A 12-month plan designed for new business owners starting out, who may want some extra guidance around business structure, accounting software setup and training, and more.

We will provide you with guidance and support on what you'll need to do to establish and commence running your new business

We can provide advice on the best business structure for your needs and take care of establishment and registrations

Set up your Xero file so it's optimised for you and give you initial training so you start off in the right way

Preparation of a budget tailored to your business and input into Xero so you can track how you're going

Starter pack

We set you up with the right Xero subscription and manage your payments.

Xero monthly subscription

We set up your Xero file so it is optimised for you and your business.

Xero setup

We prepare your GST returns ready for you to review and pay. We also remind you of when and how much to pay, and even send an alert if you forget! Requires Xero.

Prepare GST

If you would rather be doing something else, let us do your bookkeeping for you. We love coding and checking and you can relax knowing it's all done right, and on time. Requires Xero.

Bank reconciliation

An hour of training on how to use Xero to it's full potential.

Xero training

We'll set up your Xero file from scratch, then give you the training you need to use it to its full potential.

Xero setup & training

Get your 2024 tax return sorted with ease! This guide answers frequently asked questions from Kiwi business owners.

TAX  •  28 NOVEMBER 2024  •  1 MIN READ

Get your 2024 tax return sorted with ease! This guide answers frequently asked questions from Kiwi business owners. Read more.

Tax Return 2024: a Complete Guide

Tax season is around the corner, but fear not, we’re here to break down everything you need to know about your tax return for 2024. Whether you’re a seasoned business owner or new-to-business, this guide will equip you with the knowledge and resources you need to navigate the process smoothly.

What's the deadline for filing my tax return in 2024? 

Your tax return for 2024 is due 7th of July 2024. Mark this key date on your calendar. However, you may be eligible to get an extension of time (EOT) if you have an accountant or a tax agent. In this case, your return won't be due until 31st of March 2025. 

If you’re unsure when your tax return is due, always consult with your accountant. Or check out our key date calendar on the website.

You can either file your tax return yourself online using myIR. What you’ll need to do is just gather your income details, expense receipts, and any other relevant information. Or you can file your 2024 tax return through your accountant. If you are not working with an accountant, book a call with us to discuss your situation and see how we can help.

How can I get an extension for filing my tax return?

In New Zealand, the tax year ends on 31 March. However, the deadline for filing your tax return is generally the 7th of July. For example, you don’t need to file your 23/24 tax return until 7th of July, 2024. This provides a window of opportunity to gather your financial records and ensure accurate reporting.

However, there are some exceptions. If you're working with an accountant or a tax agent, you may be able to get an extension of time (EOT) to file your tax return. The deadline might be extended to the 31st of March, the following year. For example, if you’re already working with Beany and eligible for an EOT, your tax return won’t be due until 31st of March, 2025. 

If you’re not sure when your deadline is or whether you’re eligible for an EOT, we recommend you consult with your accountant. If you’re not working with one, talk to one of our team members. 

What information do I need to file my tax return? 

To file your tax return for 2024, you’ll need the following information:

Financial records, such as bank statements, invoices, receipts.

Other relevant information, such as IRD number, GST details, PAYE details, details of assets and liabilities.

It’s important to note you need to keep your records for at least 7 years in case you’re audited by the IRD. We have the ultimate fact sheets on New Zealand tax returns if you’re interested to learn more.

Missing tax deadlines can lead to penalties and interest on unpaid tax. Late payment penalties start at 1% and increase to 5% within a week. It might even trigger an IRD audit in some cases.  If you can’t make the payment in time, contact the IRD as soon as possible to discuss potential options and avoid further penalties. IRD has more information on late payment penalties.

With Beany, you can stay on top of your tax deadlines - you’ll receive notifications from us when there is a deadline approaching so you can stay on top of it. We also have the key date calendars, mark those important dates on your calendar.

No matter what your business structure is, there are several taxes you’ll need to pay as a business owner: income tax, GST (if you’re GST registered), PAYE (if you pay wages). If you choose to operate your business through a company structure, read our guide on company taxes. If you need more information on what taxes you need to pay, we recommend you seek professional advice.

