Quick answer
In New Zealand, the GST inside a GST-inclusive amount is 3/23 of it, roughly 13%. A simple habit is to move 3/23 of each week's takings into a separate account, then let your claimable purchases reduce what you actually owe. A tighter method is to set aside 15% of sales minus GST-claimable costs, both excluding GST. Either way, the money should leave your everyday account before you're tempted to spend it.
Key points
- GST in a GST-inclusive figure is 3/23 of it; on an exclusive figure it's 15%.
- What you owe is GST on sales minus GST on claimable purchases, so the true set-aside is usually lower than 3/23 of takings.
- A separate GST account, topped up weekly, is the single most effective habit.
- Seasonal businesses should set aside on actual takings, not a flat average.
GST day is only painful when the money isn’t there. The GST itself was never yours: customers paid it to you so you could pass it on. The trouble starts when it sits in the same account as everything else and quietly funds stock, wages and the odd emergency. The fix is a number and a habit.
How do you work out the GST in your takings?
New Zealand GST is 15% of the GST-exclusive price. Work backwards from a GST-inclusive figure and the GST share is 15/115, which simplifies to 3/23, or about 13.04%.
| GST-inclusive takings | GST inside (3/23) | Amount excluding GST |
|---|---|---|
| $1,150 | $150 | $1,000 |
| $11,500 | $1,500 | $10,000 |
| $23,000 | $3,000 | $20,000 |
| $46,000 | $6,000 | $40,000 |
A common mistake is putting aside 15% of GST-inclusive takings. That’s more than the GST they contain. It errs on the safe side, which isn’t terrible, but it also locks away cash the business could be using.
Why is the GST you owe smaller than 3/23 of takings?
Your GST return nets two figures: GST you collected on sales, minus GST you paid on claimable purchases such as stock, materials, rent, fuel and subscriptions from GST-registered suppliers. Wages, interest, most bank fees and other exempt financial services carry no GST, so they don’t reduce the bill.
That gives you two ways to set money aside:
- The simple method. Move 3/23 of every week’s GST-inclusive takings into a GST account. When the return is done, the surplus (roughly the GST on your purchases) can come back. Easy and safe, but it parks more cash than necessary.
- The net method. Each week, take sales excluding GST, subtract GST-claimable costs excluding GST, and set aside 15% of the difference. Closer to the real bill, but it relies on you knowing your costs.
Illustrative example. A Wellington café takes $9,200 a week including GST ($8,000 excluding). It spends $3,000 a week excluding GST on food, beverages, rent and other GST-able costs. The simple method sets aside 3/23 of $9,200, which is $1,200 a week. The net method sets aside 15% of $5,000, which is $750. Over a two-monthly period of about nine weeks, that’s roughly $10,800 versus $6,750. The second figure is close to the actual bill; the first leaves a cushion of about $4,000.
What’s a good weekly GST routine?
The method matters less than doing it every week, on the same day:
- Open a separate account called something unmistakable, such as “GST: not ours.”
- Pick a sweep day. Monday works for most: look at last week’s takings and transfer the GST portion.
- Adjust for big purchases. A large GST-able purchase in the period means you can set aside less, but only once it’s actually on the return.
- Check against each return. Compare what’s in the account with what the return says. If you’re consistently short, your costs estimate is too optimistic.
- Leave the surplus alone until the return is filed. Then move it back, or keep it as the start of next period’s buffer.
Our GST & provisional tax set-aside planner does the arithmetic for you, including seasonal patterns, and lays out the next due dates on your filing cycle.
How does seasonality change the set-aside?
A flat weekly transfer based on the annual average works badly for seasonal businesses. A Queenstown tour operator or a Coromandel café earns most of its GST in summer, and an average figure under-saves in January and over-saves in July. Set aside on actual takings, week by week. The bills follow the same seasonal shape, just a month or two later, so the money will be there when the big summer return arrives in autumn.
Filing frequency also changes how lumpy the bills feel. On two-monthly or six-monthly filing, a busy period’s GST lands well after the season, which is exactly when owners are most tempted to dip into the account.
What about provisional tax?
GST is only half the tax picture. If your residual income tax last year was over $5,000, provisional tax is also coming, usually in three instalments for a 31 March balance date. Many owners run one tax account for both, which works if you track what belongs to each. See the four provisional tax options and the provisional tax dates to plan the second half.
When the set-aside isn’t enough
Sometimes the account is short for reasons a routine can’t fix: a big customer pays late, a slow season runs longer, or growth soaks up the cash. Inland Revenue will usually talk to you about an instalment arrangement if you contact it before or on the due date. Some owners prefer to settle the tax in full and repay a lender over a planned term instead, which keeps their IRD record clean; if you want to explore that, start an enquiry here.
A cleaner tax account, then the next move
A well-run GST account is one of the first things a lender notices, because it shows the business separates its own money from Inland Revenue’s. If you’re planning a hire, a fit-out or more stock and want funding lined up, we can look at unsecured options for trading businesses and loans secured on property. There’s no credit check to ask, your details aren’t passed around to other lenders, and a real person on our New Zealand team reads your answers. The more accurate they are, the more useful our first call. See if you qualify.
Frequently asked questions
What fraction of a GST-inclusive price is GST?
3/23. Because GST is 15% of the exclusive price, the GST inside an inclusive figure is 15 divided by 115, which simplifies to 3/23, or about 13.04%.
Should I set aside 15% of my takings?
Not of GST-inclusive takings; that would put aside more than the GST they contain. Use 3/23 of inclusive takings as a safe upper figure, or 15% of the exclusive amount after subtracting GST-claimable costs for a closer estimate.
Do wages reduce my GST?
No. Wages and salaries carry no GST, so they don't reduce what you owe. Only purchases from GST-registered suppliers that include GST give you a claim.
Should provisional tax go in the same account?
Many owners use one tax account for both, which works well if you know how much of the balance belongs to each. Our set-aside planner splits the weekly amount between GST and provisional tax so you can track them separately.
What if I've already spent the GST?
Contact Inland Revenue before the due date if you can't pay in full. An agreed instalment arrangement usually costs less in penalties than missing the date without a plan.