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As a new business owner, it’s important to be aware of what taxes you need to pay and when you need to pay them. This can make running a business much easier; a well-managed business should have no such thing as an unexpected tax bill.

This article is a simple overview of some of the taxes that apply to businesses in New Zealand, and gives some general ideas to help you manage your tax obligations more easily. 

This article does not purport to offer tax advice. Tax involves complex legislation and it is important that you get your own independent expert advice.


Firstly, make use of free help 

The Inland Revenue

If you’re new to business, or you are having difficulty with your tax compliance, make use of the free services offered by Inland Revenue. Their website features useful tax articles, frequently asked questions and various tax documents and forms.

Using an accountant

Few businesses achieve success without the help of good advisers. Give serious consideration to using a chartered accountant as your tax agent (submitting tax returns on your behalf) and as a tax adviser.

Here are some benefits:

  • Accountants deal with tax issues every day and keep up with the latest tax rulings and changes. It makes more sense to use a specialist than to divert your energies from your core business activities, in an attempt to keep up with changes that might affect your business.
  • An accountant can help you set up a good record keeping system and a calendar of tax returns to streamline your tax compliance.
  • You'll get reminders of due dates for tax returns, helping you to avoid late payment penalties.
  • Submitting your end of year tax returns is time consuming and tricky for beginners. Your accountant has the experience of preparing many returns each year.
  • An accountant can help you claim all the expenses you're entitled to - and is likely to be aware of more than you are.
  • You also get advice on issues such as the tax advantages of leasing versus buying equipment, using a private vehicle or company car, and other tax matters.

Other tips:

  • To find a suitable Chartered accountant, contact several other businesses similar in size or industry type to yours. They will usually be happy to tell you which accountant they use, and even give an indication of the fees charged.
  • If you consult your accountant more regularly than just for end of year accounts, you should expect to pay more for the service. Remember though, that low fees are not as important as the value an accountant can add to your business.
  • If your business is just starting, look for an accountant with a special interest in helping businesses to grow. Some accountants are more proactive in this area than others. Ask the accountant what they could do for your business. 

Secondly, manage your records accurately

Keeping accurate, up-to-date records for tax purposes is essential.

You must keep business records for at least 7 years, including:

  • Bank records, as they show your sales and expenses.
  • Invoices you’ve sent to clients for sales or received as expenses. There are minimum requirements such as address and specific details of what was sold or bought.
  • Invoices you’ve received for purchases.
  • Cashbook, petty cashbook and wage book.

Good management also includes estimating your tax liabilities at regular intervals and setting aside money to meet tax obligations. Be aware of due dates for taxes to avoid penalties. It is important to be on time!

If you make a mistake in calculating your tax or you don't think you can pay a tax bill, contact your accountant or Inland Revenue early to discuss a plan of action. Inland Revenue may allow you to enter into an instalment arrangement to pay off late tax: early action will count in your favour.

Small business taxes in New Zealand

Income tax


You need to pay income tax on the net taxable income your business makes each year. No escaping this one.

Income tax is payable on the net taxable income of your business. That is the difference between your business income for the goods and services you sell, and your business expenses that you can claim against business income.


  • Some of your expenses may need to be excluded for the purposes of calculating your taxable income. For example:
    • You can’t claim 100% of the costs up front for some assets or equipment purchased as a business expense; you may have to spread the cost over a number of years, called ‘depreciation’. An accountant is the best person to explain to you in more detail how this works, and the different ways of claiming depreciation. The accountant can help you draw up a depreciation schedule for all your plant and equipment.
    • You may not be able to claim 100% of the cost of food and drink; special rules apply for this type of entertainment expenditure.
  • If you work from home, you may be able to claim a portion of home expenses as a business expense (mortgage interest, power, phone etc.). 
  • Get advice from an accountant if you are new to business.

Year 1 is the simplest.

At the end of the financial year (usually 31 March), your net profit is calculated via a Profit and Loss Account. You then calculate your net taxable income based on your net profit, which must be adjusted for non-deductible expenditure or non-taxable income.

Don’t worry, your accountant or bookkeeper can do this for you!

Tip: depending on whether you’re a sole trader, a partnership or a company, tax rates may vary slightly. You can find out more about this on the Business income tax section of the IRD website.

Year 2 onwards is a bit trickier…

Many people starting out in business are under the illusion that they don't have to pay tax in the first year. This is certainly not the case. The illusion of a 'tax holiday' comes about because the income of a new business cannot be properly assessed until the first year's accounts have been completed. Tax is then due on the net taxable income (if there is any).

If there is a profit, the business may be required to pay Provisional tax during the course of the next year, based on the results of this first year, plus a percentage for growth in the coming year, or an estimate of likely profits in the year ahead.

Many new businesses find this 'double' tax bill in the second year (tax on the first year's trading, plus Provisional tax for the second year's trading) a difficult burden, as they have not made suitable provision for the tax payments.