In New Zealand, provisional tax is a requirement for some taxpayers who earn income that’s not subject to PAYE - it’s a way for self-employed individuals, those with investment income, and companies as well as trusts to stay on top of their income tax as their income can fluctuate significantly. By making incremental payments, they can effectively manage their tax liability and avoid a large, unexpected tax bill at year-end. 

Read more: Residual vs Provisional vs Terminal taxes - confused?

If your annual turnover is above $60,000, you’re required to register for GST. If you don’t meet this threshold, you still can choose to become GST-registered voluntarily. Once you’re GST-registered, you can claim back the GST proportion you’ve paid on your business expenses. The decision of whether to voluntarily register for GST depends on your specific circumstances. Factors like your business structure, industry, profit margins, and growth projections all come into play. It’s recommended to have a chat with your accountant. 

Read the latest news on GST regulation for businesses listing their services via a digital marketplace.

A key requirement for claiming home office expenses is having a dedicated workspace within your home. For example, working on the dining table doesn’t make a ‘dedicated workspace’.  This space should be used exclusively for business activities and not for personal purposes. If you have a dedicated workspace, you can claim a portion of your household expenses related to that space. 

Deductible expenses typically include a portion of your rent or mortgage interest, rates, insurance, electricity, and internet costs. Other expenses directly related to your workspace, such as office furniture and equipment, and renovation costs of your workspace can also be claimed.

It’s important to note that you can only deduct the proportion of these expenses that corresponds to the size of your workspace relative to your entire home. For instance, if your workspace occupies 10% of your home's floor area, you can claim 10% of the eligible expenses. However, there are other methods to calculate your home office expenses. If you’re interested in this topic, we have a blog on claiming home office expenses and how to calculate it. 

Given the nuances of home office deductions, we recommend you to consult an accountant. 

When filing your tax return for 2024, the golden rule is: the expense must be directly related to earning your business income. Some common deductible expenses are:

Interest on borrowing money for the business

Work-related mobile phones and phone bills

However, there are some no-go zones. For example, a holiday is generally not tax deductible. And those personal gym memberships, while good for your health, won't impress the IRD. The key is to keep it relevant to your business activities and keep those receipts organized.

The rules can be a bit fuzzy sometimes when it comes to claiming business expenses (e.g. entertainment expenses). That's where an accountant comes in - they’ll guide you through the rules and ensure you’re claiming all eligible expenses in order to minimise your tax bills. Book a call with us to discuss more.

Your tax obligations remain the same if you made a loss. This means, you still need to file tax returns for 2024 if you made a loss in 2023. The form you'll need to file depends on your business structure. Sole traders need to use IR3 form, while companies use IR4. 

Filing a tax return when your business has incurred a loss allows you to carry the loss forward - you’re able to offset the current year’s loss against future profits to reduce your tax liability in the following year.

Here is an example. Even though Sarah's bakery didn't make a profit, she still needs to file her 2024 tax return by 7 July 2024. By filing her tax return and declaring the $5,000 loss, Sarah can carry this loss forward to future years. If her bakery makes a taxable profit of $100,000 in 2025, she can offset the $5,000 loss against this profit, effectively reducing her taxable income to $95,000 and lowering her tax bill.

If you need more clarification on this topic, talk to your accountant. 

Let's face it, tax can be confusing. A good accountant is worth their weight in gold. They can help you navigate the complexities, ensure you're claiming everything you're entitled to, stay compliant with the rules and regulations, and keep you on the right side of the IRD. Book a call with one of our team members to explore how we can work together.

Beany Resources delivered straight to your inbox.

Discover how Polymodels Hub capitalised on an opportunity in the pharmaceutical tech space and how Beany's support helped the business thrive. 

CUSTOMER STORY  •  5 NOVEMBER 2024  •  5 MIN READ

Polymodels hub - accelerating drug development with modelling, simulation, data and the accounting support of Beany

Meet Antonio Benedetti, Co-Founder of Polymodels Hub

Drawing on past experience, Polymodels Hub is capitalising on an opportunity to accelerate the development of new drugs and deliver them to patients faster.

“We are a venture-backed business that supports pharmaceutical companies with digital tools in the development of new molecules and products.” Antonio explains, “We work on the development side of things. How to bring a drug from the lab to the manufacturing facilities and how to do that in a digital manner.”

