How the numbers work: gST and business tax

Adding GST (GST-Exclusive to GST-Inclusive)

1. Formula: GST-Exclusive Price × 1.15 = GST-Inclusive Price
2. Or: GST-Exclusive Price + (GST-Exclusive Price × 0.15) = GST-Inclusive Price

Adding GST (GST-Exclusive to GST-Inclusive)

1. Service cost (before GST): $1,000
2. GST amount: $1,000 × 0.15 = $150

Total price including GST: $1,000 + $150 = $1,150

Removing GST (GST-Inclusive to GST-Exclusive)

1. Formula: GST-Inclusive Price ÷ 1.15 = GST-Exclusive Price
2. Or: GST-Inclusive Price × (3 ÷ 23) = GST Amount

Removing GST (GST-Inclusive to GST-Exclusive)

1. Total price (including GST): $1,150
2. GST-exclusive amount: $1,150 ÷ 1.15 = $1,000
3. GST content: $1,150 - $1,000 = $150

GST Returns: What You Pay to IRD

1. Sales (GST-inclusive): $23,000
2. GST collected (output tax): $23,000 × 3/23 = $3,000
3. Expenses (GST-inclusive): $11,500
4. GST paid (input tax): $11,500 × 3/23 = $1,500

GST payable: $3,000 - $1,500 = $1,500

🔢 Real-World Examples

1. Week 1: $70 × 50 = $3,500 + GST ($525) = $4,025
2. Week 2: $85 × 40 = $3,400 + GST ($510) = $3,910
3. Week 3: $75 × 45 = $3,375 + GST ($506.25) = $3,881.25
4. Week 4: $70 × 25 = $1,750 + GST ($262.50) = $2,012.50

Total GST collected: $1,803.75 Total invoiced (inc GST): $13,828.75

🔢 Real-World Examples

1. Fuel: $500 (inc GST) → GST: $65.22
2. Tools & supplies: $1,200 (inc GST) → GST: $156.52
3. Vehicle maintenance: $800 (inc GST) → GST: $104.35
4. Total GST paid on expenses: $326.09

🔢 Real-World Examples

1. GST collected (output tax): $1,803.75
2. GST paid (input tax): -$326.09

GST payable to IRD: $1,477.66

🔢 Real-World Examples

1. Branding project: $4,600 (inc GST) → $4,000 + $600 GST
2. Website design: $6,900 (inc GST) → $6,000 + $900 GST
3. Marketing materials: $4,025 (inc GST) → $3,500 + $525 GST
4. Packaging design: $6,325 (inc GST) → $5,500 + $825 GST

Total GST collected: $2,850

1. Adobe Creative Cloud: $345 (inc GST) → GST: $45
2. Home office rent portion: $1,380 (inc GST) → GST: $180
3. Printing & materials: $805 (inc GST) → GST: $105
4. Online courses: $575 (inc GST) → GST: $75
5. Total GST paid: $405

1. Output tax (GST collected): $2,850
2. Input tax (GST paid): -$405

Net GST payable: $2,445

1. Project 1 - Residential home:
2. Labor: $57,500 (inc GST) → GST: $7,500
3. Materials: $172,500 (inc GST) → GST: $22,500
4. Project 2 - Office renovation:
5. Labor: $28,750 (inc GST) → GST: $3,750
6. Materials: $86,250 (inc GST) → GST: $11,250
7. Project 3 - Warehouse roof:
8. Labor: $17,250 (inc GST) → GST: $2,250
9. Materials: $40,250 (inc GST) → GST: $5,250
10. Project 4 - Garden shed:
11. Labor: $5,750 (inc GST) → GST: $750
12. Materials: $11,500 (inc GST) → GST: $1,500

Total GST collected: $54,750

1. Equipment rental: $23,000 (inc GST) → GST: $3,000
2. Fuel for vehicles: $5,750 (inc GST) → GST: $750
3. Office supplies: $1,150 (inc GST) → GST: $150
4. Insurance: $4,600 (inc GST) → GST: $600
5. Total GST paid: $4,500

1. GST collected: $54,750
2. GST paid: -$4,500

Net GST payable: $50,250

1. Week 1: 3,000 kg @ $15/kg = $45,000 + GST ($6,750)
2. Week 2: 2,500 kg @ $15/kg = $37,500 + GST ($5,625)
3. Week 3: 4,000 kg @ $15/kg = $60,000 + GST ($9,000)
4. Week 4: 3,500 kg @ $15/kg = $52,500 + GST ($7,875)
5. Total sales: $195,000 + $29,250 GST

Payment received: $0 (all invoices unpaid at month end)

1. Boat fuel: $13,800 (inc GST) → GST: $1,800
2. Gear maintenance: $9,200 (inc GST) → GST: $1,200
3. Bait: $6,900 (inc GST) → GST: $900
4. Total GST paid: $3,900

1. GST collected (invoiced): $29,250
2. GST paid: -$3,900

Net GST payable: $25,350

1. Total sales (inc GST): $92,000
2. GST-exclusive amount: $92,000 ÷ 1.15 = $80,000
3. GST collected: $92,000 - $80,000 = $12,000

