Help Setting up as a contractor / Sole trader GST Advice IRD confusion

Forums › IT Pro and developers › Help Setting up as a contractor / Sole trader GST Advice IRD confusion

mrhaboobi

165 posts

Master Geek

#288492 3-Jul-2021 15:49

Hi All

Im considering leaving full time employment and starting contracting. Lets assume for this scenario I'm employed as a full time employee until Sept 1. At this point i start my new contract.

As part of the process im aware i need to register for GST. Ive look at this process and there are two dates that im confused by, one talks about the registration start date, the other about when i start to claim GST.

"What is your start date for GST? This is usually the date you apply, but may be a future date in some cases."

"registration start date – the date you need to start accounting for GST. This can be a future date if you haven’t started your business yet."

As i only plan to start contracting in sept. i assume i set these both to 1sept or close to that.

Now this weekend there are some good deals on computer and mobile phones, and i will need these as part of my contract ( my employer use to provide them, i will need to provide them myself ). I want to take advantage of the deals and purchase these in preparation for starting in sept.

I understand i can depreciate the items, and claim back GST, my question is do i need to be GST registered at the time of purchasing, or can i buy the items today and then declare them as being used by the business ( and by business i just me a sole trader )

The IRD site is really not clear on this, and what these two dates mean. i dont want to register GST early if it will impact my current employment.. and im not sure if setting future registration dates means i cant buy goods for use in that business today,

Anyone have thoughts :)

THanks

nutbugs

268 posts

Ultimate Geek

Lifetime subscriber

#2738470 3-Jul-2021 15:57

Firstly, talk to an accountant and get set up right the first time.

Yes, you need to be registered when purchasing.
There is no reason not to register now if you will definitely be moving to contracting so you can claim expenses as you set up and get ready for your first income.

GoodSync

GoodSync. Easily back up and sync your files with GoodSync. Simple and secure file backup and synchronisation software will ensure that your files are never lost (affiliate link).

PolicyGuy

1702 posts

Uber Geek

ID Verified

Lifetime subscriber

#2738480 3-Jul-2021 16:36

nutbugs: Firstly, talk to an accountant and get set up right the first time.

This

If you have never been self-employed before, getting professional advice from someone who has done it for lots of clients is a no-brainer.
It doesn't have to be a 'big name' accounting firm, most suburban / small town accountants will be fine for this.
Ask your mates / barber / cleaner / gardening contractor who they use

amanzi

Amanzi
1275 posts

Uber Geek

ID Verified

Trusted

Lifetime subscriber

#2738483 3-Jul-2021 16:41

nutbugs: Firstly, talk to an accountant and get set up right the first time.

This.

The most important thing you need to do when going contracting is to get an accountant. Also, the IRD call centre is really good - give them a call and they'll answer your questions.

mrhaboobi

165 posts

Master Geek

#2738484 3-Jul-2021 16:44

nutbugs: Firstly, talk to an accountant and get set up right the first time.

Yes, you need to be registered when purchasing.
There is no reason not to register now if you will definitely be moving to contracting so you can claim expenses as you set up and get ready for your first income.

Thanks

Happy to get an accountant, but unfortunately thats not possible this weekend, and IRD are not open to speak to ( and to be honest ive had a hell of time getting in contact with them ) so i was reaching out for peoples experience.

My only concern was that if i registered today, starting today, then my last few pays are my existing employer would be impacted and liable for GST? obviously i'm not charging them GST currently. If you believe there are no impacts to registering today, then thats an easy process.. and i'll do it tonight, so that i can purchase the items tomorrow.

Cheers

amanzi

Amanzi
1275 posts

Uber Geek

ID Verified

Trusted

Lifetime subscriber

#2738486 3-Jul-2021 16:52

Don't rush things just because you're worried about missing out on deals. Talk to an accountant first, make sure you understand the differences between sole traders and limited liability companies, and then get the accounts all set up correctly from the start. Also, I'm pretty sure the GST registration process will take days/weeks to get set up properly. Nothing at the IRD is instant. :-)

lxsw20

3504 posts

Uber Geek

Subscriber

#2738488 3-Jul-2021 16:58

I'm doing similar. An accountant has set me up with a basic Xero account, which makes the whole thing very easy.

mrhaboobi

165 posts

Master Geek

#2738490 3-Jul-2021 17:00

lxsw20:

I'm doing similar. An accountant has set me up with a basic Xero account, which makes the whole thing very easy.

