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# Sales percentage method

Check whether you meet the conditions to use the Sales percentage method.

Last updated 22 October 2019

If you use this method, you work out the GST-free percentage of your total sales. You then apply this percentage to your trading stock purchases for the tax period to estimate your GST-free purchases.

The Sales percentage method assumes that if you only resell goods that you purchase, the percentage of your GST-free sales will be similar to the percentage of your GST-free trading stock purchases.

You can use this method if you meet all of the following conditions:

• Nature of business – reseller, or converter whose conversions are 5% or less of total sales, for example, supermarkets and convenience stores. Not available to petrol stations.
• Point-of-sale equipment – adequate.
• Same premises – not applicable.
• Turnover threshold – GST turnover of \$2 million or less.

Example: Sales percentage method

Anita owns a small supermarket. She resells most of her goods and converts only about 2% of items into taxable sales (mostly cooked chickens). She decides to use the Sales percentage method to calculate her GST.

In a quarterly tax period, Anita works out the supermarket has a total of \$200,000 in sales. Her records from her point-of-sale equipment indicate the total amount of GST-free sales is \$60,000. She has a total of \$100,000 for trading stock purchases for the period.

• Step 1 – Total sales = \$200,000
• Step 2 – Total GST-free sales = \$60,000
• Step 3 – Percentage of GST-free sales
(\$60,000 ÷ \$200,000 × 100) = 30%
• Step 4 – Total GST-free trading stock purchases
(\$100,000 × 30%) = \$30,000

Anita has to do the above calculation every tax period using this method.

End of example