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How to put money aside for your GST

Writer's picture: Kate DoyleKate Doyle

Updated: Oct 30, 2024


As a business owner, you have a lot to manage—you wear all the hats.


As your business grows, it’s easy to forget to pay your GST (or PAYE). Even with the best intentions, as you get busier, it becomes harder to keep tabs on everything.


One thing you can't afford to let slip are your tax payments.


Why don't I have money left over to pay my GST?



How much money should I put aside?


As explained in the video, to manage your GST effectively, you need to set up a separate savings account. This is where you’ll store the GST you collect.


How much, and when to transfer to that account? We usually suggest one of the following methods to our clients:


  1. Automatic Payment: Set up an automatic payment to your GST account based on the average GST collected each week. Use previous GST returns to calculate this. This method works well for established businesses with predictable sales and expenses, and enough cashflow to top up the GST account if needed.


  2. Manual Transfer: Review your live GST return on Xero and manually transfer the GST owed. This is the method I use in my business. It’s ideal for businesses that reconcile Xero regularly and have the discipline to transfer the funds. It’s also suitable for newer businesses or those experiencing growth.


  3. Transfer Per Sale: Transfer the GST amount manually each time a sale is made. This approach works best for businesses making irregular, large-ticket sales.




How we help our clients with their GST

 

Depending on client needs, we provide regular updates on their GST balance. Since we can view your GST bank account in Xero, we ensure there’s enough money set aside for tax payments.


We also complete and file GST returns within days of the period ending, giving our clients maximum notice about their upcoming GST bills. Two reminders are sent with all the details you need to make payments. Our emails include the tax type, period, and your IRD number, so everything you need is in one place.


Being GST-registered is all the more reason to have a bookkeeper. Compliance must be watertight—you want to claim all the GST you can but avoid overclaiming and facing a surprise bill later.


Xero populates GST returns automatically, but this isn’t always accurate. Xero relies on correct data input. If you forget to add GST to invoices, incorrectly treat entertainment expenses (only 50% claimable), overclaim GST on assets with personal use, or claim GST on non-GST transactions, your GST return will be wrong.


If you have any questions about your GST or want to discuss our monthly services, book a call with us.







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North Shore, Auckland, New Zealand

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