New Zealand offers three ways to account for GST — pay when you receive/make payment, when you invoice, or a mix. The basis changes your cash flow, not your total GST liability.
Last updated: June 2026
Under the invoice basis, you account for GST in the period you issue an invoice, regardless of whether your customer has paid you yet. Under the payments basis, you account for GST only once payment is actually made or received — for both sales and purchases. The hybrid basis accounts for output tax (sales) on the invoice basis but input tax (purchases) on the payments basis.
You’re generally eligible for the payments basis if your taxable turnover is under NZ$2,000,000, or in certain other specific circumstances recognised by IRD. Most small businesses and freelancers comfortably qualify under the turnover test.
The payments basis suits businesses with a gap between invoicing and payment — avoiding the situation where you owe GST to IRD on an invoice a client hasn’t settled yet. It also offers natural protection against bad debts, since you never owe GST on money you never actually collect.
No, it only changes the timing of when GST becomes due — not the total amount owed over the life of a transaction.
Yes, subject to notifying IRD and meeting eligibility requirements at the time of the switch.
No, you generally need to elect this basis when registering or apply to change later — it isn’t applied automatically just because you qualify.
You’d generally need to move to the invoice basis, since the payments basis eligibility is tied to this turnover threshold.
Payments basis is common among freelancers specifically because it avoids paying GST on invoices that haven’t been paid yet, a genuine cash-flow benefit.
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