GST for Tradies

GST for the Construction and Trade Sector

If you're a builder, plumber, electrician, painter, roofer, or any other tradesperson working in New Zealand, GST is part of every job you quote, invoice, and pay. The construction sector has some unique GST considerations that don't apply to most other businesses, particularly around progress payments, retentions, and the timing of when GST becomes payable.

When is GST Due on Progress Payments?

For GST-registered tradies on the invoice basis, GST is due when you issue the invoice, not when the customer pays. This is critical for cashflow management on large construction projects. If you issue a $50,000 progress claim in March but the customer doesn't pay until May, you still owe the GST to IRD based on your March return period. If this creates cashflow problems, consider switching to the payments basis (see our GST Basis Switcher) where GST is only due when payment is actually received.

Retentions and GST

Under the Construction Contracts Act 2002, retentions are amounts withheld from progress payments as security for defects. The GST treatment is straightforward: GST applies to the full invoice amount including the retention. When you invoice $100,000 with a 5% retention, you account for GST on the full $100,000 ($13,043.48 GST), not on the $95,000 actually received. The retention release later has no further GST implication because it was already accounted for on the original invoice.

Materials Purchased for a Job

Materials you purchase for a construction job will include 15% GST when bought from GST-registered suppliers. You claim this GST back as an input credit on your GST return. When you on-charge materials to the client (with or without markup), you charge GST on the full amount. The net effect is that GST only applies to the value you add, not to the materials cost itself, as long as you're claiming your input credits correctly.

Subcontractor GST

If you engage subcontractors who are GST-registered, their invoices to you will include GST, which you claim as an input credit. If a subcontractor is not GST-registered (under the $60,000 threshold), their invoices won't include GST and you have no input credit to claim. When you invoice your client for the project, you charge GST on the full amount including the subcontractor cost regardless of the subcontractor's GST status.

For the full suite of 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