The standard tax year in New Zealand runs from 1 April to 31 March. If you are doing your own income tax returns you’ll need to have them filed with the IRD by July 7.
You can gain an extension of time if you register with a tax agent or an accountant. That is, you will have until 31 March the following year to get your income tax return filed, instead of having to file on 7 July.
Most people will have the standard tax year that ends at 31 March each year. If upon filing your income tax return you have tax to pay (known as residual income tax) for the year, it’s payable by 7 February of the following year unless you have an extension of time.
If you have an extension of time, your residual income tax for the year can be paid slightly later by 7 April instead of 7 February.
In your second and subsequent years of business you may be required to pay income tax in instalments during the year. This is called provisional tax.
GST is a tax on most goods and services in New Zealand. It also applies to imported goods and certain imported services. It’s charged and accounted for at a rate of 15% on the selling price or market value of goods and services. It also applies when you buy or sell business assets. Note, GST is not a tax on your net business income. The tax on your net business income is a separate tax and is known as Income Tax.
Registering for GST:
You must register for GST if your business turnover (also known as sales or revenue):
- for the last 12 months was more than $60,000, or
- for the next 12 months, is expected to be more than $60,000.
If your turnover is less than $60,000, you do not have to register for GST. It is however optional to register if your turnover is less than $60,000.
Exempt and zero-rated goods and services:
There are certain goods and services you don’t charge GST on. These are either exempt from GST or zero- rated—this means that GST is charged at 0%.
Common examples of zero-rated supplies are:
- the sale of a going concern business
- exported goods
- transactions between registered parties that totally or partly consist of land.
Examples of exempt supplies are:
- certain financial services
- rent for a private home (domestic rental)
- donated goods supplied by a non-profit organisation
- bank charges
- eftpos charges
- wages (includes drawings).
How often do you have to file GST returns?
A taxable period is the length of time covered by a GST return. This determines how often you file them. When you register you can choose your filing frequency. The standard period is every two months. However if your annual business turnover is $500,000 or less, you may wish to reduce the paperwork by choosing to file your GST returns every six months. You can also request to file monthly GST returns.
When are GST returns due?
The due date for GST returns and payments is the 28th of the month following your return period, except for the periods ending:
- 30th November – due on the 15th of the immediately following January
- 31st March – due on the 7th of the immediately following May
Accounting for GST:
When you register, you have to choose how you’re going to account for GST on your sales and purchases. There are three ways to account for GST:
- Payments basis – you account for GST only when a payment is made or received
- Invoice basis – you account for GST when an invoice is issued or any payment is made or received, whichever is earlier
- Hybrid basis – is a combination of the two
Most small businesses will select the Payment basis if they have to register for GST.