Income Tax, Goods and Services Tax (GST), Pay As You Earn (PAYE) and Fringe Benefit Tax (FBT) may be new to you, and if so, this quick guide may help you understand these terms.
This is a general introduction to tax and does not discuss all tax types, so please seek professional advice for your own business. For more information about tax please see Inland Revenue.
As soon as you start operating as a business, it is important to keep track of the business's income tax obligations.
Once the first tax year is over (for most businesses this is 31 March), the business will need to file a tax return to declare all gross income the business received during that year.
You may also be able to deduct business expenses from the business's income, provided those expenses meet specific criteria. For more information on this please refer to Inland Revenue’s guidelines, Tools for Business.
You may have provisional tax obligations too, as income tax may be due in instalments throughout the tax year. For more information on this, please refer to Inland Revenue guidelines.
Your business doesn’t have to register for GST unless your turnover is more than $60,000 in a 12-month period. However your business can still be registered for GST, even if you expect to be under that threshold.
Please be aware there are some business activities which are GST exempt, such as renting out residential property. These businesses may not be eligible to register for GST and claim back GST on their costs.
Here are some points to consider:
Choose 1-month, 2-month or 6-monthly returns. There are some restrictions to the timeframe you can choose, for example you can only choose 6-monthly returns if your turnover is $500,000 or less per annum. If you are registered for GST, you may opt for filing monthly returns if you think your GST costs will be higher than your income during your start-up phase as your business may be entitled to a GST refund. Alternatively, longer filing periods may make sense for you, as this can make it easier to manage any associated compliance costs. Your accountant will be able to advise the best taxable period for your business.
If your business employs staff who receive non-cash benefits on top of their salary or wages, then your business may be liable for FBT. Benefits provided to staff such as gifts and vouchers, use of a company vehicle for personal use and medical insurance may all attract Fringe Benefit Tax. You can find out more about FBT on the Inland Revenue website.
A business that employs staff is required to deduct PAYE from employees' pay and pay this to Inland Revenue. PAYE includes income tax and ACC earners' levy and your business may also need to make other deductions from employees' pay such as KiwiSaver. You can use Inland Revenue’s PAYE/KiwiSaver deductions calculator to make employee deductions.
Tax is a complex topic and the choices you make about your business structure and funding may impact on the tax treatment of your business. Make sure you get professional advice from an accountant or qualified tax expert.
Or if you need help with your business financial packages, like Xero or MYOB, talk with an accountant or bookkeeper.
Nothing contained on this website is to be considered tax advice. The above information is a guide only and should not be relied on as it does not take into account the financial situation of your business.