Question :
Hello,I just started a small at home business selling knit and crochet items. I’m just wondering how soon I need to declare anything for tax purposes? I am definitely not making enough right now but I’m not sure how it works. I’m on a working holiday visa from the USA so not sure about NZ tax and procedure. Thanks!

Question submitted 08/05/20 @ 01:32pm
Industry: Funding & Finance
  • The New Zealand income tax year runs from 1 April to 31 March. If you started the business prior to 1 April 2020 you would need to file an income tax return for year ended 31 March 2020 by 7 July 2020. If not then your first income tax return wouldn’t be due until 7 July 2021 (for the year ending 31 March 2021).I am assuming you haven’t registered for goods & services tax (you wouldn’t be required to if your sales are under $60,000 per annum). Because the income from this business is sourced in New Zealand you would be required to file a return and pay tax on it in New Zealand even if you aren’t a tax resident of New Zealand (would need more information to determine whether or not you are a tax resident). Unfortunately even for simple/small businesses all this can be a bit complicated to understand. My suggestions to simplify would be 1) keep a separate bank account for your business income/expenses, 2) read up on the IRD website for information about income tax for individuals (https://www.ird.govt.nz/income-tax/income-tax-for-individuals) 3) find a small local accountant to help you file your annual income tax return(s) when they fall due and 4) put aside a % of your income for tax using your marginal tax rate (the tax rate corresponding to your income level per annum in the table here (https://www.ird.govt.nz/income-tax/income-tax-for-individuals/tax-codes-and-tax-rates-for-individuals/tax-rates-for-individuals). Hope that is somewhat helpful.

    Thank you for getting back to me so quickly! Was a really helpful albeit a little confusing of a read but I know I’ll just have to figure it out. Definitely have not made anything near 60,000 and I did start after April 1st so guessing I don’t need to file for a goods and service tax. I am on a working holiday visa so I don’t think I’m a tax resident.

    Cool, so in summary then, keep track of your income and expenses, put aside some money for income tax on the profit, and either at the end of this tax year (March 2021) or when you return home (whichever comes sooner) I’d recommend finding an accountant to help you file a return for the tax year ending March 2021, should be a simple job for them if you have good records.

    Only point I have to add to the great advice above is Xero is simple to use and allows for you to do most of the work yourself. An understanding accountant to help secure you as a client will help teach you too. So happy to put you in touch with some options of those help micro business get up and started too! Also some good tools by the ird to help you too. Good on you for your initiative!

    Thank you both for your advice and information!

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