With three co-founders developing expertise in differing scientific domains, Antonio believes their business provides a unique mix of product and service for the industry.

“Two of us worked together at a large pharmaceutical organisation, so we explored firsthand the actual pain and benefit of trying to implement some of these solutions, and where there was a bit of a gap, particularly from the product standpoint, but also positioning in terms of types of services offered. We’ve seen the big opportunity and return on investment that this type of tool brings to the actual pharmaceutical organisations and that gave us the confidence that we could scale across the industry in a similar manner. Our third co-founder has expertise in the product side of things, so in order to build our product it was a good move to add an additional person that could bring that.”

In a journey that’s spanned less than nine months of full-time operation, they are already making exceptional leaps beyond their initial starting plans and vision.

Antonio expresses his excitement: “I’m happy about the type of partnerships we’ve already established. Getting to work with three of the top 10 is priceless for a start-up and it’s very exciting. Being able to grow the team from day one and create a team of fantastic individuals has been another key success. Every time a new team member starts with the right attitude and skill set it feels like a win.”

Amongst their wins so far is also getting a seed round of investment.

As a small start-up, Polymodels Hub’s biggest challenge is trying to get into large pharmaceutical companies.

“You need to have the right type of conversations with the right people to convince these businesses you can effectively provide more value than other companies out there.” Antonio admits.

Although being a challenge, it’s one that they also consider a win when they can celebrate the success of obtaining a new client.

“I would say it’s really about showcasing what kind of value we can bring to the table to this large organisation, and showing we are solid enough to give them the confidence to partner with us for the years to come. It’s a nice challenge to have and we’re up for it, and I think so far it’s materialising well.”

Antonio shares the role Beany has played in helping with the start-up journey so far.

“I’ll be fully honest, it has been a fantastic experience so far.” he says. “Finding a good lawyer and accountant was the first tip I got when digging deeper into how to set up a company.”

Speaking of the partnership that’s developed, he shares “I’ve been lucky that with Beany we’ve found a perfect partner from an accountant standpoint to really satisfy the type of needs that we have as a small business. In my case, it was also coming from abroad even though I’ve lived here for a few years. I wasn’t really familiar with the accounting rules and good practices in this country and Beany was the perfect partner to navigate me through that and provide the support I needed.”

Having professional support has helped Antonio and his co-founders be able to focus on the business and what they’re trying to achieve.

“I think it’s extremely important. It's important not to cut costs when it comes to legal or accounting services. Most importantly, you need to find the right people. It’s easy to spend it but if the service is not good it’s not really going to work in the end. With Beany I was really impressed by the quality of the service and the efficient response that we also always get whenever there is a problem or a question or an issue that we need to face.”

Reflecting on his journey so far, Antonio emphasises the value of patience, knowing your vision and the people. 

“One key thing is you need to be patient for things to materialise. The second is that you need to keep strong on the vision and the strategy that you put together. I think another thing I’ve learned is to invest as much as possible in people. This is something I had the chance to explore when I was in previous roles, but with a start-up, it’s even more important. At the end of the day we are a group of people working towards a vision and a goal, so it’s crucial to find the right people to start the journey. So far it’s been great.”

When asked for advice for other business owners, Antonio gave us the following two gems:

Speak as much as possible with other founders and understand some of the challenges they face. Try to find common ground that you know may save you quite a bit of time and money.

Don’t get too distracted by all the advice out there, just try to find what works for the company you’re trying to build. There are playbooks and those are important, but everyone needs to find their own way of doing things and their own approach to business. That ultimately helps the product but also the culture of any company.

For Antonio and the team the next step is to expand as much as possible. “We want to expand the type and number of customers we have, and also try to push a lot on the product. I think the objective for next year is to start to deploy the product at scale, reach a wide number of companies and try to really shape it in the best way possible.”

With a strong belief in the importance of team, Antonio shares with us the potential to also grow in that space and create an impact that’s more than just business.

“We’re expanding the team and looking forward to seeing what else we could build on top of what has already been achieved to really create value for the companies first, but most importantly the patients.” he shares. “The ultimate goal is to reduce the timelines for the development of drugs and bring medicine to patients faster, so that’s really what creates impact. And not just a business impact, but an impact for society.”

