Our Support team receives dozens of questions each day and we love helping you. We may not be able to respond immediately though, so here are some of the most common queries with short answers and links to relevant blogs.
We try to minimise the use of technical terms but sometimes there’s just no avoiding it. The link below takes you to the most common words and phrases you may hear.
Don’t underestimate the level of enquiry needed to provide you with an answer. If we’re asked even the simplest of questions, some of the information* we need is:
- Type of property
- The dates of sale and purchase
- Parties to the transaction
- History of property transactions
If an accountant, solicitor, or tax advisor provides you with a response in 5min or via a quick email without knowing your history, maybe they haven’t asked you the right questions.
* Even if you provide us with these intial answers up-front, we couldn’t provide you with a quick response – these are just the tip of the iceberg. Five years ago, we wouldn’t have needed many questions. Now we do.
Ideally, in the company’s name if it’s going to be a company vehicle. The insurance and any financing arrangements should also be in the company’s name.
The seller and/or lender may require a personal guarantee from you, if you’re a relatively new business with few other assets or no lending history.
Another option is to have the sale and purchase agreement reflect that you’re purchasing on behalf of the company.
It depends, and it’s generally something only you can answer with your knowledge of the business.
One of the more important factors is cash flow – if you buy the asset, do you have the cash available, or do need to borrow and pay interest?
In the first couple of years, we usually don’t recommend paying yourself wages, especially if you’re the only one on the payroll. The administration just isn’t worth it.
Our blog below gives you alternatives.
If you have revenue higher than $60,000 – yes
If your revenue is less than $60,000, most of your sales are to overseas customers, and expenses are incurred in New Zealand – probably yes
If your revenue is less than $60,000 but you’d like to claim GST on a large asset purchased – probably yes
Provisional tax makes life a little easier by having you pay the current year’s tax bill in advance. It’s usually in three instalments – August, January, and May.
At the end of the year, your tax bill is worked out. If you’ve paid more provisional than your actual tax bill, you’ll get a refund. If the provisional tax payments don’t cover your tax, you’ll need to pay the difference (called terminal tax).
Terminal tax is your final tax bill for the year, after deducting any provisional tax payments you’ve made, less any tax deducted at source (such as PAYE or RWT on interest income).
The three most common reasons are:
- Your tax return hasn’t yet been filed
- Inland Revenue hasn’t processed your payment
- You’re on a payment plan with Inland Revenue
If the expense is necessary and incurred for you to generate revenue, then it’s usually fully deductible – it can be offset against the business revenue for tax purposes.
It’s not as easy as that though. Some expenses can have a personal component and cannot be fully claimed. The costs of a meal and drink with a client, for example, are only 50% deductible. The business benefits from maintaining the relationship with a client, but on the other hand, the business paying for your individual meal won’t improve revenue – you need to eat anyway.
Similar to expenses, motor vehicle expenses can be claimed, but up to a point. Most of the time, there will be a personal component. There are different ways to calculate the business portion depending on how diligent you are in keeping proper documentation.
Based on a recent Interpretation Statement issued by Inland Revenue, the answer will probably be ‘no’. The simple reason is that you need to eat to live. You need to spend money on meals anyway, even if you didn’t have a business.
Sole traders can only claim under very rare circumstances which you’re unlikely to meet.
A company can reimburse an employee for meals, or provide an allowance, if it’s outlined in the employment agreement. This applies to shareholder-employees as well.
There are two main ways to increase profit – increasing your revenue, or decreasing your expenses. It doesn’t happen naturally or overnight – you need to spend time examining the business’ transactions and operations, and then figure out what changes are needed.
Many think that your business is best as a company for tax purposes and to limit personal liability. This isn’t correct though. In many instances, it makes no difference at all and you’d be better off not having to deal with the extra paperwork companies require.
Shareholders are the owners of a company. A director is responsible for ensuring the company meets all legal requirements (and there are a lot of them).
A shareholder doesn’t need to be a director, and a director doesn’t need to be a shareholder.
Beany uses Xero to prepare your financial statements, so we’d prefer you to use that as your accounting system – your business and Beany will have access to the same financial information. It’s not compulsory though. We have a number of clients who use only spreadsheets or MYOB, or another computerised system – we can work with anything you use.
As an employee, your ACC levies are automatically deducted from your wages and sent off to ACC – similar to the PAYE that is deducted and paid to the IRD. When you’re self-employed, it needs to be paid separately, with your levies based on your profit and the perceived riskiness of your industry.
Once your tax return is filed, the IRD provides certain information to ACC. ACC will then send you a bill for the amount due.
A summary of income and expenses for a specific period of time – usually months or years. It will often show a separate column for the income and expenses in the previous period – these are called comparative figures.
A summary of assets and liabilities of the business. These are usually split between current (expected to convert into cash received or paid within one year) and non-current (longer than one year).
The difference between assets and liabilities is equity. Similar to owning a house and having a mortgage, you’d want the value of your house (assets) to be higher than the mortgage (liability).
Depreciation is a non-cash expense and applies to fixed assets. There are two ways to think of this:
- Accounting for the normal wear-and-tear of the fixed asset as a business expense each year – it reduces the value (and future selling price); and
- Claiming the cost of the fixed asset over a number of years (minor assets can be fully claimed in the year it’s purchased).
This spreads the cost of a fixed asset over its useful life. It’s an expense in the Profit and Loss Account which means it reduces your tax bill.