Any app developers here? Question about GST

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kiwichick12

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#261961 25-Dec-2019 18:38

Hi,

Does anyone here develop mobile apps that earn an income? I'm trying to figure out what my obligations are regarding GST. I'll try calling IRD after the holidays, but my past experience with them hasn't been great so I thought I'd ask for first-hand experience from developers.

I've just created my first android app and uploaded it to the Google Play Store. It has an in-app purchase. Google removes GST (or sales tax for non-NZ based buyers) and their 30% cut before paying me what's left. My sales are going to be significantly less than the $60K threshold, but the IRD website says if your goods include GST then you need to register. Does this apply for apps sold through an agent like Google who collects the GST themselves?

Any insight would be much appreciated. Thanks!

gehenna

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#2381257 25-Dec-2019 18:45

IRD don't give tax advice. You'll need to talk to an accountant.

ech3lon

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#2381264 25-Dec-2019 19:33

Not an accountant but has been in trade for about 10 years.

As you have mentioned if you make less than 60K it is optional.
Nice thing is you can claim GST back if the purchase is "business" related, downside is the paperwork.

Checked their website: https://www.ird.govt.nz/gst/registering-for-gst

kiwichick12

20 posts

Geek

#2381267 25-Dec-2019 19:39

It's that second condition at the bottom that's throwing me:

"you carry out a taxable activity and you add GST to the price of goods or services you sell."

Google adds the GST automatically, I don't think I get a choice. So that sounds to me like I would need to register for GST even if I'm only earning a few bucks.

kiwichick12

20 posts

Geek

#2381269 25-Dec-2019 19:54

Think I've found the answer. If anyone else is looking for the same info, check out this IRD page on online marketplaces:

https://www.ird.govt.nz/gst/gst-for-overseas-businesses/gst-on-low-value-imported-goods/who-needs-to-charge-gst/online-marketplaces

Looks like the marketplace (Google Play Store in this case) is responsible for the GST, and they state:

"The merchant is not responsible for any GST payable on the sale."

frankv

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#2386835 7-Jan-2020 15:43

kiwichick12:

Think I've found the answer. If anyone else is looking for the same info, check out this IRD page on online marketplaces:

https://www.ird.govt.nz/gst/gst-for-overseas-businesses/gst-on-low-value-imported-goods/who-needs-to-charge-gst/online-marketplaces

Looks like the marketplace (Google Play Store in this case) is responsible for the GST, and they state:

"The merchant is not responsible for any GST payable on the sale."

Makes sense... if *you* get the GST in your hand then you have to hand it over to IRD, and to do that you need to be registered. The benefit to you is you can then claim back the GST you spent in generating that GST. If you don't register, you can't claim back the GST you pay out.

Since you don't actually get the GST in your hand (Google does), you don't need to register (unless you make over $60K). But it may be worth your while registering anyway, since it will allow you to claim back (some proportion of?) the GST you spend on your Internet connection, computer, phone, etc.

Hopefully you already know that you will also have to pay income tax on the money you make from selling your app. But you will be able to claim back employment related expenses like Internet costs, computer and phone depreciation, home expenses, etc. NB that IRD expects you to make a profit and therefore to actually pay tax, not just claim refunds. They can (and will) retrospectively cancel your business and make you pay back all your refunds.

kiwichick12

20 posts

Geek

#2386842 7-Jan-2020 15:48

Thanks for the detailed reply. Yes, I'm fully intending to pay tax on earnings. Income tax seems pretty straightforward, it was just the GST that I was initially unsure about.

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snnet

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#2386852 7-Jan-2020 16:05

Just remember that 60k is turnover, meaning income+outgoings :)

sen8or

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#2386868 7-Jan-2020 16:47

snnet:

Just remember that 60k is turnover, meaning income+outgoings :)

nope, turnover is just sales and $60k is income based

BlinkyBill

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#2386878 7-Jan-2020 17:14

gehenna: IRD don't give tax advice. You'll need to talk to an accountant.

Early candidate for the biggest piece of mis-information of the year. Will be hard to beat.

Of course you can absolutely contact IRD and ask if you need to register for GST according to the scenario you are enquiring about.

FYI IRD run GST workshops, for free, for those new to running a business. They also run, for free, workshops covering basic tax principles for self-employed and for employers. https://www.classic.ird.govt.nz/contact-us/seminars/free-tax-seminars-workshops.html

snnet

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#2386904 7-Jan-2020 18:17

sen8or:

snnet:

Just remember that 60k is turnover, meaning income+outgoings :)

nope, turnover is just sales and $60k is income based

oops! for some reason I've always thought it meant that. My bad!