1. Food supplies: $23,000 (inc GST) → GST: $3,000
2. Coffee beans: $5,750 (inc GST) → GST: $750
3. Cleaning supplies: $1,150 (inc GST) → GST: $150
4. Equipment repairs: $2,300 (inc GST) → GST: $300
5. Rent: $6,900 (inc GST) → GST: $900
6. Utilities: $1,380 (inc GST) → GST: $180
7. Total GST paid: $5,280

1. Output tax: $12,000
2. Input tax: -$5,280

Net GST payable: $6,720

GST Basics

1. Standard rate: 10%
2. Price excluding GST: $100
3. GST amount: $100 × 10% = $10
4. Price including GST: $110

GST Basics

1. Price excluding GST × 1.10 = Price including GST
2. Example: $500 × 1.10 = $550

GST Basics

1. Price including GST ÷ 1.10 = Price excluding GST
2. Example: $550 ÷ 1.10 = $500
3. GST amount: $550 - $500 = $50

GST Basics

1. GST amount = Price including GST × 1/11
2. Example: $550 × 1/11 = $50

Example 1: Adding GST to Prices

1. Product cost (ex-GST): $45.00
2. Markup: 100%
3. Sell price (ex-GST): $90.00
4. Add GST: $90 × 1.10
5. GST amount: $9.00

Final price: $99.00

Example 2: Removing GST from Invoice

1. Total including GST: $550.00
2. Divide by 1.10: $550 ÷ 1.10
3. GST component: $550 - $500 = $50.00

Amount ex-GST: $500.00

Example 3: Business Activity Statement (BAS)

1. GST collected on sales: $8,000
2. Less: GST credits claimed: $4,700

Net GST payable to ATO: $3,300

Example 4: Mixed Business (Taxable + GST-Free)

1. Total GST credits: $2,500
2. 40% of sales are GST-free
3. Can only claim 60%: $2,500 × 60% = $1,500

Example 4: Mixed Business (Taxable + GST-Free)

1. GST collected: $1,400
2. GST credits: $1,500

Refund from ATO: $100

Example 5: Import Calculations

1. Goods value (customs): AUD $10,000
2. Customs duty (5%): $500
3. Taxable value: $10,500
4. GST (10% of taxable value): $1,050

Total to pay: $11,550

🌍 Real-World Australian GST Examples

1. Expected revenue: $90,000 (inc GST)
2. Above $75,000 threshold → Must register
3. Revenue ex-GST: $90,000 ÷ 1.1 = $81,818
4. GST to collect: $8,182

🌍 Real-World Australian GST Examples

1. Labour: $500
2. Materials: $300
3. Total ex-GST: $800
4. GST (10%): $80
5. Invoice customer: $880

🌍 Real-World Australian GST Examples

1. Bought materials for $330 inc GST
2. GST credit: $330 ÷ 11 = $30
3. Net GST: $80 - $30 = $50 to ATO

🌍 Real-World Australian GST Examples

1. GST on sales: $4,000
2. GST on purchases: $2,200
3. Net payable: $1,800

1. Sale price: $660,000 (inc GST)
2. Price ex-GST: $660,000 ÷ 1.1 = $600,000
3. GST collected: $60,000

1. GST collected: $60,000
2. GST credits: $53,000
3. Net GST payable: $7,000

💵 How the 15% is split

1. GST collected by the marketplace: 15% of the service value
2. Paid to Inland Revenue by the marketplace: 6.5%
3. Passed back to unregistered sellers (flat-rate credit): 8.5%

6.5% + 8.5% = 15%

The $60,000 GST registration threshold

1. Turnover more than $60,000 in a 12-month period: you must register for GST
2. Turnover $60,000 or less: registration is optional

Under the threshold and unregistered: you keep the 8.5% flat-rate credit and file no GST return

🔢 Worked New Zealand examples

1. GST collected by Uber: $30,000 × 15% = $4,500
2. Paid to Inland Revenue by Uber: $30,000 × 6.5% = $1,950
3. Flat-rate credit passed to Ari: $30,000 × 8.5% = $2,550

Ari keeps his fares plus the $2,550 flat-rate credit

🔢 Worked New Zealand examples

1. GST collected by Airbnb: $25,000 × 15% = $3,750
2. Paid to Inland Revenue by Airbnb: $25,000 × 6.5% = $1,625
3. Flat-rate credit passed to Mia: $25,000 × 8.5% = $2,125

Mia keeps her hosting income plus the $2,125 flat-rate credit

🔢 Worked New Zealand examples

1. Airbnb still collects 15% on the bookings
2. In Jordan's GST return, the marketplace supplies are zero-rated
3. Jordan does not receive the 8.5% flat-rate credit
4. Jordan claims GST back on his costs instead

1. Say Jordan has $23,000 of GST-inclusive costs (cleaning, supplies, commercial-rate expenses)
2. GST he can claim back: $23,000 × 3 ÷ 23 = $3,000

