Finance, tax and your business

You can’t run away from finance if you’re in business. Understanding your finances means you can manage and grow your business. You’ll be able to:

• make smart decisions. To know whether something is worth investing in or changing, you need to know what it costs.
• understand how your business is doing. Business may have been better in July than in June, but how did it compare to July last year?
• check you can pay bills on time. Will your customer be paying you before you pay your supplier?

Don’t forget you need to do two things:

• pay tax
• keep records of your finances.

Use our Compliance Matters tool to check out the rules you’ll need to follow for all kinds of things to do with your business, including paying tax.

Compliance Matters tool — business.govt.nz

Find out what records to keep — business.govt.nz

Learn a couple of things about tax

You already know that you can’t avoid tax when you’re in business. What kind of tax and how much you’ll have to pay depends on things like:

• your company structure (for example, whether you’re a sole trader or a company)
• how much you earn
• whether you have employees
• whether you export.

Income tax, and goods and services tax (GST), often apply.

Income tax applies to all income

Everyone who has an income pays tax. It’s what it says on the tin: tax on money you make. Whether that money is from business, wages, investments, or something else doesn’t matter. What’s different for your business is how you tell Inland Revenue about your income, and how much you pay.

If income tax needs to be paid in advance, it’s called provisional tax.

GST applies to most products and services

You must charge 15% GST on your goods and services:

• if you’re voluntarily registered for GST, or
• if you earned more than $60,000 in 12 months, or you expect it will be at least $60,000 in the next 12 months.

When you charge GST, you’re collecting tax. Make sure you don’t think of it as your money! You’ll have to hand it over to Inland Revenue later.

The good news is: if you charge GST, you get to claim the GST on most of your business expenses.

Learn about taxes and levies— business.govt.nz

Find out about GST— business.govt.nz

Pay the right amount of tax

Don’t like paying tax? Who does? Make sure you don’t pay what you don’t have to.

• File and pay tax on time, so you avoid interest and penalties.
• Claim expenses you’re allowed to like a portion of vehicle expenses, and household expenses if you work from home.
• Claim for depreciation (the value that assets lose each year).
• Claim for donations or for tax credits for donations – which you can do depends on your type of company (for example, whether you’re a company or sole trader).

Reduce your tax bill — business.govt.nz

See what expenses you can claim — business.govt.nz

Ease stress at tax time

Filing taxes isn’t everyone’s cup of tea, but you could do these things to make it easier:

• Put aside money as you go – for example, put aside the GST you collect, so you don’t stress about finding the money later.
• Get the help you need – if you prefer to do it yourself, make sure you know the essentials. If you can’t do everything yourself, that’s cool. Perhaps a bookkeeper could help with day-to-day transactions, or an accountant could file your tax returns and analyse your finances.
• Keep organised records – file invoices and receipts and make notes as you go. Just enjoyed lunch with a client? Write the occasion and client name on the back of the receipt before you forget. Bought stationery for the office? Make a note of that right away.
• Use a finance system that works for you – whether you’re a pen and calculator type or a software person, the key is to do what works for you. The fanciest system is no good if you don’t like it.

Find out how to make tax time easier — business.govt.nz

See what systems can help at tax time — business.govt.nz