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LETS GET DOWN TO BUSINESS.

Question :
Hi all,I became a licensee of a small event styling franchise a couple of months prior to lockdown. I’ve not received any helpful answers to the following questions and would love to get some advice as I don’t have spare $ for legal/accountancy council given I haven’t generated any income through the business during lockdown.I won’t be earning 60K or more for a few years or so, should I still register for a G.S.T number? What is the benefit of this?Do I register my business as a type of company and get an IRD number and NZBN number? Again, what are the pros and cons to this.How do I claim expenses, such as mileage, new vehicle, internet, rent offset? Is this best done by an accountant? Have I missed out doing so for this financial year? If so, can I take these expenses and claim them back next year?Tips on how to keep track of them all?Thanks so much!

Question submitted 14/05/20 @ 04:26pm
Industry: Funding & Finance
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  • Hi,

    Thanks for your question. First up, can the master franchisor provide any advice, I would imagine you are in the same situation as their other franchises and that these questions have been asked and answered before?

    Sounds like you have done some research already and understand a bit about GST which is great, the IRD does have a lot of information on their website and you can call them and discuss this, for free, http://www.ird.govt.nz/gst/registering-for-gst.

    As far as I am aware, you will need an IRD/NZBN number for your business however that doesn’t mean you are GST registered, thats a seperate “form to fill”.

    Have I missed out doing so for this financial year?

    I assume you mean the 2019/2020 financial year, returns for that period need to be filed before March 31, 2021, so you haven’t missed out on that, you will still be able to claim expenses from that period in your return.

    Managing and recording your expenses, the lowest cost way to do this is on a spreadsheet. If you feel competent, setup your business with Xero, its not expensive to do this however you do need to have a bit of financial literacy. This will allow you to significantly reduce any accountants fees later also as you are largely doing all the work and they will simply access your Xero account and prepare accounts. Makes GST filing a ton easier also.

    There are guidelines with the IRD about mileage allowances, home office allowances, etc, need to keep an eye on FBT (fringe benefit tax).

    All the said, as much as you aren’t keen to spend $’s with an accountant, it probably would be money well spent. You could possibly get a local accountant to provide you with a fixed price quote to provide the advice.

    Good luck and I hope your business does well.

    Greg

    Hi
    Further to the above, if you haven’t already set up a company, you don’t have to set one up. You could carry on the business as a sole trader, use your own, existing, IRD number, and register for GST in your own name. Carrying on the business through a company would provide limited liability and create a separation between your personal affairs and the business. A company does however come with some set up and running costs and additional admin. If either you or the company registered for GST, this would enable you to recover GST on your expenses – but you would required to charge GST on your sales. In the short term, being registered can therefore be helpful for cashflow as you get GST back on your set up costs but, assuming you are expecting to derive revenue, adding GST will effect how competitive your pricing is and, again, can introduce some additional admin and operating cost. As it seems you are aware, once sales are expected to exceed $60,000pa you would be required to be GST registered. All the best.

    Ah good catch, you certainly do not need to actually set up a company to do this if you haven’t already.

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