The New Zealand tax year runs from 1 April to 31 March, marking a crucial time for individuals, sole traders, businesses, and property owners to ensure their financial records are in order and tax obligations are met.

This article will guide you through what you need to know and how you can prepare, as the tax year draws to a close.

• Understanding the New Zealand Tax Year
• Key Tax Dates to Remember
• Advantages of having a Tax Agent
• Preparing for Tax Year End if you are a Sole Trader
• Preparing for Tax Year End if you are a Business
• Preparing for Tax Year End if you own Rental Properties
• Final Tips for Everyone
• FAQ’s

Understanding the New Zealand Tax Year

The NZ tax year begins on 1 April and ends on 31 March of the following year.

Key tax dates to remember include:

Deadline for submitting individual tax returns

• 7th July for individuals not using a tax agent, OR
• Extension of time to 31st March of the following year if using a tax agent, (such as a Chartered Accountant). The extension of time is available provided the individual qualifies.

Final tax payment due for the previous tax year

• 7th February if not using a tax agent, OR
• Extension of time to 7th April if using a tax agent.

For a full list of tax due dates for all tax types, (including provisional tax, GST, FBT etc) please refer to the Inland Revenue website directly.

Advantages of Having a Tax Agent

A registered tax agent can provide several benefits, including:

• Extended Deadlines: If you use a tax agent, you may qualify for an extension to file your tax returns, often until 31 March of the following year.
• Expert Guidance: Tax agents can help you navigate complex tax laws, ensuring compliance and maximising deductions.
• Time Savings: Delegating tax preparation allows you to focus on other aspects of your business or personal life.
• Avoiding Penalties: With professional assistance, you’re less likely to miss key deadlines or make costly errors.
• Ensuring you understand your responsibilities and meet deadlines can help avoid penalties and interest.

Preparing for Tax Year End if you are a Sole Trader

Things to Consider:

As a sole trader, your business income is taxed as part of your personal income. This means you’ll need to:

• Keep accurate records of all income and expenses.
• Claim deductions for allowable business expenses.
• Track and pay Goods and Services Tax (GST) if your turnover exceeds $60,000 per year.

New Zealand’s personal tax brackets determine how much tax you’ll pay on your income. Click here for detailed information about NZ’s Tax Brackets.

First Year Self-Employed Tax-Free: What Does It Mean?

When you first become self-employed, you don’t pay provisional tax until your second year of trading. However, this isn’t truly “tax-free.”

Instead, you’ll pay your first-year tax liability in the following tax year, along with provisional tax for the second year.

This can result in a significant lump sum payment, so it’s wise to plan and save for this expense. A qualified Chartered Accountant can help you plan and put processes in place to prepare you for this situation. Contact ABA Chartered Accountants for further advice and assistance.

Preparing for Tax Year End if you are a Business

As a business owner, you’ll need to:

• File a company tax return (IR4).
• Pay corporate tax on your profits at the current rate of 28%.
• Manage PAYE for employees if applicable.
• Manage your Shareholder Current Account effectively. (If you would like to understand more about how the shareholder current account works, read our article – The Shareholder Current Account Explained).
• Account for fringe benefit tax (FBT) on benefits provided to employees, such as company vehicles or gifts.

Provisional Tax Payments

Businesses may need to make provisional tax payments if their annual income tax liability exceeds $5,000. These are typically spread across the year to help manage cash flow. A qualified Chartered Accountant can help understand this works, and assist you to plan for this. Contact ABA Chartered Accountants if you would like our advice and assistance.

Preparing for Tax Year End if you Own Rental Properties

Rental income must be declared, and associated expenses can often be deducted.

Key considerations include:

• Record Keeping: Maintain detailed records of rental income and expenses.
• Claimable Expenses: These may include mortgage interest (subject to phase-out rules), rates, insurance, maintenance, and property management fees.
• Bright-Line Test: If you sell a property within a certain timeframe, you may be liable for tax on the gain. The bright-line test rules have changed in recent years. For the most up to date information, we recommend referring to the IRD website directly. 
• Depreciation: While building depreciation is no longer claimable, you can still claim depreciation on some chattels like appliances and furniture.

ABA Chartered Accountants, are specialist accountants for property investors. Contact our friendly team to assist with all your Property Accounting needs.

Final Tips for Everyone

• Use a Tax Agent: A registered tax agent can help you meet deadlines and optimise your tax position.
• Plan Ahead: Avoid surprises by setting aside funds for tax liabilities throughout the year.
• Stay Informed: Tax laws change frequently. Make sure you’re up-to-date on the latest rules and regulations.

Frequently Asked Questions (FAQs)

Get Help from an Expert!

A qualified and experienced Chartered Accountant (such as the team at ABA Chartered Accountants), can help you navigate your year end tax returns and plan your taxes effectively to avoid unnecessary penalties and interest.

Get in touch today to discuss how we can help. We offer a full range of Accounting & Taxation Services to assist individuals and business owners with all their accounting and tax requirements.