Getting your GST returns up to date before you borrow

If there’s one thing we’d ask every business owner to do before applying for finance, it’s this: get your GST returns up to date. It sounds dull, and when you’re busy it’s the first job to slide. But overdue GST is one of the most common reasons an application stalls, and it’s usually one of the quickest problems to fix.

Why lenders care so much about GST

For many lenders, your GST returns are the most reliable independent record of what your business turns over. Bank statements show money moving; GST returns show sales and purchases you’ve declared to IRD. When the two line up, a lender can be confident about your income.

Overdue returns create two problems:

1. No reliable turnover figure. The lender can’t confirm what you’re telling it.
2. An unknown IRD debt. Until returns are filed, nobody knows how much GST is owed, including you. Lenders don’t like lending into an unknown liability that ranks ahead of them in practice.

Step 1: Find out where you stand

Log in to myIR and check which GST periods are filed, which are overdue and what’s currently owed. Print or download a statement of account. If you have an accountant or bookkeeper, ask them for the same summary. Knowing exactly how many periods are missing turns a vague worry into a list.

Step 2: Gather records for each missing period

For each overdue period you’ll need:

• total sales, including GST, with invoices or sales reports;
• purchases and expenses where GST was charged, with tax invoices;
• any adjustments, such as private use of business assets;
• bank statements to check nothing was missed.

If you use accounting software and it’s been kept reasonably current, much of this is already there. If not, start with the bank statements and work outwards.

Step 3: File, oldest first

File the oldest overdue return first and work forward. This keeps the timeline clean and makes it easier to reconcile. If you’re unsure about any figure, it’s better to file a careful estimate and correct it later than to leave the return outstanding, but ask your accountant about how to handle adjustments properly.

Step 4: Deal with what’s owed

Once the returns are filed, you’ll know how much GST is owed. Options include:

• Paying it in full, if cash allows.
• An instalment arrangement with IRD, set up through myIR or by phone.
• Including it in a loan, if you’re borrowing anyway and the lender agrees. See IRD tax debt loans.

Penalties and interest may apply to late returns and payments. IRD may be willing to discuss them, especially if you’ve filed and engaged early.

Step 5: Keep it current from now on

The real win is never getting behind again. A few habits make a big difference:

• A separate GST account. Transfer a fixed share of every deposit on the day it arrives.
• Calendar reminders a week before each due date.
• Regular bookkeeping, even fifteen minutes a week.
• The right filing frequency. If two-monthly bills keep catching you out, monthly filing can make each one smaller.
• Payroll software that handles PAYE automatically, so tax obligations don’t compete for attention.

How long catching up takes

For one or two missing periods with decent records, an evening’s work can be enough. For a year or more of missed returns with patchy records, allow a few weeks and get professional help. Either way, the time spent is usually far less than the delay caused by applying with returns outstanding.

An illustrative example

An Auckland food truck owner hasn’t filed GST for three two-monthly periods after a busy summer. She wants equipment finance for a second truck. She downloads her bank statements and point-of-sale reports, spends two evenings with her bookkeeper reconciling sales and supplier invoices, and files all three returns. She owes about $11,000 in GST and sets up an instalment arrangement with IRD over six months. With returns current and a clear arrangement in place, an equipment finance lender approves the second truck. Illustrative only.

What lenders will see after you catch up

A run of recently filed returns with an instalment arrangement isn’t a red flag. Lenders see it as a business that hit a busy patch and sorted it out. What helps most is a short explanation: why the returns slipped, what you’ve done to catch up and what’s changed so it won’t happen again.

When catching up reveals a bigger problem

Sometimes filing overdue returns shows that the business owes more than expected or isn’t as profitable as it seemed. That’s uncomfortable, but it’s better to know. It gives you the chance to talk to your accountant about pricing, costs or a restructure before taking on new debt, and to talk to IRD about realistic payment terms.

GST, bank statements and low doc lending

If your annual accounts are behind but GST is current, you’re in a much better position. Many bank statement and low doc lenders rely on GST returns as the main proof of turnover, so having them current can open lending even when financial statements aren’t ready.

Common GST catch-up mistakes

A handful of errors come up again and again when owners rush to file overdue returns. Claiming GST on purchases without a valid tax invoice is one; IRD can ask to see the invoices later. Forgetting to account for GST on the sale of a business asset, such as an old vehicle, is another. Mixing up the period in which a sale is recorded, especially if you use the payments basis rather than the invoice basis, can shift GST between returns and create confusing results. Finally, many owners forget to include private use adjustments for vehicles or home offices. None of these is a disaster, but each one can mean amending returns later, which delays the clean picture a lender wants.

Working with your accountant

If your accountant has been waiting on records from you, the fastest way to catch up is to give them everything at once: bank statement exports, sales reports and a folder of supplier invoices. Ask for a firm date by which the returns will be filed, and ask whether they can also prepare a simple summary of turnover for the last twelve months, which many lenders find useful. If you don’t have an accountant, a bookkeeper who specialises in GST catch-ups can often sort several periods quickly at a fixed price.

Ready when your returns are

Tell us where your GST is at, what’s owed and what you need. Asking won’t mark your file, your enquiry isn’t passed down a list of lenders, and a real person reads it and calls you back. If you’re partway through catching up, tell us that too; we can talk about timing. Start your enquiry.