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business tax
Tax is
an important part of being in business. Getting the right
information and advice and setting up the right systems from the
start will help your business meet its obligations.
Basic Business Tax Rules
Businesses in New Zealand must follow certain tax laws. We also
discuss some of these in our Government section and recommend you
read the outline of the taxation system provided in the
Government section before proceeding with this section.
 There are a number of taxes that businesses will or may be
involved with. For all of these taxes your business will need to
:
- Have an Inland Revenue (IRD)
number
- Complete and send various tax
return forms to Inland Revenue each year
- Make a number of tax payments
each year
- Keep sufficient records, in
English, so you can complete the various tax returns and
calculate any taxes to pay or to be refunded to you.
You may also need to:
- Charge Goods and Services Tax
(GST) to your business’s customers
- Deduct tax at source from
anyone your business employs in New Zealand
Your IRD Number
If you already have an IRD number for non-business income and you
are a sole trader, you use the same number for your business. You
would also use this number if, as a sole trader, you need to
register either for GST or as an employer.
If you are going to operate your business as a company,
partnership or trust, you will need to get a separate IRD number.
Income Tax
 You will need to complete an income tax return each tax year. The
tax year for most businesses is 1 April to 31 March. As a New
Zealand resident you will be taxed on your worldwide income. When
you complete a tax return, you must include eyour income from all
sources (including that from overseas).
If you are operating your business as a company, partnership or
trust, you will need to file a separate tax return for your
business.
Income tax is payable on the net profit from your business, which
is the income earned less any business expenses.
Some expenses that can be deducted from the income are:
- Rent, rates, power and phone
costs for the business premises
- Purchases of raw materials or
trading stock
- Business vehicle and
transport costs
- Wages paid to employees
- Stationery and supplies for
the business
However, certain types of
deductions are not permitted. These include deductions from your
business income for personal expenses and/or money drawn as
personal remuneration.
Paying Income Tax
 Income tax rates can vary from time to time. There are rebates
available to sole traders and partners in a partnership that
reduce the tax rates if their income is under NZ$38,000.
A business usually needs to pay income tax through the year in
three installments (known as Provisional Tax). When you send in
your tax return, you pay or receive the difference between what
you have already paid in provisional tax and the actual tax
payable for the year.
Goods and Services Tax (GST)
GST is New Zealand’s form of indirect value-added tax. It is
a tax on the goods and services provided by a GST-registered
person in their business. It is charged at a rate of 12.5% to the
person (including other businesses) who buys the goods or
services. It is not a tax on the business.
Anyone with a business turnover of NZ$60,000 or more (excluding
GST) must register for and charge GST. Registration in optional
if the annual turnover is less than NZ$60,000. When registered,
the business completes regular GST returns (every one, two or six
months) and pays or receives the difference between the GST
charged and GST paid on business expenses. If a business is not
registered for GST, it cannot charge or claim back GST.
Some goods and services, such as rent from domestic accommodation
and income from financial services, are exempt from GST.
Employing People
 Your business is an employer if it:
- Hires someone to work as part
of your business
- Controls the way in which the
person works
- Supplies any equipment for
that person to use when working for you
Your business will need to
register with Inland Revenue as an employer and make
pay-as-you-earn (PAYE) and other deductions (such as student loan
repayments) from its employee’s wages each pay day.
Each month your business lets Inland Revenue know who its
employees are, how much they earned and what was deducted from
their wages, and pays those deductions to Inland Revenue. Your
business will also need to keep wages records, such as a wage
book.
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