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The Complete Tax Return Guide for Small Business 2024

Danie Kruger
Let’s talk about tax, baby. That little three letter word that so often has small business owners desperately trying to blend into patterned walls or retreat into hibernation until it’s all over. We get it, we do. Tax returns can be daunting and time-consuming, especially for those without a weirdly comprehensive understanding of exactly how it all works. Yeah, most of the population, we see you. There’s a lot to consider when it comes time to file your tax returns - there’s residual income tax, provisional tax, GST returns, confusing due dates, dealing with the Inland Revenue Department - and it’s all designed to add more stress to our daily cry of too much to do and too little time. Luckily, we know some quality folk that are all about tax, and all about helping you de-stress and improve your life. Hint, it’s us. And we really do want to help you minimise the amount of time you spend pulling your hair out over tax returns. That’s why we’ve created the Holy Grail of Tax Returns. The Tax Return bible, if you will. Whatever you want to call it, we’ve pulled together a complete guide to tax returns for small business tax nz - and if you’re still needing a little extra help, why not go ahead and schedule a call. Let’s start with the basics.

First up, what are the NZ tax due dates 2023-24?

This one’s easy, sort of. For most individuals, companies, sole traders, trusts, and other entities, the New Zealand financial year runs from the 1st of April to the 31st of March the following year. Yup, just to be difficult, the financial year doesn’t correlate with the regular year. Riddle me that.

Nevertheless, you’ve got a couple months after the end of the financial year before your income tax return needs to be filed with big brother - aka the Inland Revenue Department (IRD). The default due date for income tax returns to be filed for the previous tax year is the 7th of July - so for most individuals, that’s the date to remember.

But - and there’s always a but - if for whatever reason, IRD has granted you an extension of time, or if you are represented by a tax agent or accountant that has been granted a valid extension of time, your tax return will be due on the 31st of March the following year, so exactly one year after the previous financial year ends.

This means that for the year starting the 1st April 2023 - 31st March 2024:

  • Filing due date for individuals and entities without an extension of time → 07 July 2024
  • Filing due date for individuals and entities with a valid extension of time →31 March 2025

Now, just when your toes have been gently dipped in and you’re feeling like you’ve got an excellent handle on the due dates for income tax returns - enter provisional tax.

Provisional tax is another important aspect that comes into play if an individual, or any other entity, has to pay more than $5,000 in tax at the end of the year from their last return. But don’t sweat it, it’s not an extra income tax for individuals on top of the regular tax to pay. It’s just a method of paying income tax liability in advance to make sure you don’t get stung with a big old hearty tax debt when sending your income tax assessment.

Provisional tax effectively allows the tax liability to be spread over the relevant year of assessment, and is payable the following year (exactly 12 months) after your tax return. When it comes to calculating provisional tax, the standard provisional tax option is payable in three instalments that are due on the 28th of August, the 15th of January, and the 7th of May.

So, to recap on when you should be paying your provisional tax for the financial year starting 1st April 2023 to 31st March 2024, the standard provisional tax instalment timeline looks like this:

  • First instalment due → 28 August 2023
  • Second instalment due → 15 January 2024
  • Final instalment due → 7 May 2024

We know. For someone that still struggles to remember any birthdays aside from their own and the good Lord’s - it’s a lot. It may be time to invest in that firemen - uh, kitten calendar, after all.

So, how much money does a small business have to make before filing taxes?

Unfortunately for small businesses, there’s no getting out of this fun little yearly ritual. The Inland Revenue Department requires all businesses to file an annual income tax return, regardless of the amount of profit or revenue they have made throughout the previous financial year. A person’s a person, no matter how small. 

But - told you, there’s always a but - if, for any reason, your business hasn’t had any transactions or taxable activity during the previous tax period, a ‘nil return’ will be required. This means you declare to IRD that no business profit or loss has been recorded at all in that financial year. That’s right, you’ll still need to file an income tax return, even if it’s nil. 

Now, it’s slightly different in the event of a deficit or loss, which can often occur when small businesses or individuals are still finding their feet, and spend more money than they get in. If this does happen and you do experience a deficit or loss, you can claim that amount in your tax return, and carry it forward to the next tax year. It can then later be offset, or claimed against future profit, therefore reducing your tax bill. Hoorah for silver linings?

Will I get a tax refund if my business loses money?

That would be the dream, but sadly, no. All business losses will be carried forward to future tax periods, until it can be offset (or ‘claimed’) against future profits. However, there are certain scenarios where provisional tax may be refunded:

  • When you file your business’ income tax return and calculate the tax for the year, you deduct the provisional tax you paid earlier. If the provisional tax that was paid is more than the income tax amount due, the business may get a refund and may receive interest on the difference. Jackpot.

