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Business income tax
Tāke moni whiwhi mō ngā pakihi
Business income tax

Glossary of business income tax terms

Balance date

The balance date is the end of the accounting year.  When you apply for an IRD number, your balance date is 31 March.  You need to apply to us in writing if you want to request a different balance date.

Business income

This is income earned from goods and services you sell (including invoices you've issued but have not yet received payment for).

Capital expenditure

Any expenditure that creates an asset, for example:

  • purchase of plant or machinery
  • improvements to assets that increase their usefulness or extend their useful life
  • expenditure incurred in transporting an asset to its site and preparing it for use.

Company

A formal and legal entity in its own right, separate from its shareholders (or owners).

Depreciation

An allowance acknowledging the fact that your business assets eventually wear out or decrease in value, even though you routinely maintain or repair them.

Disposal

The term "disposal" includes:

  • an asset that is compulsorily acquired
  • an asset taken out of New Zealand (other than only temporarily)
  • changes in use or location of use of a business asset
  • ceasing intangible asset rights
  • an asset that is irreparably damaged
  • any distribution of assets (including distributions of assets to the beneficial owners for no cost)
  • ceasing deemed ownership of a fixture or improvement
  • an asset that is lost or stolen if that asset is not recovered in the income year when the loss or theft occurs.

Dividends

Company profits paid to shareholders according to the proportion of the company they own.

Drawings

The money that you take out of a business to either live on and/or pay any personal expenses. Drawings are part of the net profit and not a business expense.

Expenses

Costs associated with producing business income, for example, paying wages, rent, buying stationery; but not including capital expenditure.

Fringe benefit tax

A tax on benefits that employees receive or enjoy as a result of their employment.  Most benefits given to employees other than their salary or wages are fringe benefits.

Imputation credit

A tax credit received from a company for tax it has already paid on the profits it derives.

Net profit

Business income minus allowable expenses.

Non-profit organisation

Any society, association or organisation:

  • not carried on for the profit or gain of any member, and
  • whose rules do not allow money, property, or any other benefits to be distributed to any of its members.

Partnership

Where two or more people are in a business partnership. Each partner contributes something to the business and, in return, receives a share of any profit or loss.

Provisional tax

Tax paid in instalments during the year based on what you expect your income to be, or what it was last year.

Resident withholding tax

An amount of tax deducted from investment income. For example, when banks pay interest they deduct resident withholding tax before paying the recipients.

Sole trader

A person in business on their own. The business is controlled, managed and owned by that person.

Tax credit

A credit for tax that has already been deducted or paid on your behalf.  Examples of common tax credits are:

  • PAYE deducted from your wages.
  • RWT deducted from interest you have received.