We can’t wait to see the difference Polymodels Hubs will continue to make with their technology and the lasting impact on the acceleration of drug development and the overall healthcare industry.

You can find Polymodels Hub at https://www.polymodelshub.com/

As a business owner, we know you value your time. That’s why we designed the simplest and most pain-free online accounting service around. Our team of experts handle the number crunching, so you can focus on what you do best - starting and growing your startup. From filing year-end tax returns to bookkeeping and GST, we're here to support you every step of the way.  Ready to simplify and unlock your business's potential? Visit our website, sign up, or get in touch.

Customer story

We're excited to share that we're a finalist for 2025.

BEANY NEWS  •  30 OCTOBER 2024  •  1 MIN READ

We are delighted to share that Beany have been selected as a finalist for the London Chamber of Commerce and Industry SME London Business Awards 2025 in both Website of the Year and Online Business of the Year categories 🎉

This is a great achievement for our UK team. We look forward to celebrating the finalists and winners at the awards night in February!

Beany named as a finalist in the SME London Business Awards 2025

Beany news

If you find yourself wanting more from your current accountant, it may be time to switch. We provide some guidance on how to make the transition.

FINANCIAL LITERACY  •  30 OCTOBER 2024  •  3 MIN READ

If you find yourself wanting more from your current accountant, it may be time to switch. We provide some guidance on how to make the transition smooth.

How to handle transitioning from your previous accountant

Is it such a stretch to expect excellent service from your accountant? We don’t think so! 

If you’ve found yourself constantly nudging your accountant for responses, deciphering vague replies, or feeling like your business is just another file on their desk, it could be time to raise the bar. Why? 
Because it’s crucial to have an accountant who not only understands your present needs but also strategically prepares for your future. After all, an effective accountant is one who values your time as much as you do, offering swift, clear, consistent support tailored to your business needs.

Assess your current situation and identify what’s lacking with your current accountant. Is it about responsiveness, expertise, or something else? We have a blog on 8 signs you should switch your business accountant, you can check your situation against it.

Look for accountants who resonate with your business ethos, and prioritise those with a strong understanding of modern business dynamics.  

Set up meetings and don't be shy to reach out to discuss your business needs. It's your chance to lay out exactly what your business requires in terms of accounting services. You can book a meeting with one of our team memebers to discuss how we can work together.

Be specific and candid about your needs, whether it's detailed financial reporting, strategic tax planning, diligent bookkeeping, or expertise in certain industry areas. Inquire about their experience with small businesses and how well they understand the tax nuances in your specific region. For businesses operating in New Zealand, it's crucial to choose an accountant who has a deep understanding of both areas to ensure seamless financial management.

Compare what’s on offer from potential accountants, looking beyond just the fees. Consider the overall value and personalised service you'll receive. In your search, keep an eye out for options like Beany's monthly accountancy package. Our transparent, fixed monthly pricing not only helps you budget effectively but also ensures you stay on top of your administrative needs without any surprises.

Inform your current accountant politely that you’re switching. It's not just courtesy; it's good business karma. If you maintain professionalism and provide adequate notice to ensure a smooth transition, you should avoid any potential friction. And don’t forget to request copies of your financial records, tax returns, and other relevant documents! (Some accountants will handle this process for you so you don't even have to do it yourself).

Work with your new accountant to transfer files and information. Make sure to grant your new accountant access to all the essential documents (e.g., your Xero account), and prioritise the secure handling of sensitive information during this transition.

Settle up with your old accountant and grant them permission to pass on the relevant information to your new accountant.

Establish your communication expectations. Regular chats and updates with your new accountant can do wonders for your business health. For example, we have a team of experts available to answer your questions, without additional costs. If you’re seeking further support or clarity around switching your accountant, please contact our team.

Not at all. With the right approach and guidance, it's very straightforward and can be instrumental for improving your business. Learn 8 signs you should switch your business accountant.

Absolutely. There's no 'wrong' time to make a change that benefits your business. 

What if I've prepaid my current accountant?

No worries, you can still make the move. Any prepaid fees can often be adjusted or refunded (depending on work they've completed and their client terms and conditions).

