Verified for 2026 Tax Year

GST on Deposits & Progress Payments

When do you owe GST on a deposit? Learn the "Time of Supply" rules for retainers, installments, and non-refundable fees.

In New Zealand, GST is generally triggered by the earlier of two events: the issuance of an invoice or the receipt of any payment. This has big implications for deposits.

The Trigger

Even if you haven't started the work, if you receive a $1,000 deposit, you owe the IRD $130.43 (the GST portion) in the period you received that cash.

Different Types of Payments

Refundable Deposits

True security deposits (like a bond) that might be returned are often not taxable until they are applied to the final bill.

Non-Refundable Fees

Retainers or booking fees are taxable as soon as they are paid or invoiced.

Progress Payments & Milestones

For long-term projects (like construction or software dev), you account for GST on each milestone payment as it occurs. You do not wait until the total project is finished.

🕒 Time of Supply: Usually when any payment is made or an invoice is issued.
🧾 Tax Invoices: You must provide a tax invoice within 28 days of receiving a progress payment if requested.

Construction Retentions

Special rules apply to construction retentions. GST is usually not triggered on the retained amount until it is actually paid out or a separate invoice for it is issued.

Deposit Timing Rules

The "Time of Supply" Trigger

In NZ, GST is triggered by the EARLIER of two events: Issuing an invoice, or receiving payment.

Invoice Basis Trap

If you issue an invoice for the FULL amount but only receive a deposit, you owe the IRD GST on the FULL amount.

Payments Basis Solution

If you are on the Payments Basis, you only declare GST on the exact deposit amount received.

Frequently Asked Questions

Do I pay GST on a deposit I haven't spent yet?

Yes. If you are GST-registered, you must account for GST on any business income in the period it's received, regardless of when the expense or work happens.

What if a customer pays me in installments?

You account for the GST portion of each installment in the GST return period that the payment was received (if on Payments Basis) or when the invoice was issued (if on Invoice Basis).

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