Tax management

Business tax made simple

As a business owner, it’s important to be aware of what taxes you need to pay and when you need to pay them. This guide covers it all.

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Why understanding tax is important

Nothing is certain except death and taxes. So you’ll be doing your business a great favour if you get on top of taxation issues right from the start. Staying on top of them will make running your business easier, and help you to avoid an unexpected bill down the track.

Here's an overview of the main taxes and levies in New Zealand your business may have to pay, or at least know about. It also provides tips to help make managing your tax easier.

However, we don’t offer tax advice. It’s important to get independent advice from your accountant or tax specialist.

Get an IRD number

First things first. You’ll need an IRD number for your business.

If you’re a sole trader, you can use your personal IRD number.

Companies or partnerships need their own IRD number, which you can apply for when you form your company. 

Income tax

Income tax is tax on what your business earns, and every business – including yours – must pay it each year. 

The amount of tax you pay is based on the amount your business earns from selling goods and services, minus what you spend in business expenses. This is your net taxable income. Profits are taxed at different rates depending on if you’re trading as a company, sole trader, or partnership.

Paying your income tax

Income tax is usually estimated and paid in instalments throughout the year, called provisional tax.

If you make more profit than you thought, you’ll need to pay slightly more at the end of the year. If you made less profit than you thought, you may get a tax refund or credit. 

The way you pay your income tax under the provisional tax method is different for your first year in business. At the end of your first financial year, usually 31 March, you (or your accountant or bookkeeper) work out your net taxable income and calculate the tax you pay on that. If you want to spread the load a bit rather than pay your whole tax bill at the end of the year, you can choose to make voluntary payments throughout your first year.

After your first year, you’ll need to pay provisional tax. There are four provisional tax payment methods.

Standard option

With this option, you’ll pay provisional tax in three instalments during the year (generally August, January, and May). 

The amounts are based on the previous year’s income tax return, with a percentage increase applied. The increase will be 5% if you’ve filed the previous year’s return before your first provisional tax instalment for the next year is due. Otherwise, it’ll be 10%. 

Estimation option

With this option, you estimate what your income will be for the coming year and work out the tax payable on your estimate. 

At the end of the year, you work out your actual income. If you earned more than your provisional taxable amount, you may need to make an extra payment known as terminal tax. If you earned less (and have therefore paid too much tax), you can get a refund or a credit towards next year’s payments.

Like the standard option, you’ll pay provisional tax in three instalments.

Ratio option

If you’re GST registered, you can calculate your provisional tax by applying a ratio percentage to the taxable supplies in your GST returns. This way, your provisional tax instalments align with your business cashflow. 

Accounting income method (AIM)

In April 2018, Inland Revenue introduced AIM as an option for small businesses, sole traders, and contractors.

AIM lets you use approved accounting software to calculate your provisional tax on a pay-as-you-earn basis. 

Set money aside

It’s important to know that if your final liability is more than your provisional taxable amount, Inland Revenue will charge you interest on any underpayment of your provisional taxes:

  • If you use the standard option, the interest applies from the third instalment date.
  • If you use the estimation option, it’ll be charged from the first instalment date.

It’s a good idea to set money aside as you earn it to help avoid this situation.

ACC levies

All businesses pay an annual levy to the Accident Compensation Corporation (ACC) to cover workplace injuries to anyone who works in the business. Even if you’re self-employed and have no staff, you need to pay self-employed ACC levies.

Think of it like an insurance payment, covering you if you suffer an accident and can’t work in your business.

The amount you’ll pay depends on:

  • The type of industry you work in, as some industries carry a higher risk of workplace injuries
  • How much you earn
  • If relevant, how much you pay your staff.

GST (goods and services tax)

If your business turnover is likely to exceed $60,000 a year, you’ll need to register for GST. Registration is optional below that threshold, but it can be a good idea to do it anyway. For example, you can claim a GST refund right away if you have large start-up costs. For credibility, you may not want suppliers and customers to know that you’re turning over less than $60,000. 

You can register for GST on the Inland Revenue website. Once you’re registered, you must add GST (currently 15%) to the cost of the goods and services you sell, and file a GST return regularly (usually every two months, or every six months for smaller businesses). 

Simply add up all the GST on your sales and take away the GST you’ve paid on your business expenses. If sales exceed these expenses, you pay GST.  If expenses exceed sales, you claim a GST refund.

You can file GST returns electronically, and some accounting software packages can generate them for you automatically.

Keep good records

To help account for GST, keep proper tax invoices of all goods or services you supply, as well as invoices for all the goods and services you buy for the business.

PAYE (pay as you earn)

If you employ staff or pay yourself a salary, you’ll need to make PAYE deductions from your employees’ earnings and pay these deductions to Inland Revenue each month. 

PAYE deduction includes an ACC Earner’s levy. You may also need to make deductions for child support, KiwiSaver or student loans. Your staff will each have different tax codes and tax rates depending on their personal circumstances.

You’ll need to file returns each month and keep accurate payroll records for Inland Revenue. There are also payday reporting requirements.

Consider using payroll software, as it’ll make it much easier to keep track of what to pay and when, holidays, sick days, and so on. There are a number of payroll systems available which can automate many parts of the process and help make payroll management easier. If you’re considering a payroll system, you may want to check out Smartly's special six-month free trial for ANZ customers.

For more information about your PAYE obligations, visit the Inland Revenue and websites.

Employer superannuation contribution tax (ESCT)

If you’re paying employer contributions to your workers’ superannuation scheme, e.g. KiwiSaver, you’ll need to pay ESCT on those contributions. 

Fringe benefit tax (FBT)

If you provide benefits or perks to employees as part of their employment, you’ll need to pay fringe benefit tax (FBT). Benefits can include:

  • Private use of a motor vehicle
  • Parking
  • Discounts on your goods or services
  • Insurance and superannuation schemes
  • Gifts and prizes.

There are different methods, and different rates, for calculating FBT. For more information, chat to a tax adviser and check out the Inland Revenue website.

Get expert advice

Every business is different, so it’s important that you get professional advice specific to your business. Your accountant is also a key source of information, and Inland Revenue offers a free business tax information service for businesses that are starting up or changing the way they operate. 

Inland Revenue’s advisers will tell you:

  • Which taxes you need to know about
  • What records you need to keep
  • How to complete your tax returns, e.g. GST and employer returns
  • When to file returns and make payments.

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Important information

We’ve provided this material as a complimentary service. It is prepared based on information and sources ANZ believes to be reliable. The content is information only, is subject to change, and isn’t a substitute for commercial judgement or professional advice, which you should seek before relying on it. To the extent the law allows, ANZ doesn’t accept any responsibility or liability for any direct or indirect loss or damage arising from any act or omissions by any person relying on this material.

Please talk to us if you need financial advice about a product or service. See our financial advice provider disclosure at

This information is current as at 21 December 2023 and is subject to change. 

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