Business Accounting And Tax New Zealand

Business Accounting And Tax New Zealand
Especially if you are a new arrival in New Zealand and have purchased an existing business or franchise, you will need professional help with accounting, tax and sales tax (GST) matters, at least until you have familiarised yourself with your new country's laws relating to business taxation, social security payments for employees and other financial headaches.

As with all countries business income tax is paid on the business's gross profits set against the legitimate business expenses incurred during the financial year, known as net profits. Unlike a number of other first world countries, provisional tax as a series of instalments is paid during the year, with the amount adjusted at year end.

The tax rate by which businesses are charged depends on the business type – sole trader, partnership, company, etc and also on the income year. First-year start-ups cannot operate tax free, but can opt to make voluntary payments, thus spreading the final cost over the year. Single traders and partnerships may be able to claim early payment discounts at year end if they choose this route. In subsequent years, provisional tax is usually paid three times a year.

Sole traders are taxed at individual tax rates as per their tax code, with percentages varying between 10 and 35 per cent dependent on the amount of annual taxable income. Partnerships are normally established between two people sharing the pre-tax profits (or losses) equally, unless a formal, legally registered partnership agreement includes other arrangements such as one partner receiving a wage. Partners are each taxed on their own share of net profits.

Company tax is calculated on a different system for organisations legally registered under the Companies Act. Generally, the corporate tax rate runs at 28 per cent. If a company is loss-making for a period during which its expenses exceed its income, tax may not be due in that year and the loss can be rolled over to reduce income in the following tax year, resulting in less tax being paid.

Annual accounts, usually provided by a qualified accountant, must be submitted to the Inland Revenue by the due date, normally 31 March, although by agreement with the IR, an end-September date may be used. The IR employs various measures allowing tax relief for businesses affected by extreme weather conditions or natural disasters such as earthquakes or droughts.