At Beany, we're 100% committed to your success. Our core package covers your year-end compliance, with one fixed cost split over 12 months. This includes your end-of-year accounts and tax returns, tax minimisation, unlimited support and more. We also have a wide range of other helpful services to help you as you start out or as you grow, such as bookkeeping, GST returns, payroll and more. Book a call for a free chat about your accounting requirements - we'd love to help.

Financial literacy

You may want to show your appreciation by giving employees or clients gifts during the festive season. However, there are some FBT and tax rules you need to follow. 

EXPENSES  •  30 OCTOBER 2024  •  3 MIN READ

You may want to show your appreciation by giving employees or clients gifts during the festive season. However, there are some FBT and tax rules you need to follow.

FBT & tax rules: gifting to employees and clients

You may want to show your appreciation by giving employees or clients gifts during the festive season. However, there are some Fringe Benefit Tax (FBT) and tax deductibility rules you need to follow. 

Essentially, there are 2 important things to consider: what you can gift and how much you can gift. 

The gold rule for gifting to employees and clients is if the gifts consist of food and/or drinks, you’re only eligible for claiming 50% of expenses as part of a tax deduction. However, if your gifts consist of some foods/drinks but not all (e.g. gift box, gift basket), the food and drink items are 50% tax deductible and the rest of the non-food/drink items are 100% tax deductible. 

Besides the nature of your gifts, you’ll also need to consider if you are gifting more than $300 (GST inclusive). In other words, if your gift to your employee is less than $300 per quarter, you may be exempt from FBT. However, if the total value of the gift exceeds $300 per quarter, then it’s subject to FBT.

In other words, as long as you don’t provide any single employee with a gift worth more than $300 each quarter (March, June, September, and December), the costs are 100% deductible. But always bear in mind, if the gift is food and/or drink, then only 50% can be claimed.​ If you need to file an FBT return, make sure to check these key dates for quaterly FBT.

If you’re gifting vouchers, GST can’t be claimed on the purchase price. The 50% rule applies here too – if the vouchers relate to food/drink, you can only deduct 50% of the cost.​

If you’re providing a staff shout, only 50% of the expenses can be claimed because food and drinks are being provided.​

For gifts to clients and suppliers, the rules are exactly the same as above, except there is no set dollar value.​

You can adjust these items to 50% deductible when you reconcile your transactions. Don't panic if you forget – your accountant will correct this for you when the financial statements are prepared.​

Read more: A guide to entertainment expenses 

Other gift items that are not food or drink

If you’re an employee (or a shareholder-employee) receiving PAYE-paid wages from the business, you can. Otherwise, no.​

This is set by Inland Revenue. Anything more than $300 (GST inclusive) per quarter is captured by the FBT regime.

Gifting over $300 is not tax-effective although you still can claim GST on the gift, but the value of the gift will be subjected to fringe benefit tax. 

We’ve compiled a list of business expenses you can deduct, download this checklist and minimise your taxes in just under 5 minutes! 

Need a helping hand? At Beany, we specialise in making accounting and tax a breeze. Our team of experts can handle your tax compliance so you can focus on what you do best – running your business. Let Beany be your trusted accounting partner. Get in touch with us today.

Understanding FBT & tax: gifting to employees and clients

Expenses

Thinking of setting up a company? Before you jump in, consider these key things: choosing a company name, knowing your company’s taxes, and more.

NEW BUSINESS  •  7 OCTOBER 2024  •  5 MIN READ

Thinking of setting up a company in NZ? Before you jump in, consider these key things: choosing a company name, knowing your company’s taxes, and more.

Top 9 Things to Think About When Setting Up a Company in NZ

Setting up a company is an exciting step towards your dream. However, it's important to be well-informed and prepared. 

In this guide, we'll walk you through the top things to consider, from choosing a company name to understanding your legal and tax obligations.

Your company name is one of the most important things you should think about when setting up a company. Your company name (the one you register) doesn't have to be the name your customers know you by. You can use a different "trading name" for your day-to-day business.

Think of your registered company name as being similar to your legal ID – it needs to be unique and follow the rules. For example, you can’t use the same (or very similar) name to another unrelated company. It’s also not allowed to contain any specific sensitive, abusive, offensive or illegal words, and it must end in limited or ltd. Just remember to use your registered name on all official paperwork.

