If you are running a business in New Zealand, you are liable to pay tax on profits after deducting allowable expenses from your income. Many people have an irrational fear of tax issues but if you familiarise yourself with the process and the regulations and hire a competent accountant to help you with compliance and planning, you can maximise your tax efficiency.
The New Zealand Inland Revenue Department (IRD) expects you to submit a properly completed tax return every year and this is in turn based on your annual financial statements. The department prefers you to have a tax agent (normally a chartered accountant) to handle your tax affairs. If this is the case, they will normally allow you an extension up to 31st of March of the following year to file your return.
If you fail to meet this deadline, you will find yourself in an unpleasant situation with the following consequences:
- You could face penalties and “Use of Money Interest”.
- You will probably lose your “Extension of Time” with your tax agent.
- If you continue to flout IRD regulations, you could face stiff monetary penalties and possibly criminal charges.
Instead of delaying or being paralysed by fear, take decisive action and contact your accountant or your tax agent immediately. The process is not as complicated as you think. And you should let your accountant take charge of the process. Here is a sample of the kind of information you should provide to your accountant for the preparation of the tax return.
- The details of any major property transactions
- Complete bank records and bank statements
- The details of all cash transactions
- Your general ledger, if you have one
- The details of your accounts receivable and your accounts payable
- Details of the inventories, fixed assets and motorcars
Your accountant will have more detailed requirements which you should fulfill scrupulously. We generally send our clients checklists that help them collate the information we need and keep our fees down.
How to select a tax agent
Planning your tax affairs to minimise the strain on you and maximise your tax efficiency depends almost entirely on your choice of the chartered accountant to act as your tax agent. What you need is pro-active and efficient advice. Your accountant should:
- Stay in touch with you to inform themselves of how your business is going
- Provide you with input on major investment and financial decisions to maximise your tax advantage
- Help you to prepare a business plan and to monitor the progress in accordance with the plan. This will ensure that you can take timely corrective action as required.
- Help you to maximise your operating efficiency and streamline your cash flow.
Stop spending sleepless nights worrying about your tax affairs. Find yourself a top-flight accountant who can shoulder some of your worries and assist in efficient management of your tax.