Invoicing as a contractor in NZ

What changed on 1 April 2023

New rules that took effect on 1 April 2023 replaced the requirement to use tax invoices with a more general requirement to provide and keep records known as taxable supply information. A debit or credit note became supply correction information, and a buyer-created tax invoice became buyer-created taxable supply information.

The rules were designed to be more flexible, so an invoice that met the old rules still meets the new ones, and you can keep calling your document a "tax invoice". Records such as invoices, bank statements, supplier agreements and contracts can now support the figures in your GST return on their own or together.

If a GST-registered client asks for taxable supply information for a sale over $200, you must give it to them within 28 days of the request, or by another date you both agree.

What an invoice must show

These are the minimum records Inland Revenue lists for a GST-registered seller, by the value of the sale.

The GST rate is 15%. If you are not registered for GST, you cannot charge it: Inland Revenue says you need to register before you can add GST to your prices, and adding it makes registration compulsory. Your invoice then shows no GST and no GST number.

Whatever the law requires, a client pays faster when the invoice also shows:

• who it is addressed to, with any purchase order or reference number they gave you;
• the period the work covers, and the hours and rate behind the amount;
• the due date, written as a date rather than "14 days";
• your bank account name and number, and what to put as the reference.

Numbering and corrections

Inland Revenue's list does not include an invoice number, but give every invoice one anyway. Number them in order, never reuse a number, and use it as the payment reference, so each deposit in your bank account matches exactly one invoice.

Do not edit an invoice once you have sent it. If the price changes after you have issued taxable supply information, or after you have filed the GST return it went into, Inland Revenue says you may need to issue supply correction information, the old credit or debit note. Issue it as a new document with its own number, referring to the original.

Payment terms

Your agreement with the client sets the payment terms, so settle them in writing before the work starts, not on the first invoice.

• When you invoice: weekly, monthly, or at each milestone.
• How long they have to pay, and the exact date that gives.
• Who invoices go to, and anything their accounts team needs on them, such as a purchase order number.
• Any late payment fee or interest. If you want one, put it in the agreement up front; adding it for the first time on a reminder invites a dispute.

Two tax points change what you receive. If your client deducts schedular tax, the payment arrives less that tax, which counts towards your income tax for the year. And if you account for GST on the invoice basis, you owe the GST on an invoice in the period you issue it, even if your client has not paid yet. On the payments basis, open to you if your sales are $2 million or less, you account for it when you are paid. Contractor tax in NZ: how much to set aside covers both.

Chasing a late payment

1. Check the basics first. Did the invoice reach the right person, with the purchase order number they need?
2. Send a polite reminder the day after the due date, with the invoice attached and the amount and number in the subject line.
3. Follow up a week later, and ask when it will be paid, not whether.
4. Pick up the phone. A short call can get you a firm payment date where emails have not.
5. Put a final request in writing, with a date, and keep a log of every reminder and reply.

If the client disputes the amount and it stays unresolved, the Disputes Tribunal deals with small claims up to $60,000, including disputes about contracts, business agreements and disputed debts. It is quicker, cheaper and less formal than court, and its decisions are binding. It cannot help with a debt the client agrees they owe but simply does not pay: in its own words, it is not a debt collection agency. Civil disputes between $60,001 and $350,000 usually go to the District Court. The Tribunal points people to community law centres and Citizens Advice for help.

Records to keep

Inland Revenue asks you to keep all your business records, including electronic ones, for at least seven tax years, and to keep records of all cash and electronic sales and purchases for seven years. They must be in English or Māori unless it approves another language, and if you store them offshore, including in the cloud, either you or your provider needs its approval.

• every invoice and every correction, in number order;
• your contracts, rate agreements and any purchase orders;
• the timesheets or other records of the work behind each invoice;
• bank statements that show each payment arriving;
• receipts and taxable supply information for what you buy for the business;
• your log of reminders for any invoice that was paid late.