GST Basis Switcher

Understanding GST Accounting Bases in New Zealand

New Zealand's GST system offers two main accounting bases that determine when GST becomes payable to IRD and when you can claim input credits. The choice between invoice basis and payments basis can have a significant impact on your business cashflow, particularly if your customers are slow to pay or you carry substantial trade receivables.

Invoice Basis (Accrual)

On the invoice basis, you account for output GST when you issue an invoice, regardless of when the customer pays. Similarly, you claim input credits when you receive a supplier's invoice, even if you haven't paid them yet. This is the default basis for most businesses and is mandatory if your taxable turnover exceeds $2 million. The advantage is simplicity: your GST return aligns with your invoicing. The disadvantage is cashflow: you may need to pay GST to IRD before your customer has paid you.

Payments Basis (Cash)

On the payments basis, you account for output GST only when the customer actually pays you, and claim input credits only when you pay your suppliers. This basis is available to businesses with taxable turnover of $2 million or less. The cashflow advantage is clear: you never pay GST to IRD on money you haven't received. For businesses with long debtor days (customers who take 30, 60, or 90 days to pay), the payments basis can free up significant working capital.

Hybrid Basis

Some businesses use a hybrid approach where they account for sales on the payments basis (output GST when paid) but claim purchases on the invoice basis (input credits when invoiced). This requires IRD approval and is less common, but can offer the best of both worlds for certain business structures.

Switching Between Bases

You can apply to IRD to change your GST accounting basis. When switching from invoice to payments, you'll need to make a wash-up adjustment for any GST already accounted for on unpaid invoices. The change takes effect from the start of the next taxable period after approval. Use our GST Return Estimator to model the impact of switching.

For more GST tools, visit the GST.co.nz homepage. For 200+ other NZ calculators, visit Calculate.co.nz.

Last updated: April 2026 | Rates current for the 2026/27 tax year