GST timing and cash flow: choosing the settings that suit your business

Why GST is a cash flow issue

GST isn’t your money — you collect it on IRD’s behalf. But it sits in your bank account until it’s due, which makes it easy to spend by accident. And depending on your settings, you can owe GST on sales you haven’t been paid for yet.

Getting the settings right won’t change how much GST you pay over a year, but it can change when you pay it, which matters a lot to cash flow.

Setting 1: Filing frequency

IRD offers three filing frequencies:

For seasonal businesses, the choice matters. Six-monthly filing looks convenient, but it can concentrate a large GST payment into one due date — which may fall in your quiet season. Monthly filing keeps each payment close to the income that generated it.

If your business often receives GST refunds — for example, during a big fit-out or a pre-season stock build — monthly filing means the refund arrives sooner.

Setting 2: Accounting basis

• Payments basis. You account for GST when money is actually received or paid. Generally available to businesses with turnover under $2 million. This is usually the friendliest setting for cash flow, because you don’t pay GST on invoices your customers haven’t paid.
• Invoice basis. You account for GST when an invoice is issued or received, whether or not it has been paid. You can end up paying GST on money you haven’t collected.
• Hybrid basis. Invoice basis for sales and payments basis for purchases (or similar combinations). Less common.

For businesses with slow-paying customers — trades waiting on payment claims, consultancies on 20th-following terms — the payments basis can prevent a common squeeze: owing IRD GST on invoices still sitting unpaid in your debtors ledger.

Setting 3: Due dates

GST is generally due on the 28th of the month after your period ends, with two exceptions:

• Periods ending in November are due 15 January.
• Periods ending in March are due 7 May.

Mark every GST due date in your cash flow forecast. For two-monthly filers, check which months your periods end in; IRD assigns them, and they can be changed in some cases.

GST on imports

Most imported goods attract GST at the border, collected by New Zealand Customs before goods are released. For importers and wholesalers, that’s GST paid weeks or months before the stock is sold. You can generally claim it back in your GST return, but in the meantime it’s cash out of the business. Include it when you work out how much working capital each shipment needs — see our working capital cycle guide.

Practical habits that prevent a GST squeeze

1. Open a separate GST account. Transfer the GST component of every receipt into it straight away.
2. Reconcile regularly. Check your GST account balance against what you’ll owe at the next due date.
3. Match filing frequency to your cash. Seasonal businesses often do better filing more frequently.
4. Use the payments basis if eligible and your customers pay slowly.
5. Don’t fund GST from the next period’s GST. It’s a common trap that snowballs.
6. Talk to your accountant before changing settings, because changes can have one-off effects.

What if a GST payment lands at the wrong time?

It happens, especially after a strong season with a large GST bill due in a quieter month, or when a big customer pays late.

• Talk to IRD early. If you can’t pay on time, contacting IRD before the due date gives you more options. Late payment penalties start the day after the due date.
• Consider a short-term facility. A line of credit can pay GST on the due date and be repaid when your customers pay you. It’s generally for businesses trading six months or more.
• Clear built-up arrears. If GST debt has accumulated over several periods, a property-secured loan of $20,000 to $1m can refinance or pay out IRD debt. See paying IRD on time from a facility.

A quick settings review

This guide is general information. Your accountant can advise on the right GST settings for your business.