A tax expert warns that Labour's proposal to increase the threshold for GST registration could come with its own problems.

On Thursday, Labour leader Chris Hipkins said it would introduce changes designed to help small businesses, if it were in government after the coming election.

Big businesses would have to pay small suppliers within 15 days on invoices of $25,000 or less, and publish how quickly they paid suppliers.

The asset write-off limit would be lifted from $1000 to $10,000 for businesses with turnover of less than $10 million, so small businesses could deduct the cost of equipment from their tax bill.

It would also raise the GST registration threshold from $60,000 to $80,000, which would mean about 35,000 operators would not have to register for GST, when they would have had to at the current level.

At the moment, GST registration is optional for those who have turnover of less than $60,000 a year, but once the limit is reached, a business or sole trader has to add GST into its prices and pass that tax on to Inland Revenue.

Businesses registered for GST can also claim back the GST they pay on their supplies.

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The $60,000 threshold has not changed since 2009.

In 2024, accounting platform Hnry said 36 percent of respondents to its survey limited what they earned, so they could remain below the GST boundary.

Wellington personal trainer Carl Rein told Hnry he could not absorb GST or pass it on to clients.

"Increasing my rates by that much would impact my earnings, because people have less to spend on wellness, particularly in Wellington. Once you hit $60,000, you have to earn a lot more quickly to avoid a pay cut, unless you think your clients can afford a 15 percent increase.

"At the moment, it's just not worth it, so I have to manage my workload to stay under, which causes uncertainty towards the end of the year."

Deloitte GST expert Alan Bullot said an increase to the threshold would benefit businesses that were generating money through their own labour, rather than buying and selling things, but there were other perspectives too.

"Inland Revenue has always raised the counter argument that the only reason we really had a threshold when GST first came in was because of the cost of compliance that you had.

"Way back in the days of 1985, no small business would have even had a computer, let alone cloud-based software... so there's certainly a number within Inland Revenue who say, rather than increasing the threshold, we should actually look to decrease it."

He said New Zealand was middle-of-the-pack by international standards at $60,000. If the threshold had kept pace with wage inflation, it would be more like $130,000.

An increase would mean less GST was collected, he said, which Labour was planning to compensate for by reducing funding for the Investment Boost policy.

"There will certainly be a number of small businesses that I think would like this," Bullot said.

"There will be a number of small businesses that may just be on the other end of this, which will go, 'Well, I make $81,000 a year, I'm feeling really hard done by'. It won't solve the problem, it will just move the problem."

He said many people made less than $60,000, but were captured for GST purposes by the platform rules that apply to ride-sharing and food-delivery services.

"Even if they only make $10,000 a year, they're in effect within the GST net, because of the platform economy rules. You do end up with a bit of inconsistency that someone's going to say, 'Well, I've got the skills to be a personal trainer and I can make up to $79,000, if the change goes ahead without any GST, but instead, I'm a food-delivery driver and, from $1, I'm wearing GST'."

He said Inland Revenue was also concerned about cherry-picking. People could choose to register below the threshold, which could create a situation where those making less would choose to register when it benefited them, such as when they could claim large amounts of GST back.

"You're then working in a situation where, if it's not in your benefit to register, you don't. Inland Revenue looks at that and says, 'Hey, we're kind of missing out here, because we've got these people that are getting refunds with turnover being less than $80,000, and this other person that's got $79,000 is choosing not to register'."