Provisional tax

Provisional tax is similar to PAYE for a wage or salary earner: it is a way of spreading out taxes for a business, instead of the business facing one large tax bill at the end of the tax year. Most Provisional tax payments are spread over the year in three equal instalments depending on your balance date.

The tax is called 'Provisional' because the amounts are only an estimate, until the actual net income is determined at the end of the tax year. The difference between the actual net income and the Provisional tax paid is sorted out in a terminal tax payment.

There are three ways of calculating Provisional Tax:

  1. Standard – the default calculation, based on your income tax payable from last year plus an additional buffer to take into account your business’ growth in the upcoming year, with the expectation that you will make more profit. By default Inland Revenue will calculate your Provisional Tax payments using the Standard method.
  2. Estimation – you are allowed to estimate (especially if you know you will make more/or less than last year). This involves filing an estimate with Inland Revenue for what you think your taxable income for the year will be, and the tax to pay on this amount is split into three equal payments.
  3. Ratio option – based on your GST turnover. This can be a less painful method of paying tax than forking out a lump sum all at once.

At the end of the year, you calculate your net taxable income. Of course the chance is low that the tax you end up owing is EXACTLY what you have paid to Inland Revenue. Your net taxable income fluctuates each year as you would expect. There are two scenarios:

  1. Your Provisional Tax payments you made during the year are not high enough to cover your tax payable for the year. You will need to make a top-up tax payment, known as ‘Terminal Tax’. Use-of-money (UOMI) may be applicable if your tax liability for the year is more than $60,000. You may also be liable for penalities if you do not meet your provisional tax obligations.
  2. Your net taxable income is lower than expected, and the Provisional Tax payments you made will be more than you needed to pay for the year. You will be able to get a refund or a credit towards next year’s payments. You will also receive Use of money Interest from Inland Revenue for any overpayment of Provisional tax.

Tip: you’re not required to pay Provisional Tax until after the year your tax payable for the year is more than $2,500.

Your accountant will help you sort out the calendar of dates involving Provisional and terminal tax and explain the process more fully to you. You can also use a tax due date calendar from IRD to help you plan your tax payments.


  • Register with Inland Revenue to get an IRD number if you’re forming a partnership or company. Sole traders use their personal IRD number.

Accident Compensation Corporation (ACC) levies


You MUST pay an annual levy to ACC to cover workplace injuries to any employees and yourself. Even if you are self-employed and have no staff, you will need to pay self-employed ACC levies in case of injury. Think of it like an insurance payment to cover you if you suffer an accident and cannot work in your business.

The amount you’ll need to pay depends on:

  • The kind of industry you work in. Some industries contain a higher risk of workplace injuries.
  • How much you earn and how much you pay your staff (if applicable).

You can find out more about ACC levies on the Business section of their website.

Goods and Services Tax (GST)


As a business you MUST register with Inland Revenue to pay GST on your business activities if you believe you will turn over $60,000 or more in the upcoming 12 month period, or you have exceeded the $60,000 threshold in the previous 12 month period.

How does GST work?

  • GST is built into the cost of almost every good and service in New Zealand.
  • You add up the GST on all of your sales, and take away all the GST on your business expenses. 
  • Depending on which is larger (your sales or expenses) you will either have an amount to pay, or you will receive a refund.


  • You don’t need to register for GST if your turnover is less than $60,000, but it can help your business because:
    • Completing regular GST returns will help you maintain accurate records.
    • You can claim a GST refund if you have large set up costs.
  • A useful tip is to put aside the GST you collect on invoices in a business savings account. Then you will never be short when GST is due to be paid. Inland Revenue is just like any other creditor you owe money to, and they automatically charge penalties and interest if you’re late.
  • GST returns are made easier if you use accounting software that allows you to generate GST reports at the click of a button.
  • It also helps to talk to your accountant, tax advisor and/or IRD on how to make the returns, which items (such as bank charges) carry no GST and how to handle other adjustments (such as exported goods, or zero rated GST supplies).
  • There’s more comprehensive information on GST from

Pay As You Earn (PAYE)


  • This tax applies to your business if you employ staff, or if you pay yourself a salary. 
  • You have to deduct PAYE tax from any employees you pay wages or salaries to, and pay this to Inland Revenue every month.
  • You MUST keep accurate payroll records for Inland Revenue. Using payroll software can make it easier to keep track of what to pay and when, holidays, sick days etc.
  • There is more information on your PAYE responsibilities from

Employer Superannuation Contribution Tax 


Employer Superannuation Contribution Tax has to be paid on contributions your business makes towards your employee’s superannuation schemes. This includes the contributions made to your staff’s KiwiSaver funds. Check out for more detail on Employer Superannuation Contribution Tax.

Fringe Benefit Tax


Your business will have to pay Fringe Benefit Tax if it provides benefits or perks to employees as part of their employment, such as:

  • private use of a motor vehicle
  • parking
  • discounts on your goods or services
  • insurance and superannuation schemesg
  • gifts and prizes.

Here’s more detail on Fringe Benefit Tax from

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