Preparing GST returns and reconciliations is part of business life in New Zealand. While it may seem straightforward, GST rules are often misunderstood and often lead to common GST errors. Even small errors can lead to penalties, unexpected adjustments, or unnecessary stress.
At Rodgers & Co, we regularly review GST returns for clients and have seen a consistent pattern of mistakes. The good news? Most of these are preventable with the right processes and advice.
Why Common GST Errors Happen
Many errors occur because GST rules are more complex than people realise. Businesses often:
- Misinterpret what expenses can and can’t be claimed,
- Fail to separate private and business costs, or
- Rely on accounting software settings that aren’t always applied correctly.
A little attention to detail can save a lot of time and money.
The Most Common GST Errors
A. Incorrect Claims
- Overseas transactions – GST is often claimed where it doesn’t apply.
- Everyday expenses – Interest, wages, fines, health insurance, and gift cards or vouchers are commonly claimed in error.
- Private costs – GST is sometimes claimed on the full amount of a Visa statement without separating private spending.
- Motor expenses – Some businesses claim GST on mileage allowances, when these are not claimable.
B. Assets and Finance
- Double-claiming – We often see GST claimed twice on financed asset purchases (once on the purchase and again on loan repayments).
- Hire purchase/finance payments – Clients sometimes code monthly payments with GST, creating year-end adjustments not in their favour.
- Rental properties – Claiming GST on residential rental expenses where there’s also commercial rental income is a frequent issue.
C. Software & Process Issues
- Date range mismatches – Non-Xero clients occasionally enter or edit transactions outside of the GST return period.
- Cash vs invoice basis – Forgetting to untick cash basis or misunderstanding invoice-basis settings in Xero can cause errors.
- Journal adjustments – Clients don’t always realise that invoice-basis GST records all GST journal adjustments automatically.
- Prior year variances – Some businesses return only the GST portion of a variance, instead of correcting the full transaction.
- Incorrect coding during reconciliation – Always review each transaction when reconciling, as accounting systems don’t always prompt the correct code. If left unchecked, this can result in GST being claimed incorrectly.
- Double-counting payments – When one payment covers multiple invoices or bills, make sure the payment is correctly matched. Coding the payment directly to an account and then manually marking invoices as paid can cause a double-up of GST being claimed.
D. Entertainment & Travel
- Entertainment – GST is incorrectly claimed on the full expense, rather than the 50% allowable portion.
- Overseas travel – GST is sometimes claimed on international expenses where no GST applies.
Consequences of GST Errors
Getting GST wrong doesn’t just create extra work — it can also:
- Lead to unexpected adjustments at year-end (often not in your favour),
- Trigger IRD audits, and
- Waste time fixing mistakes that could have been avoided.
How to Avoid These Mistakes
A few simple practices can make GST compliance far smoother:
- Review all expenses before claiming GST — especially unusual or one-off items.
- Use Xero correctly, and check settings for cash vs invoice basis.
- Separate private and business costs on Visa or other shared accounts.
- Understand which expenses (like wages, fines, and insurance) are GST-exempt.
Seek advice if you’re unsure.
At Rodgers & Co, we can review your GST returns, provide training, and help set up processes that reduce the risk of errors.
Final Thoughts
GST doesn’t need to be stressful. By understanding the common pitfalls and tightening your processes, you’ll save time, reduce your risk, and have greater confidence in your returns.
Need help with your GST? Get in touch with Rodgers & Co and let our team support you.
