GST for Tradies: A Plain-English Guide for Self-Employed Tradespeople in NZ

GST is one of the areas that catches self-employed tradies out most often. Either they register too late, spend the GST portion before it is due, or miss out on claiming back GST on legitimate business purchases.

This guide covers what you actually need to know — without the jargon.

GST (Goods and Services Tax) is a 15% tax added to most goods and services sold in New Zealand. When you are GST-registered, you collect GST on behalf of IRD from your clients, and you can claim back GST on your business expenses.

The key thing to understand: the GST on your invoices is not your money. It belongs to IRD. Your job is to collect it and pass it on.

You must register for GST if your turnover exceeds — or is expected to exceed — $60,000 in any 12-month period.

For most tradies, this threshold arrives quickly. A builder doing residential work, an electrician running their own jobs, a plumber with a handful of regular clients — $60,000 in turnover is not a high bar.

If you hit the threshold and do not register, IRD can come back and charge you GST on all your past invoices as if you had been registered. That comes out of your pocket, not your clients'.

The rule: as soon as you think you are going to hit $60,000, register. Do not wait until you have already crossed it.

Yes — in most cases for tradies.

Here is why: as a tradie, you spend a lot on materials, tools, subcontractors, and equipment. All of those purchases include GST. If you are not registered, you cannot claim any of it back.

Once you register, you can claim back the GST on:

• Timber, pipes, wire, paint, and all other materials
• Power tools, hand tools, and safety equipment
• Your work vehicle running costs
• Fuel
• Subcontractor invoices (if they are GST-registered)
• Accounting and professional fees
• Phone and internet (business portion)

For a tradie spending $30,000–$50,000 a year on materials and equipment, that is $4,500–$7,500 in GST you can claim back annually. Voluntary registration pays for itself quickly.

The main reason not to register early is if most of your clients are private homeowners who cannot claim GST back themselves — adding 15% to your prices may make you less competitive. But if you work for commercial clients or other businesses, they can claim the GST back anyway, so it makes no difference to them.

Once registered, you file GST returns with IRD — either:

• Monthly — if your turnover is over $500,000, or if you prefer monthly cash flow
• Two-monthly — the most common option for tradies
• Six-monthly — available if your turnover is under $500,000 and you prefer less frequent filing

Each return covers the GST you collected on sales (output tax) minus the GST you paid on purchases (input tax). The difference is what you pay to IRD — or, if your input tax exceeds your output tax, what IRD refunds to you.

Example:

• You invoice $50,000 + GST in a two-month period → you collected $7,500 GST
• You spent $20,000 + GST on materials and expenses → you paid $3,000 GST
• You owe IRD $7,500 − $3,000 = $4,500

This is where tradies get into trouble. The money hits your account, it all looks like income, and before you know it you have spent the GST portion on something else. Then the return comes due and you do not have the money.

The fix is simple: open a separate bank account for GST. Every time a payment comes in, transfer 15% of the GST-inclusive amount into that account immediately. When your return is due, the money is sitting there waiting.

Some tradies use a rough rule of thumb — set aside 13% of every payment received (which approximates the net GST liability after accounting for input credits). But the safest approach is to keep the full 15% separate and let the surplus build up as a buffer.

To claim GST on a purchase, you need a valid tax invoice. For purchases over $50, the invoice must show:

• The supplier's name and GST number
• The date
• A description of the goods or services
• The GST-inclusive price and the GST amount (or a statement that GST is included)

For purchases under $50, a simpler receipt is acceptable.

Practical tip: photograph receipts with your phone as soon as you get them. Paper receipts fade and get lost. If you use Xero, you can attach photos directly to transactions.

Not registering on time. IRD monitors turnover and will contact you if they think you should be registered. Registering late means back-paying GST you should have collected — which comes out of your margin.

Spending the GST before the return is due. The most common and most painful mistake. Keep it separate from day one.

Claiming GST on private expenses. You can only claim GST on business expenses. If you buy a tool that you use 50% for work and 50% personally, you can only claim 50% of the GST. Claiming 100% is incorrect and IRD can adjust it on audit.

Not claiming GST on all legitimate business purchases. The flip side — many tradies miss GST claims on things like accounting fees, phone bills, and vehicle costs because they do not think to include them.

Forgetting to account for GST on private use of business assets. If you use a business vehicle for personal trips, you need to account for GST on the private-use portion. Your accountant can help you work this out correctly.

Filing late. GST returns have due dates — typically the 28th of the month following the end of the period. Late filing attracts penalties and interest. Set a reminder.

If you use subcontractors, check whether they are GST-registered. If they are, their invoice will include GST and you can claim it back. If they are not registered, their invoice will not include GST and there is nothing to claim.

You cannot claim GST that was not charged. And you should not pay GST on an invoice from someone who is not registered — if a subbie adds GST to an invoice but is not registered, that is their problem to sort out with IRD, not yours.

GST is not complicated once you have a system. The tradies who struggle are usually those who treat it as an afterthought — filing returns from memory, scrambling for receipts, and hoping the numbers add up.

The tradies who get it right set up a separate account, use accounting software like Xero to track everything, and file on time every time.

At Eastmure & Associates, we help self-employed tradies across Christchurch, Canterbury, Selwyn, and Waimakariri get their GST right from the start — and fix it when it has gone wrong. We offer fixed monthly fees so there are no surprises.

Book a free 30-minute consultation →

Eastmure & Associates are Christchurch accountants and registered tax agents. We are Xero certified advisors working with tradies and small businesses across Canterbury.