GST for Contractors
Updated for 2026/27 IRD rates and thresholds
The basics, in numbers
| Setting | 2026 value |
|---|---|
| GST rate | 15% |
| Compulsory registration threshold | $60,000 of taxable turnover in any 12 months (excluding GST) |
| Voluntary registration | Available at any turnover level |
| Filing frequency | Monthly, two-monthly or six-monthly |
| Return and payment due | 28th of the month after the period ends |
| Exceptions | Period ending 31 March → 7 May; period ending 30 November → 15 January |
| Basis options | Invoice, payments or hybrid (payments basis if turnover under $2 million) |
The threshold is measured on taxable supplies, excluding GST. If you invoice $60,001 in a 12-month window you must register from the month you crossed the threshold — or earlier, if you knew you would. Late registration still requires you to account for GST on supplies made after the threshold was crossed, which can wipe out a year's profit for a contractor billing $100,000 at 45%+ penalties.
Invoice, payments or hybrid basis?
| Basis | GST is due | Best for |
|---|---|---|
| Invoice | When you issue the invoice, whether or not you are paid | Contractors paid promptly, with GST-registered clients |
| Payments | When you actually receive payment | Slow payers, long debtors, fluctuating income (turnover under $2m) |
| Hybrid | Expenses when paid, income when invoiced | Rarely the right answer; a legacy option |
Choosing the payments basis is one of the few GST decisions with real cash-flow value: if your clients take 60 days to pay, the invoice basis makes you fund GST on money you have not received. You can change basis with IRD's approval, usually effective from the start of the next taxable period.
GST-exclusive vs GST-inclusive quoting
Contractors on hourly rates need to be explicit. At a $75 GST-exclusive hourly rate you must charge $86.25 including GST; the client pays $86.25, you keep $75 and pass $11.25 to IRD. If you quote "$75 an hour" to a GST-registered business and then add GST, they can claim it back and are indifferent — but a private consumer cannot, and a surprise 15% on the invoice is the fastest way to lose a job.
- GST-registered clients: quote exclusive and add GST — they claim the GST back.
- Private clients: quote inclusive — what they pay is the total.
- Mixed clients: quote both figures on every invoice to avoid dispute.
What you can and cannot claim
| Claimable | Not claimable |
|---|---|
| Tools, equipment and materials used for work | Motor vehicles and other assets bought before registration |
| Vehicle expenses (GST on fuel, servicing, tyres) at your business-use percentage | Private expenses such as groceries and personal travel |
| Accounting fees, software subscriptions, insurance | Residential rent (exempt), and fines or penalties |
| Phone and internet at your business-use percentage | Any expense you cannot document with a valid tax invoice |
| Business travel, accommodation and client meals with records | Entertainment of non-business associates |
You need a valid GST tax invoice — supplier name, amount, GST number and description — for claims over $50. Keep them for seven years. Bank statements alone are usually not enough if the claim is ever checked.
A full year for a $100,000 contractor (two-monthly, payments basis)
- Invoice $100,000 plus $15,000 GST over the year.
- Register once turnover passes the $60,000 threshold and start charging GST on the next invoice.
- Record GST on all business expenses with valid invoices — say $18,000 of expenses, carrying $2,348 in claimable GST.
- File six two-monthly returns, paying $15,000 − $2,348 = $12,652 over the year.
- File the income tax return separately (9 May provisional/IR3 dates) — GST and income tax are tracked and paid separately.
Deep dive — 2026 update
GST and income tax are not the same thing
The most common mistake for new contractors is treating the GST in their bank account as income. Your income tax is on the GST-exclusive amount; the 15% is money you hold on IRD's behalf, not yours.
| Income tax | GST | |
|---|---|---|
| Calculated on | GST-exclusive revenue minus allowable expenses | GST-exclusive revenue minus GST on expenses |
| Rate | Progressive, 10.5%–39% (or 28% for companies) | Flat 15% |
| Paid by | Provisional tax, 28 Aug / 15 Jan / 7 May | GST returns through the year |
| Records | Invoices, receipts, logbooks | Valid GST tax invoices |
Practical rule: open a separate bank account and transfer the GST portion of every payment into it as soon as the invoice is paid. Contractors who spend their GST and then face a two-monthly return in a slow month are the classic IRD hardship case.
GST on specific contractor situations
- Rideshare and food delivery drivers: if your turnover crosses $60,000 you must register — and GST applies from registration, with the platform's commission able to be claimed as a business expense.
- Short-stay accommodation: hosting a property on Airbnb or Bookabach can push turnover over the threshold more easily than people expect, and registration is required at $60,000 of gross booking income before commissions.
- Zero-rated supplies: exports of goods and some services are zero-rated (0% GST), but you still report them in the return.
- Sales of a business as a going concern: can be zero-rated if both parties are GST-registered and agree in writing.
- Assets kept on deregistration: GST is payable on the market value of business assets you keep when you deregister.
A simple compliance calendar
- 20th of each month: PAYE for any employees, including yourself if you are a shareholder-employee on payroll.
- 28th every two months: GST return and payment (adjusted for the 31 March and 30 November exceptions).
- 28 August, 15 January, 7 May: provisional tax instalments if residual income tax was over $5,000.
- 7 July: IR3 individual return due for the year ended 31 March.
- Ongoing: keep GST tax invoices for seven years and record the business-use percentage for mixed-purpose expenses.