Goods and Services Tax has been with us for almost 25 years now:
Goods and Services Tax (GST) is a value added tax introduced in New Zealand on October 1, 1986 at 10%, and later increased to 12.5% on July 1, 1989, and was increased to 15% on October 1, 2010.
Easy sums at 10%
When GST was first introduced at 10% the sums were easy: if an item was worth $100, for example, and you needed to add 10% GST, then all you had to do was divide 100 by 10 and add:
$10+100 = $110.
If you knew a price included GST then you’d divide by 11 and subtract:
110/11 = $10.
$110-10 = $100.
Easy sums at 12.5%
Even at 12.5% the sums were easy: divide by either 8 or 9.
If an item was worth $100 divide 100 by 8 and add:
100/8 = $12.50.
$12.50+100 = $112.50.
If you knew a price included GST then you’d divide by 9 and subtract:
112.50/9 = $12.50.
$112.50-12.50 = $100.
Impossible sums at 15%
The recent increase to 15% is a headache. You can roughly divide by 7 or 8, but neither is accurate and as the amounts involved increase, the error increases too.
If an item is worth $100 divide 100 by 7 and add:
100/7 = $14.28.
$14.28+100 = $114.28. In fact at 15% it should be $115.
If you know a price includes GST then divide by 8 and subtract:
115.00/8 = $14.37.
$115.00 -14.37 = $100.63. Where, of course, it should be $100.
Still, as a rough guide while shopping it does, sort of.
The simple and brilliant
One New Zealand accounting firm has taken the brilliant step of creating a handy app, just for GST — Kiwitax GST Calculator iPhone App:
The Kiwitax GST Calculator is a quick and easy tool for working out New Zealand GST amounts at both 12.5% and the new 15% rate. With 3 useful functions it adds GST to exclusive prices, removes GST from inclusive prices and converts prices at 12.5% GST to 15% GST. A helpful, useful app for small business owners and anyone wanting to calculate GST on the move, anywhere, anytime.
This is a simple app that does only a couple of things, but what handy things it does. If you’re a Kiwi with an iOS device just go download this one now. It’s free.