On the other hand, your trading name is more flexible, allowing you to create a brand that resonates with your customers.

2. Who are your shareholders going to be?

The shareholders are the owners of the company. They invest money in the company, and in return they get a share of the profits. This share of the profits is called a 'dividend'.

Shareholders can also be allocated a shareholder salary at the end of the financial year, for payment of work performed. This is an option instead of becoming an employee of your company.

When choosing how many shares to allocate, make sure you are issuing enough so you can share these as required, but not too much to overcomplicate things. The majority of small companies start off with 100 shares.

Also, think about having a shareholder agreement. This will help to combat any future conflict between shareholders as you have clear guidelines and expectations to follow.

Read more: Understanding dividends and imputation credits in New Zealand

Directors are the people who manage the day-to-day running of the company. They make the decisions and ensure the company is operating smoothly.

Being a Director should not be a decision made lightly. A director is legally responsible for ensuring the company follows all laws and regulations and is able to meet its financial obligations.

It's important to note that one person can hold both roles. You can be a shareholder (owner) and also a director at the same time. Or, you could be just one or the other.

4. Register your company with the Companies Office

When setting up a company, registering it with the Companies Office is typically a straightforward process. To get started, you'll need to have your company name ready and put through a name application. Once the name is approved, you can continue with your company set-up. You will need to provide the details of your directors and shareholders (date of birth, IRD numbers, full name and address). Also, you'll need to disclose what industry your company will be trading in. You can apply for an IRD number at this point as well!

Once the Companies Office has processed your application, they will issue you with a Certificate of Incorporation. Keep this handy as you will need it further on.

Ready to take the next step? Let Beany guide you through the company set up process, ensuring everything is done correctly and efficiently. Register today.

Once your company is set up, there are some important tax registrations you'll need to complete with Inland Revenue, regardless of whether you're making a profit yet. If you didn’t apply for an IRD number when registering your company, you will need to do this first. IRD has info on how to apply for an IRD number.

Your company will automatically be set up for Income Tax, but other taxes to consider are:

Goods and Services Tax (GST): If your annual turnover reaches the GST threshold (currently $60,000), you'll need to register for GST. Once registered, you'll need to file regular GST returns, either monthly, two monthly or six monthly. If you will have a lot of upfront costs, we recommend setting up for GST asap so you can claim these in your first GST return. You can’t claim expenses incurred before you were registered for GST (you can still get an income tax deduction at year-end so long as they were post company registration).

Read more: 10 common GST mistakes small business owners should avoid

Pay As You Earn (PAYE): If you have, or are going to have, employees, you'll need to register for PAYE. This system allows you to deduct income tax, ACC, and KiwiSaver contributions from your employees' wages and pay them to Inland Revenue. You'll also need to run payroll and submit them to Inland Revenue under the payday filing rules.

We highly recommend opening a separate company bank account after you set up your company. This is because a company is a separate legal entity from yourself, even if you own it and run it. Any money the company makes or spends should come out of this bank account - it makes your company’s finances so much cleaner and easier, especially during the tax season! You will need to take your Certificate of Incorporation from the Companies Office with you to be able to set this up. 

Read more: Should you class your business as a sole trader or a company?

There is so much value in using accounting software, such as Xero or MYOB, from the outset. A key benefit is that you can clearly see how your business is doing, and more specifically which products or services are doing particularly well or not so well. 

Read more: How Xero accounting software enriches your business

We all know the saying fail to prepare and you’re preparing to fail. This couldn’t be more relevant for a company.

Before you jump in, it's crucial to do your homework. Understand your customers, your competitors, and the overall market. Then, create a clear plan outlining how you'll reach your goals.

Also, it’s important to make a budget. This helps you keep track of your spending and spot any problems early on. Think of it like a roadmap for your finances – it keeps you on track and helps you avoid getting lost.

There is so much to think about when setting up a company in New Zealand, but if you do it right it can be a super exciting journey. If it’s completely new to you then it’s a good idea to get a professional, like an accountant (e.g. Beany) involved. They can help with everything from checking if the company structure actually suits your needs, company registration, to filing tax returns.

