GST and VAT: net, gross and recoverable tax

This guide explains a practical choice of inputs, a worked example and the assumptions behind the linked tools.

Separate net and gross amounts

For a net price N at rate r, tax is N × r and gross is N × (1+r). If you start with gross G, included tax is G × r/(1+r). Subtracting r percent of the gross amount gives the wrong tax-inclusive split.

Use the New Zealand inclusive fraction

For standard 15% GST-inclusive figures, the tax fraction is 15/115, or 3/23. NZ$11,500 of taxable sales includes NZ$1,500 output GST. NZ$5,750 of fully claimable purchases includes NZ$750 input GST. Their simple balance is NZ$750 payable before adjustments.

Do not confuse a zero balance with no reporting

A fully recoverable reverse charge may create equal output and input VAT entries. A zero net cost does not establish that reporting is unnecessary. Classification, place of supply, registration, recoverability and local return requirements need current official guidance. Mixed-use and exempt transactions are outside the simple New Zealand settlement tool.

Worked example

Scroll the table horizontally on small screens to see every column.

GST and VAT: net, gross and recoverable tax — worked example
Item	GST-inclusive amount	Tax component
Taxable sales	NZ$11,500	NZ$1,500
Fully claimable purchases	NZ$5,750	NZ$750
Net balance	—	NZ$750

The example assumes standard-rated sales and fully eligible purchases, with no other GST adjustments.

Sources and checks

Examples are illustrative and can be checked with the linked tools. Read each tool’s assumptions before applying its result. How we verify methods.

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