How to Correctly Calculate GST Figures

01 February 2018

 

Calculate GST correctly

It seems quite a few people are struggling to calculate GST correctly, they are incorrectly subtracting 15% from a GST inclusive amount to find the GST content and exclusive figures. So, we’ve posted a super clear tutorial on how to work out GST figures & as always please ask if you have any questions!

First some basic calculations

Let’s calculate 15% GST for a GST exclusive figure of $100…
$100 x 15% = $15 GST

To get the total GST inclusive figure simply add the GST to the GST exclusive amount…
$100 + $15 GST = $115 GST Inclusive.

Here’s Inland Revenue’s recommended formula to find the GST amount from a GST inclusive price…
GST Inclusive Price X 3 ÷ 23 = GST Amount

Now let’s work backwards

To find correctly calculate GST and GST exclusive amount from the total GST inclusive figure, we’ll use Inland Revenue’s recommended formula of multiplying the inclusive amount by 3 then dividing by 23. Doing this we get…
$115 X 3 ÷ 23 = $15 GST

We now know the GST amount from the GST inclusive figure. Don’t worry about how the multiply by 3 then divide by 23 works, it just does! To work out the GST exclusive amount simply subtract the GST from the GST inclusive amount to get the original GST exclusive figure so…
$115 – $15 GST = $100

We’re now back to the start with a GST exclusive figure. As you can see the $15 GST amount stays the same when adding GST on and finding the GST amount from the inclusive figure – when using the correct formula.

Here’s why subtracting 15% from the GST inclusive figure is incorrect

Let’s calculate and subtract 15% from our $115 GST inclusive figure from above…
15% of $115 = $17.25 (not $15)

$115 – 15% = $97.75 (not $100)

What’s happened is we’ve calculated 15% of the GST inclusive, not 15% of the GST exclusive! The result is quite different and incorrect. From the correct method above we know the exclusive figure is $100 and the GST should be $15

15% of $100 = $15 GST

$115 – $15 GST = $100

We hope this shows exactly why subtracting 15% off the GST inclusive amount is the wrong way to work out the GST content. If you’re still unsure or would like help with your GST returns please ask us!

To make working out GST super easy use the Kiwitax GST Calculator!

 

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