Jordan recovers $3,000 of input GST through his GST return

1. GST collected by the platform: $12,000 × 15% = $1,800
2. Paid to Inland Revenue by the platform: $12,000 × 6.5% = $780
3. Flat-rate credit passed to Sam: $12,000 × 8.5% = $1,020

Sam keeps his delivery earnings plus the $1,020 flat-rate credit

The Compulsory Threshold

1. Look at your taxable turnover over the last 12 months
2. Also consider the next 12 months you expect
3. If either is over $60,000, registration is compulsory
4. Turnover means sales, not profit

You Charge It and You Claim It

1. GST collected on sales over the period
2. Less GST paid on business purchases
3. The difference is paid to Inland Revenue
4. If you paid more GST than you collected, you may get a refund

A Simple GST Decision Path

1. 1. Track your rolling 12-month turnover
2. 2. Register if you are over, or expect to go over, $60,000
3. 3. Below that, weigh voluntary registration for your customer mix
4. 4. Choose a filing frequency and accounting basis that fit
5. 5. Quarantine collected GST and keep tax invoices

The Floor Area Method

1. Work area is 12 square metres
2. Total home is 120 square metres
3. Business-use percentage is 10%
4. Claim 10% of eligible household running costs

The Logbook Method

1. Logbook shows 60% of driving is for business
2. Total annual vehicle costs are, say, $8,000
3. Claim 60% of $8,000, which is $4,800
4. Refresh the logbook periodically to keep it valid

A Simple Approach

1. 1. Measure your home work area as a percentage of the home
2. 2. Choose the actual-cost or square metre rate route
3. 3. For the vehicle, pick logbook or kilometre rate
4. 4. Keep measurements, a logbook, and receipts
5. 5. Claim only the business portion and get advice if unsure

Provisional Tax for Contractors

1. Earn contracting income (no PAYE withheld)
2. If tax liability above threshold, must pay provisional tax
3. Standard dates: 28 Aug, 15 Jan, 7 May (or Feb with tax agent)
4. Based on previous year or estimate current year
5. Terminal tax due after year-end squares up actual liability

How GST Works for Contractors

1. Charge GST on invoices (add 15% to your rate)
2. Collect GST from clients
3. Pay GST on business expenses you incur
4. File GST return: Pay IRD (GST collected minus GST paid)
5. Frequency: monthly, 2-monthly, or 6-monthly depending on turnover

Setting Aside Money for Tax

1. Receive payment from client
2. Immediately transfer set-aside % to separate tax account
3. Never touch tax account except for tax/ACC payments
4. Live on remainder - your actual net income
5. When provisional tax or year-end tax due, money waiting

What Drives Your Levy

1. ACC looks at your liable earnings
2. It applies a levy rate for your work classification
3. Riskier work has a higher rate
4. You are invoiced for the levies, often after your return

A Simple Plan

1. 1. Know that you pay ACC levies directly when self-employed
2. 2. Check your occupation classification is correct
3. 3. Decide if CoverPlus or CoverPlus Extra fits your income
4. 4. Set money aside for the levy invoice
5. 5. Consider private income protection as well, if needed

The Two Main Methods

1. Identify the asset and its depreciation rate
2. Choose diminishing value or straight line
3. Apply the rate to calculate the year deduction
4. Reduce the asset book value by the depreciation claimed

Depreciation Recovery and Loss on Sale

1. Sale price higher than book value: depreciation recovered, taxable
2. Sale price lower than book value: a loss may be claimable
3. Sale price equals book value: no adjustment

➕ Adding GST to an Exclusive Price

1. Exclusive price: 100 dollars plus GST
2. GST at 15 percent: 100 times 0.15 equals 15 dollars
3. Inclusive total: 100 plus 15 equals 115 dollars
4. Shortcut: multiply the exclusive price by 1.15

The Correct Method

1. Inclusive price: 115 dollars
2. To find the GST-exclusive amount: divide by 1.15
3. 115 divided by 1.15 equals 100 dollars
4. GST portion: 115 minus 100 equals 15 dollars

The Flow of GST

1. A business adds GST to the price of what it sells
2. The customer pays the GST-inclusive price
3. The business records the GST it collected (output tax)
4. It also records GST it paid on its purchases (input tax)
5. It pays Inland Revenue the difference, or claims a refund

As a Business

1. Charge GST on standard-rated sales
2. Keep the GST aside, it is not your income
3. Track GST paid on purchases to claim it back
4. File the GST return and pay the difference on time

How Provisional Tax Is Calculated

1. Previous year's RIT × (100% + uplift %)
2. Result = Current year's provisional tax amount
3. Divided by 3 for each instalment (or 2 if different method)

Setting Aside Tax from Income

1. Estimate your likely tax rate (including ACC if self-employed)
2. Set aside that percentage from every payment/invoice received
3. Transfer to separate savings account immediately
4. Don't touch this account except for tax payments
5. At payment dates, money is waiting - no scramble required

Rates and Calculation

1. Identify the benefits provided to staff
2. Work out the taxable value of each benefit
3. Apply the FBT rate, choosing a calculation method
4. File the FBT return and pay Inland Revenue