{"id":205242,"date":"2021-05-04T15:17:32","date_gmt":"2021-05-04T02:17:32","guid":{"rendered":"https:\/\/legalvision.co.nz\/?p=205242"},"modified":"2026-03-11T17:19:18","modified_gmt":"2026-03-11T04:19:18","slug":"tax-responsibilities-small-business","status":"publish","type":"post","link":"https:\/\/legalvision.co.nz\/startups\/tax-responsibilities-small-business\/","title":{"rendered":"What Are the Tax Responsibilities of a Small Business in New Zealand?"},"content":{"rendered":"

One of the most important responsibilities of being a business owner is correctly managing your tax responsibilities. You might have accountants and payroll software to help with your tax affairs. Even still, it is important that you understand the different taxes you and your business must pay. This article explains the tax responsibilities of small businesses in New Zealand.\u00a0<\/p>\n

IRD Numbers<\/h2>\n

An Inland Revenue Department (IRD) number is a unique number attached to a taxpaying entity, like a person, company or partnership. The first step in managing your business\u2019 tax affairs is registering an IRD number.\u00a0<\/p>\n

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You should already have a personal IRD number for your individual tax responsibilities. If you are running your\u00a0business as a sole trader<\/a>, you simply use your IRD number.\u00a0<\/p>\n<\/div>\n

If you are a\u00a0member of a partnership<\/a>, you and the other partners will also use your personal IRD numbers. However, the partnership\u00a0itself<\/i>\u00a0should also have its own IRD number. You and the other partners also need to declare your share of the partnership income in your individual tax returns. Still, the partnership itself will file a tax return allocating the profits or loss to the different partners. This is despite the partnership itself not paying income tax.\u00a0<\/p>\n

Further, if you run your business\u00a0through a company<\/a>, it should have its own IRD number. You can register an IRD for a business entity, such as a company or partnership, on the Inland Revenue website.<\/p>\n

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Income Tax<\/h2>\n

Businesses pay income tax on their profits, that is, their income minus their expenses. For this reason,\u00a0 it is crucial to keep a detailed record of your business expenses. Doing so helps minimise tax payable by maximising deductions.<\/p>\n

You can claim a range of different expenses as deductions, some of which you can only deduct a certain percentage of. Also, you can find a more detailed look at business deductions on the\u00a0IRD website<\/a>.<\/p>\n

Additionally, the rate of tax your business will pay on its profits depends on how your business is structured. Suppose you operate your business as a sole trader. In that case, you are a member of a partnership or a beneficiary of a trust in your personal capacity. You simply include your business income with the rest of your personal income and pay tax at your personal income tax rate.\u00a0<\/p>\n

New Zealand\u2019s personal income tax rates as of 1 April 2021 are set out below:<\/p>\n

\n\n\n\n\n\n\n\n\n
For each dollar of income<\/td>\nTax Rate<\/td>\n<\/tr>\n
Up to $14,000<\/td>\n10.5%<\/td>\n<\/tr>\n
Over $14,000 and up to $48,000<\/td>\n17.5%<\/td>\n<\/tr>\n
Over $48,000 and up to $70,000<\/td>\n30%<\/td>\n<\/tr>\n
Over $70,000 and up to $180,000<\/td>\n33%<\/td>\n<\/tr>\n
Remaining income over $180,000<\/td>\n39%<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/figure>\n

Most businesses will file an income tax return at the end of their first year of operation and pay their tax owed as a lump sum at the end of the year. Going forward, businesses will typically pay their income tax in instalments throughout the year. This is known as provisional tax.<\/p>\n

For companies, the corporate income tax rate is 28%.<\/p>\n\n\n Continue reading this article below the form\n <\/i>\n<\/a>\n

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