As a business owner in New Zealand, registering for GST is an important decision that can impact your cash flow. One of the key decisions you'll need to make is which GST registration option to choose - invoice or payments basis. In this post, we'll explore the pros and cons of each option to help you make an informed decision.
Invoice Basis
Under the invoice basis, you pay and claim GST when you raise or receive an invoice. This means that if you make a sale but haven't received payment yet, you still need to pay GST on that sale. While this option may seem less favourable, it does provide some benefits for businesses. For example, you can claim back GST on any expenses you incur before you receive payment. This can help with cash flow, especially if you have significant expenses.
Payments Basis
The payments basis, on the other hand, means you pay and claim GST when you receive or make payment. This option may be better for smaller businesses with tighter cash flow, as you won't need to pay GST until you've received payment for your sales. However, it's worth noting that under this option, you can't claim back GST on any expenses until you've paid them.
Sales Under $2m
It's important to note that businesses can only be on a payments basis when they have sales under $2 million. If your business exceeds this threshold, you'll need to register for the invoice basis.
Choosing the Right GST Basis
Choosing the right GST basis is an important decision that can impact your organisation's cash flow. It's important to consider your business's specific circumstances, including your sales volume, expenses, and cash flow. If you're unsure which option is best for your business, it's always a good idea to seek professional advice.
Need Help with GST?
If you're feeling overwhelmed by GST, or simply need some help navigating the process, Your Finance Team is here to help. Our team of experienced professionals can assist with all aspects of GST registration and compliance, ensuring your business stays on track and in compliance with all relevant regulations.
In conclusion, when deciding which GST basis is best for your business, it's important to consider your business's specific needs and circumstances. Both the invoice and payments basis have their advantages and disadvantages, so it's important to carefully weigh your options. And if you need help, don't hesitate to reach out to a trusted Chartered Accountant.
Comments