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Business income tax: Filing business income tax returns
For income years starting on 1 April 2014 and later companies (including look-through companies) with:
- annual revenue of $30 million or less, and
- assets of $60 million or less
must prepare financial accounts that meet our minimum financial reporting requirements. These thresholds apply to all companies in a group where the parent company is incorporated in New Zealand.
For subsidiaries of multi-national companies the levels are:
- annual revenue of $10 million or less, and
- assets of $20 million or less.
|Subsidiaries of New Zealand companies that prepare consolidated general purpose financial reports must prepare their own financial accounts that meet our minimum financial reporting requirements.|
The following companies are required to prepare financial statements to a higher standard of accounting:
- Large companies with income of more than $30 million or assets of more than $60 million.
- New Zealand subsidiaries of multi-nationals with income of more than $10 million or assets of more than $20 million.
- Companies with ten or more shareholders (unless they opt out).
- Companies with fewer than ten shareholders who opt in.
These companies must prepare general purpose financial reports using the standards mandated by the External Reporting Board (XRB). Separate financial accounts do not need to be prepared for us.
Small company exemption
Small companies are not required to prepare financial accounts if during the income year they:
- are not part of a group of companies, and
- haven't derived income in excess of $30,000, and
- haven't incurred expenditure in excess of $30,000.
Tax records must be kept to calculate taxable income, expenses, and GST (if you're registered). If a small company is also an employer records for employment-related taxes will also need to be kept.
Non-active company exemption
Non-active companies are not required to prepare financial reports.
A company can apply for non-active status if all of the following conditions for an entire income year are met:
- It has not derived any gross income from any source, and is not deemed to have derived any gross income.
- It has no allowable deductions.
- It has not disposed of any assets, and is not deemed to have disposed of any assets.
- It has not been party to, or continued with, any transactions that have given rise to:
- income or deemed income in any person's hand
- fringe benefits to any employee or former employee, or
- a debit in the company's imputation credit account or dividend withholding payment account.
Minimum financial reporting requirements
The financial statements must consist of:
- a balance sheet setting out the assets, liabilities, and net assets of the company as at the end of the income year.
- a profit and loss statement showing income derived, and expenditure incurred, by the company during the income year.
- a statement of accounting policies setting out:
- the policies and assumptions that have been applied or changed, and
- a description of the effect of any material changes in accounting policies used since the previous income year.
The statements must comply with the following accounting principles:
- double-entry method of recording transactions, and
- accrual accounting.
The financial statements may disclose amounts using the following valuation principles:
- tax values, when they are consistent with double-entry and accrual accounting
- historical cost, when tax values are not consistent with the accounting principles used or when historical cost provides a better basis of valuation, or
- market value, when they provide a better basis of valuation than tax values and historical cost.
The financial reports must show:
- comparable figures for the previous income year.
- whether they have been prepared on a GST inclusive or exclusive basis.
- reconciliation of the company's financial statements and taxable income for the income year.
- taxation-based schedule of fixed assets and depreciable property.
- reconciliation of movements in shareholders' equity for the income year.
- all amounts from the Financial statements summary (IR10) form relevant to the company.
- sufficient notes to support amounts required to be disclosed as an exceptional item on the IR10.
The following amounts must be grossed up:
- interest and dividends received - grossed up for resident withholding tax.
- dividends received - grossed up for imputation credits to the extent the dividend is taxable and the credits are available to satisfy the company's income tax liability for that income year.
Certain types of business must provide additional industry-specific information:
- Foresters must show information about the cost of timber as at the end of the income year and a reconciliation of movements.
- Owners of specified livestock must show details of livestock valuation methods, valuations, and calculations for tax purposes.
|You can choose to apply a higher standard of reporting if you wish.|
Associated person transactions
From the tax year commencing 1 April 2015 the following associated person's transactions must also be shown when the associated person is not a company, or is not a tax resident of New Zealand:
- interest expense on loans from associates
- loans or other advances to associates
- expenses for services provided by associates including wages, salaries, management fees, and payments for other services provided to the company
- expenses to associates for rent and leases
- expenses to associates to acquire intangibles or for their use including royalty payments.
Your accountant or tax agent can tell you more about financial reporting. Otherwise you can visit the website of the External Reporting Board (XRB).