Need to know
Frequently Asked Questions
If there is something else you would like to know that we haven't listed here, please call or send us an email.
These are year-end accounts that are submitted to the relevant authorities, such as the Inland Revenue and the Companies Office. Company accounts can be complex and require a variety of disclosures to be made in addition to the profit and loss account and the balance sheet. It is therefore important to appoint an advisor who will prepare these accounts for you and give you the appropriate guidance and information.
It is a separate legal entity, a company whose shareholders have limited their liability to the value of the shares they hold. This means the shareholders are only liable for money owing on their shares or for any personal guarantees given to lenders or creditors. A company can be owned by just 1 person or many.
This is when two or more people agree to carry on a business together intending to share profits. You share the business profits and losses. A Partnership is easy to setup but I would advise having an agreement setup between the partners. The Partners will be liable for any financial or legal strife they get into. One Partner may also get into difficulty caused by the other partners.
There is also another type of Partnership called a Limited Partnership. A Limited Partnership is a corporate structure with separate legal personality like a company. There will be general partners, who are liable for the debts of the partnership, and limited partners who are only liable for the amount of their capital contribution to the partnership. The advantage of this structure is that it can be easier to attract investors and unlike a company, profits and losses pass through the business to the partners.
This is the simplest type of business. There are no shareholders, just the owner’s money and borrowings. A sole trader may also be known as a sole proprietor. You may work for yourself or work as a contractor for someone else. You can still hire staff as a Sole Trader. The income from the business is declared on your personal tax return. There is less admin but the owner is personally responsible for any debt or legal trouble.
With us you get bookkeeping with a management accountant’s eye – so you get advice, insights and training that you wouldn’t normally get from a bookkeeper. You also get the peace of mind that comes from knowing you are dealing with a company that has professional indemnity insurance and will be able to appreciate the bigger picture of your business.
This depends on your location and requirement but we have successfully used email, post, or arranged to meet customers at a mutually convenient time and place.
Personal Tax Rates
|Income Level||Tax Rate %|
|0 to 14,000||10.50%|
|14,001 to 48,000||17.50%|
|48,001 to 70,000||30.00%|
|70,001 and Upwards||33.00%|
Company Flat Tax Rate: 28%
Trustee Flat Tax Rate: 33%
A common misconception is that your first year in business is tax-free. Although you may not be making tax payments during your first year, the year is still taxed.
You'll have to pay this tax by 7th February the following year or 7th April if you have a tax agent with an extension of time.
If the residual income tax (RIT) your business has to pay after its first year of operating totals more than $2,500, you might have to pay your next year's tax in instalments during the following year. These payments are known as provisional payments.
Provisional tax requires business owners to think ahead and budget effectively for payments.
Provisional tax is often confused as being separate to income tax, but it is in fact the same thing – just paid through the financial year in instalments, instead of in one final payment.
When you pay provisional tax, you pay instalments to the IRD based on the method of calculation you have chosen. If you don’t make a choice, Inland Revenue will allocate you the standard method.
After you file your tax return at the end of the financial year, Inland Revenue compares your Residual Income Tax (RIT) with the provisional tax payments you have made during the year to determine if there is any remaining RIT to pay. If you have over-paid, you will receive a refund and if you have underpaid, there will be further tax to pay.
Your residual income tax is the amount of tax to pay after deducting any PAYE, imputation credits, withholding tax and resident withholding tax credits.
This progress payment is paid three times a year for most taxpayers. The due dates are 28th August, 15th January and 7th May. For clients who pay their GST on a six monthly basis they pay two instalments of provisional tax on the 28th Oct and 7th May. If it is not paid, or if it is short paid then you can be faced with extra penalties and interest.
If you short pay your provisional tax it can, in some cases, have very severe interest consequences. If your final tax bill is much greater than what you have paid as provisional tax then there are times when you will have to pay interest backdated to start from when the first instalment of provisional tax was due. This can happen even when the first instalment was correctly calculated and paid in the first place. It can even occur when unexpectedly large profits arise towards the end of the tax year.
Short payments may also incur penalties if insufficient care was taken when estimating. But you are not penalised with not having taken reasonable care if you have over-paid your provisional tax.
Provisional tax is simply paying your current years taxes on a pay as you go basis, in instalments. At the end of the year when you prepare your tax return you will get a credit for the provisional tax paid. You can estimate your tax if your circumstances have changed from the previous year but beware – there are penalties for getting it wrong. So, if you have any concerns about meeting your tax payments you need to see your accountant who has the facility to make payment arrangements with the tax department and to negotiate penalties.
GST stands for Goods and Services Tax. It’s a tax built into the price of virtually all products and services that you buy or sell. The current GST rate is 15%
As a GST-registered business, you collect GST on behalf of the Government by building it into the prices of your products and services, and then you claim GST back on the products or services you have bought as business expenses. If you are not GST-registered, you can’t do this.
So the basic principle of GST is you end up paying Inland Revenue the difference between the GST you collected on what you sold and the GST you paid on the supplies you bought for your business by filing regular GST returns with Inland Revenue throughout the year. Your GST returns will show that you either have GST to pay or you will be receiving a GST refund.
Once your business starts to turn over more than $60,000 a year, you’re required to become a GST-registered business. However, for some businesses it’s worth voluntarily registering from day one. For example:
- If your expenses are greater than your income in the early phase of your business, then registering for GST may mean you can claim GST refunds.
- If you are an exporter, you will be able to claim GST on your expenses but your exports will be zero-rated, so you will be in a GST refund position.
If you charge GST you must register regardless of your turnover.
We suggest you get advice on whether to register for GST or not. Please call us or send us an email and we can provide you will the best advice for your situation.
As a business owner you will pay an ACC Work Levy each year which will provide cover for you and your employees. You will also deduct an ACC Earners' Levy from your employees' wages.
If you are self-employed or contracting, you will also pay ACC every year. This will cover you for work and non-work-related injuries.
Employer invoicing by ACC usually takes place from June each year. It is based on employee earnings for the year ended 31 March. The IRD provide ACC with relevant earnings data so they can calculate the levies due. If you Self-employed or receive a Shareholder Salary then the IRD provide ACC with your income details once your tax return has been filed.