Need a helping hand with setting up a company in New Zealand? At Beany, we specialise in making accounting and tax a breeze. Our team of experts can handle your tax compliance so you can focus on what you do best – running your business. Let Beany be your trusted accounting partner. Get in touch with us or register today.

Top 9 things to think about when setting up a company in NZ

New business

From answering the most commonly asked questions such as business vehicles - lease or buy to calculating motor vehicle expenses, this guide for business vehicles is everything you need. 

EXPENSES  •  30 SEPTEMBER 2024  •  5 MIN READ

From answering the most commonly asked questions such as business vehicles - lease or buy to calculating motor vehicle expenses, this guide for business vehicles is everything you need.

The Essential Guide for Business Vehicles

Kiwi business owners frequently enquire about business vehicles. In this guide, we’ll explore some key questions around this topic: from leasing vs buying a business vehicle, business vs private use, deducting vehicle expenses for business to record keeping.

When it comes to getting a business vehicle in New Zealand, you can either lease it or buy it. Both choices have different cash flow and tax effects to think about. 

Leasing means you pay a set amount each month, and you don't have to pay a big sum upfront. These monthly payments can usually be fully deducted as business expenses, which can lower your taxes at the end of the financial year. It’s a good option if your business doesn't have a lot of cash on hand or if you don't want to deal with owning a vehicle. It’s worth noting that you should check your contract carefully because you’re usually tied in for a set period of time and they’re difficult to break if your situation changes.  

On the other hand, buying a vehicle means you own it, and its value can be included as part of your business assets. You could also deduct the cost of the vehicle losing value over time from your taxable income (this is called Depreciation and is tax deductible). However, buying a vehicle requires a larger upfront investment.Another plus side is that because you own the vehicle you can choose to sell it and receive money back whenever you want to - you’re in complete control.

The choice between leasing and buying depends on your business's financial situation, how much you drive, and what your plans are for the future. If you’re not sure which option you should choose, it’s best to consult your accountant and understand the tax implications. If you’re not working with an accountant, register today and you’ll get a team of experts that take care of you and your business. 

Depreciation is a way of spreading out the cost of a business vehicle over its useful life. The vehicle’s wear and tear can be claimed as a tax deduction. For example, if you buy a van for your business, you can't claim the entire cost as a tax deduction in the year you bought it. Instead, you claim a portion of the cost each year, reflecting the van's decrease in value. The specific amount you can claim each year depends on the type of vehicle and the depreciation method* you use.

To calculate how much you can claim as tax deduction, get in touch with your accountant. 

*There are 2 ways to calculate depreciation: diminishing value (DV) and straight line (SL). 

Read more: What is depreciation and what’s it for?

Business vs private use of business vehicle

Using a vehicle for both business and private purposes has specific tax implications. If you use your vehicle solely for business, you can claim the full running costs (e.g., fuel, insurance, depreciation etc) as a business expense. 

However, if you use it for both business and personal purposes, the situation becomes more complex and you need to allocate costs correctly. For instance, if a vehicle is used 70% for business and 30% for private use, only 70% of the total expenses can be deducted. You may also be liable for fringe benefit tax (FBT) if the vehicle is owned by a company and you provide a vehicle for private use.

Understanding Fringe Benefit Tax (FBT) and business vehicle

If you provide a company vehicle to your employees for private use, you may be liable for Fringe Benefit Tax (FBT). This is a tax on the benefit your employees receive from using the vehicle for non-work purposes. The amount of FBT you pay depends on factors like the vehicle's value and how much it's used privately. 

There are 2 ways to calculate FBT: the cost method or the market value method. 

The cost method considers the actual costs of running the vehicle, including depreciation, interest, insurance, and maintenance. 

The market value method is based on the vehicle's market value and assumes a certain level of private use. 

It's important to note that if you use the vehicle yourself for private purposes, you may also be liable for FBT on that portion of use. 

Read more: What is fringe benefit tax (FBT)?

If your business is registered for GST, you can claim back the GST paid on purchasing vehicles. You might also be eligible to claim GST when selling the vehicle.

To determine the amount to claim, estimate the proportion of business vs personal use of the vehicle. It’s worth noting this ratio may vary and impact the GST you owe or can claim back, so you might need to adjust your calculations accordingly. 

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