The Inland Revenue Department (IRD) is the established entity where you will submit the required tax payments and forms. The IRD can also clarify questions about the tax process relative to your business structure.
Planning for your income tax - During the tax year you need to know how much tax to pay, and when you have to pay it (see Balance Date below). By planning and saving for your taxes you will:
- have better control of your business cashflow
- avoid penalties for late payment
- save yourself unnecessary worry and stress.
It's a good idea to use a separate bank account to put aside money to cover your tax and provisional tax payments.
Balance date - A balance date is the end of an accounting year. When you apply for an IRD number (online via the IRD website), your balance date will be 31 March. For most businesses the accounting year begins on 1 April and ends the following 31 March. This is referred to as a standard balance date. If you want to use a balance date other than 31 March, you can apply to the IRD to change your balance date.
To change a balance date you need to submit an application to the IRD. A list of complete application materials can be found here.
Paying business taxes
If you are running a business, you will need to fill out a tax return each year and send it to the IRD by the due date. When completing your tax return you must include income from all sources, and work out the tax on your total taxable income. Learn about which income tax rate applies to your type of business, when income tax returns should be sent in and what income tax returns to use.
Tax rates. The rates for income tax vary depending on which type of business you are operating. Learn about your specific of business structure and the tax rates that apply.
Tax on interest and dividends. A business may receive interest with RWT (resident withholding tax) deducted, receive dividends with tax credits attached or pay interest from which tax needs to be deducted.
Provisional tax. During the tax year you may be liable to pay provisional tax, if your residual income tax (essentially the "tax to pay" on your last tax return) is $2,500 or more. This is paid as a series of instalments of income tax for this tax year. Learn how businesses can meet their income tax obligations during the tax year in relation to provisional tax payments and view an example.
Deduction for donations. If a company makes a donation to a donee organization it can claim a tax deduction for that donation.
Double tax agreements. You may be a tax resident in both New Zealand and another country or territory. If both countries or territories tax their residents on worldwide income, you could be taxed twice! Double tax agreements have been negotiated between New Zealand and many other countries or territories to decide which country or territory has the first or sole right to tax specific types of income.
Reporting tax return errors
If something is wrong with your tax returns, the IRD encourages you contact them quickly as to correct errors as soon as possible. This is called making a voluntary disclosure. Individuals and businesses can make a voluntary disclosure.
If the IRD finds errors in your tax returns, you could face significant penalties. It is best to tell them what is wrong with your tax returns before errors are found another way. The benefits of making a voluntary disclosure are greater if you make a disclose the details before being notified of a pending tax audit. You can make a voluntary disclosure:
- by completing a voluntary disclosure (IR281) form
- by contacting the IRD by phone, letter, fax or email
- by visiting an Inland Revenue office
- during an interview.
Follow the link for complete details for filing your business taxes in New Zealand.