put together, a fee advertised at $1,500 plus GST is $1,725 to pay, $1,500 after the GST claim, and $1,005 after the deduction. That last figure is what the service actually costs, and it is the only one worth comparing between providers. This calculator converts any headline into it, handles GST-inclusive and GST-exclusive quotes correctly, and shows how the answer moves with your income.

What it really costs
$1,005.00
after GST claim and deduction
You actually pay out
$1,725.00
before anything comes back
Per month, real cost
$83.75
$19.33 a week

From headline to real cost

Advertised fee$1,500.00
BasisPlus GST
Amount you pay the provider$1,725.00
GST reclaimed$225.00
Cost after GST$1,500.00
Marginal tax rate33%
Deduction saves$495.00
Real cost to you$1,005.00
Total relief from the headline$720.00
Real cost as a share of profit0.84%

The same fee at different incomes

The deduction is relieved at your marginal rate, so the identical fee costs less the more you earn.

Annual profitMarginal rateDeduction savesReal cost
This is an estimate, not tax advice. It assumes the fee is fully deductible business expenditure and that you are on a standard GST basis. Private or mixed expenditure must be apportioned, and some categories have their own rules. Confirm your position with Inland Revenue or your accountant.

Comparing two quotes correctly

The mistake is comparing one provider's GST-inclusive price against another's GST-exclusive one, and it is easy to make because both are advertised as a single number with the basis in small print. For a registered business the GST washes out on both sides, so the comparison should be made on the GST-exclusive figures. For an unregistered business it does not wash out, so the comparison should be made on the GST-inclusive figures. Using the wrong pair can reverse which quote looks cheaper when the two are close, and the difference is 15 percent, which is larger than most price gaps between competitors.

Why the deduction narrows gaps rather than changing winners

Because both fees under comparison are usually deductible, the deduction shrinks each of them by the same proportion. The cheaper option stays cheaper. What changes is the size of the difference in money you actually feel: at a 33 percent marginal rate, a $500 gap in headline price is a $335 gap in real cost. That can be enough to make a more expensive service worth choosing on scope, and it is the reason comparing headline prices tends to overstate how much the decision matters.

Worked example

A GST-registered sole trader with $120,000 of profit is quoted $1,500 plus GST. They pay the provider $1,725.00, then reclaim $225.00 of GST through their return, leaving $1,500.00. That amount is deductible, and at a marginal rate of 33 percent it reduces their tax bill by $495.00. The real cost is $1,005.00, or $83.75 a month.

The same quote to someone not registered for GST, with profit of $40,000, looks very different. They cannot reclaim the GST, so the cost after GST is the full $1,725.00, and their deduction is relieved at 17.5 percent rather than 33 percent. Their real cost is $1,423.13, which is 42 percent more than the registered trader pays for exactly the same service.

How this is calculated

If the advertised fee excludes GST, the amount paid is the fee plus 15 percent; if it includes GST, the amount paid is the fee itself. A GST-registered payer reclaims the GST portion, taken as three twenty-thirds of the GST-inclusive amount. The remaining cost is deductible, and the tax saved is calculated by comparing the tax on your profit with the tax on your profit less that cost, rather than applying a single rate, so a fee that spans a bracket boundary is relieved correctly. Rates are those in force from 1 April 2025: 10.5% to $15,600, 17.5% to $53,500, 30% to $78,100, 33% to $180,000, and 39% above that.

Related NZ calculators

Data sources: the rates and thresholds on this page are maintained against Inland Revenue. Figures are checked twice monthly.

Frequently asked questions

Why is the real cost of a business fee lower than the advertised price?

Two separate reliefs apply. If you are GST registered you reclaim the GST on the fee through your GST return, so that portion never really costs you anything. What remains is ordinarily deductible against your business income, so it reduces your taxable profit and therefore your tax bill by the amount of the fee multiplied by your marginal rate. A $1,500 fee at a 33 percent marginal rate leaves a registered business $1,005 out of pocket, and that figure is the one worth comparing between providers.

Does it matter whether the advertised fee includes GST?

It matters a great deal, and it is the most common way two quotes are misread against each other. A fee advertised as $1,500 plus GST is $1,725 to actually pay, while one advertised as $1,500 including GST is $1,304.35 before GST. For a registered business the GST washes out either way, so the comparison is between $1,500 and $1,304.35. For an unregistered one the comparison is between $1,725 and $1,500. The direction of the difference reverses depending on your registration, which is why the setting exists here.

Is the deduction worth the same to everyone?

No. The deduction is relieved at your marginal rate, so the same fee costs a low earner more in real terms than a high earner. A $1,500 fee costs $1,342.50 at a 10.5 percent marginal rate and $915.00 at 39 percent. This runs opposite to intuition: the service that looks affordable relative to a large income is also the one that is subsidised most heavily by the deduction.

Should I choose a service based on its real cost?

Use real cost to compare like with like, but not to decide on its own. Both fees being compared are usually deductible, so the deduction narrows the gap between them without changing which is cheaper. What it does change is how much the difference actually matters: a $500 gap in headline price is a $335 gap in real cost at a 33 percent rate, which may be small next to a difference in what the two services include.

Are all business service fees deductible in New Zealand?

Fees incurred in earning your business income, including fees for managing your tax affairs, are ordinarily deductible. Private expenditure is not, and a fee covering both business and private matters must be apportioned. Some categories, entertainment being the clearest example, have their own limits. If a fee is only partly business related, enter only the business share here.