Paying tax in your first year in business:

Move along kids, nothing to see here. The process of calculating and paying income tax in your business’ first year of trading will be exactly the same as any other financial year. Boring, right? The only difference may be a shortened trading timeline, which (fingers crossed) could mean a smaller tax bill than usual.

How do I file small business taxes?

Now for the nitty gritty. All New Zealand businesses are required to file an annual Companies Income Tax Return (IR4) to declare their income, expenses, assets, liabilities, and equity to IRD.  A paper-based IR4 return may be submitted via the post, but IRD also offers an electronic alternative through their secure online services facility, myIR, which simplifies the filing process and helps save the planet at the same time. Mm, efficiency at it’s finest.

First up, when it comes time to file your IR4, it’s important to gather the necessary information, otherwise you’ll drag the process out even longer than it needs to be. Our goal? Much like the age old adage, the quicker you can rip off the band aid, the less it hurts.

You’ll need:

  • All the details on the company’s income, expenses, assets, liabilities, and equity.
  • Let that sink in, because that’s kind of a fair bit.

Then, once you’ve gathered all your information, you’re ready to file.

  • Go to the myIR login page and enter your credentials. (If you don’t have an account, now’s the time - you’ll need your IRD number, so have that ready. And if you don’t have one of those, you’d better apply for an IRD number quick-smart.)
  • Go to your return and follow the prompts
  • Select your income types
  • Enter the required information
  • Complete any additional forms that may apply
  • Complete the return
  • IRD’s IR4 guide provides further insight if needed.

*Side note: if you are a sole trader, you will be required to file an Individual Income Tax Return (IR3) rather than a Companies Income Tax Return (IR4). But don’t worry, the process is pretty similar to the above, so the same rules apply.

Now, we all know Kiwi’s are the king of the can-do attitude, ourselves included. However, when it comes to your tax return, it might be better to practice some of that Kiwi humility and ask for help. 

If you don’t have anyone in your company with a strong financial background, it’s recommended that you find an external accountant to complete your Companies Income Tax Return (IR4) - there’s a lot to navigate, and purely for easier management, a small business accountant might be the way to go.

What can a small business claim on tax?

Now for the exciting part. Because your business’ tax bill is calculated on the year’s net profit (income minus expenses), you can reduce your tax bill by claiming as many valid business expenses as possible. Key word, valid. The more expenses you claim, the less tax you have to pay. 

However, you’ll need to keep good records of receipts, invoices, and logbooks, and hold onto them for at least seven years. And yes, we realise that for some us seven years seems like a small eternity (commitment issues say what) but the Inland Revenue Department will need to see these records if your business is ever audited, so unfortunately it’s a necessary evil.

Luckily for your tax payments, business expenses can include:

  • Vehicle expenses, transport costs, and travel for business purposes
  • Rent paid on business premises
  • Depreciation on items like computers, office furniture, and other assets
  • Interest on borrowing money for the business
  • Some insurance premiums
  • Work-related journals and magazines
  • Membership of professional associations
  • Home office expenses
  • Work-related mobile phones and phone bills
  • Stationery
  • Work uniforms
  • Tax agent’s fees.

That means you can claim all these things, or at the very least a proportion of these things, against your income for a reduced tax bill at the end of the year. And a reduced tax bill means more money that can be reinvested into your business, or a little easier justification for your third take-out coffee of the day. But before you go reaching for your loyalty cards, there’s a few important things to remember.

What to do when claiming expenses:

  • Keep all expense receipts and invoices you receive.
  • Try to pay for anything that could be a claimable business expense through your business account, so you've got a paper (and electronic) trail.
  • Keep records of all your expenses — remember, you have to keep these records for seven whole years. Gag.
  • Entertainment expenses can either be 50% or 100% deductible, so check with the Inland Revenue Department which yours fall under.
  • You'll claim your expenses as part of your tax return by entering totals into the relevant boxes. You don't need to provide the receipts with your return, but you need them on hand if the Inland Revenue Department wants to see them.

 What not to do when claiming expenses:

  • DO NOT claim full expenses on things like travel costs where your trip mixes work and personal time. Only claim the business portion.
  • DO NOT try and claim any personal expenses through the business in an effort to reduce the tax bill. We understand the allure, but it’s a no from us too.

If you’ve made it this far, we applaud your effort and hope the confusing world of tax returns is a little easier for you to navigate. And if there’s anything you’re still confused about, or you’re wanting help with your tax returns, feel free to set up a chat with us.  We’re as happy to help as we are ending this on a shameless plug.

Danie Kruger

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