Yes have reached out to an accountant to see if they can advise and get some help. I dont want a limited company.. just simple sole trader. maybe trading as at the best... no real benefit with a company.

can i ask a rough indication of your zero account costs?

Batman

Mad Scientist
29675 posts

Uber Geek

Trusted

Lifetime subscriber

#2738491 3-Jul-2021 17:01

you can both be an employee and a sole trader at the same time

your salary will not be charged GST

but since you don't understand this, what it says is you need to talk to an accountant regardless because it can get messy if you don't understand what to do.

in terms of purchasing you don't need to be GST registered to purchase but if you are not GST registered you won't be able to claim back the GST on your purchase, but if you register after you purchase you are likely able to claim back the GST but if you don't know what you are doing, every transaction you make generates mess for the accountant to sort out.

write down all your questions before seeing the accountant.

Stu1

1696 posts

Uber Geek

ID Verified

Subscriber

#2738492 3-Jul-2021 17:03

I registered for GST before I started contracting, your start date can be any date in the future just means the date from when your return cycle starts, I highly recommend HNRY great for contractors starting out what you get paid is after all your taxes are paid , they also do indemnity insurance which you will need on most cases . https://hnry.co.nz/

mrhaboobi

165 posts

Master Geek

#2738493 3-Jul-2021 17:06

Batman:

you can both be an employee and a sole trader at the same time

your salary will not be charged GST

but since you don't understand this, what it says is you need to talk to an accountant regardless because it can get messy if you don't understand what to do.

in terms of purchasing you don't need to be GST registered to purchase but if you are not GST registered you won't be able to claim back the GST on your purchase, but if you register after you purchase you are likely able to claim back the GST but if you don't know what you are doing, every transaction you make generates mess for the accountant to sort out.

write down all your questions before seeing the accountant.

Oh i totally dont know what im doing :) im just starting the journey and an accountant is something im already exploring. im just trying to take advantage of some very good sales i can pick up this weekend on a laptop and phone. if i can claim back gst after thats fine.. no biggie.. if i cant well then thats also not a huge deal. i also didnt want to jump into generating a GST account against my existing IRD number incase it had some ramifications for my last month of salary. the IRD site is somewhat unclear on that sort of information.

mrhaboobi

165 posts

Master Geek

#2738494 3-Jul-2021 17:08

Stu1: I registered for GST before I started contracting, your start date can be any date in the future just means the date from when your return cycle starts, I highly recommend HNRY great for contractors starting out what you get paid is after all your taxes are paid , they also do indemnity insurance which you will need on most cases .

Thank you i have also been looking at this site as cost aside it looks useful.

Did you register for GST whilst still full time employed? and did you set a future date or just the started the date you applied?

CHeers

Stu1

1696 posts

Uber Geek

ID Verified

Subscriber

#2738498 3-Jul-2021 17:26

mrhaboobi:
Stu1: I registered for GST before I started contracting, your start date can be any date in the future just means the date from when your return cycle starts, I highly recommend HNRY great for contractors starting out what you get paid is after all your taxes are paid , they also do indemnity insurance which you will need on most cases .

Thank you i have also been looking at this site as cost aside it looks useful.

Did you register for GST whilst still full time employed? and did you set a future date or just the started the date you applied?

CHeers

Sure did as takes a while for gst registration I put start date as date of application.I continued in full time employment even though I was registered for GST. The cost of HNRY is an expense which you can claim which they set up for you. I had no idea when I started Hnry are great and really good support team . They take care of all your taxes including acc . Basically you get paid from your agency to hnry they deduct and pay your taxes and then pay you what’s left which is yours . It’s really easy to get in debt if you don’t have an account or a tax agent like Hnry. Give them a try see how you go.

snnet

1410 posts

Uber Geek

#2738499 3-Jul-2021 17:31

As others have said you do need to be GST registered to claim the GST at the time - you can register now as a sole trader/contractor but you'll be filing nil returns until you start operating properly. If you decide to back out and cancel your registration you'll probably be expected to pay any GST credited to you back