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Introduction to BusinessProfessional Historians Assn
11 October 2008
Presented by John Forde
Business Tax Information Officer
www.ird.govt.nz
Going into business
• Banking and budgeting • Keeping records• GST• Income tax• Provisional tax• Business expenses
www.ird.govt.nz
Banking and budgeting
• Bank accounts
• Budgeting for:• ACC• Student loan• Income tax• GST
www.ird.govt.nz
GST
• Do you need to register?
• Choose your
accounting basis: payment, invoice, hybrid
filing period
www.ird.govt.nz
Tax Invoices/Receipts
• Less than $50
• Less than $1,000
• More than $1,000
Page 47 – Smart business IR320
www.ird.govt.nz
GST
Page 10 – Smart business IR320
• 12.5% on sales and service
• GST on expenses and purchases
• File on time
• Online filing
www.ird.govt.nz
GST return
Total sales for period $1,125
GST collected from sales (1/9th) $125
Total purchases for period $900
GST paid or claimable (1/9th) $100
_______ $125 - $100 = GST to pay $ 25
www.ird.govt.nz
Business Expenses
Home Office – Calculation
• Mortgage interest
• Rates
• Insurance
• Power
179m ²
Total floor space
15m²
Floor space used 15m² X 100%
Total floor space 179m²
= 8.38%
Page 39 – Smart business IR320
www.ird.govt.nz
• Telephone
• Travel & Accommodation
• Insurance
• Interest
• ACC
• Depreciation
Other Business Expenses
www.ird.govt.nz
Income Tax
Profit and Loss Account
Sales (Gross Income) $30,000
Less ExpensesRent $4,000Materials $3,000Advertising $ 500Interest $ 500 Insurance $2,000
$10,000
Net profit $20,000
Drawings are not deductible expenses
www.ird.govt.nz
Provisional Tax
Example
Profit (2009 Income Tax year*) $20,000
Tax on profit at 19.5% $ 3,900 (due 07/02/2010)
Residual income tax >$ 2,500
Need to pay provisional tax next tax year
* 1 April 2008 – 31 March 2009
www.ird.govt.nz
Provisional Tax
Example
Residual Income Tax (2009 tax year) $3,900
Allow for inflation next year (add 5%) $ 195
Provisional tax 2010 $4,095
There will be 3 payments of $1,365 28 August 200915 January 2010 7 May 2010
Residual Income Tax $3,900 Due: 7 February 2010(2009 tax year)
www.ird.govt.nz
Provisional Tax
• GST and Provisional Tax Ratio option
• Early payment discount
Page 33, 27 – Smart business IR320
www.ird.govt.nz
Tax Rates
Individuals
• Under $38,000 19.5%
• $38,001 - $60,000 33 %
• Over $60,001 39 %
Company 30%
www.ird.govt.nz
Tax Rates from 1/10/08
Individuals
• Under $14,000 12.5%
• $14,001 - $40,000 21%
• $40,001 - $70,000 33 %
• Over $70,001 39 %
Company 30%
www.ird.govt.nz
Support and information
• Website
• Contact centre
• INFOexpress
• Newsletters
• Advisory services
• One on One
• Seminar/Group
www.ird.govt.nz
• Set up an efficient record keeping system
• Keep all receipts and Tax Invoices
• Budget for your taxes
• Work out if you need to register for GST
• Send IRD returns and payments before they are due
• If you can’t meet return dates call us
• Ask for help
Key Messages