Quick Summary
To find the 15% GST amount within a GST-inclusive price in New Zealand, the most accurate method is to multiply the inclusive price by 3 and then divide by 23. This will always provide the correct GST component. For example, $115 * 3 / 23 = $15 GST.
Details
Calculating the GST Component from an Inclusive Price
If you have a price that already includes 15% GST and you need to determine the GST amount or the GST-exclusive price, there's a precise method recommended by the IRD.
- The Fraction Method (Most Accurate):
- Multiply by 3: Take the GST-inclusive price and multiply it by 3.
- Divide by 23: Take that result and divide it by 23.
- Formula:
GST Amount = GST-Inclusive Price × (3 ÷ 23)
Example:
-
Product price (inclusive of GST): $115
-
GST amount ($115 × 3 ÷ 23): $15
-
GST-exclusive amount: $115 - $15 = $100
-
Alternative Decimal Method (Less Accurate without enough decimal places):
- You can also calculate the GST component by dividing the GST-inclusive price by 7.66666666. However, it's crucial to use at least 8 decimal places to ensure accuracy, as fewer can lead to incorrect answers. The fraction method (3/23) is preferred for its inherent precision.
Source: GST guide (IR375)