Maintain Tax Records

Importance of Clear and Accurate Records
You will need to keep accurate records because they will contribute to the success of your business. Good records will be able to contribute in the following ways.

  • Enable your cash to be controlled

  • Enable full financial accounts to be prepared

  • Enables a business to monitor its finances from day to day

  • Keeps close track of all operations of the business

  • Enables actual performance to be measured against your plan

  • Should highlight problems and other opportunities that arise along the way

  • Enables the business owner to have quick access to information that is important for business decisions.

  • Good records will save a lot of time and effort

  • Good records will, in some cases, come to the fore and be the saviour of the business where legal action has been undertaken (good records are especially of critical importance when it comes to legal fights or court actions).

  • Enables all obligations to the IRD and other regulations to be met

Records Required under N.Z Law

Under New Zealand Tax law anyone carrying on a business must keep proper records to “enable the Tax Commissioner to ascertain the correct tax liability they have”. You have to be able to explain all transactions in your business.

This includes recording sufficient information for the IRD to ascertain your correct taxable profit and confirm your deductible expenses.

The IRD requires you to keep all records in the English language and those records must be clear enough to enable them to work not only the correct taxable income of your business but also the correct taxable income of you as business owner. Your business records must be retained for at least 7 years, from the date when your tax returns are lodged.

In some cases the IRD can go back 10 years if they so require. Your records must be kept safe in an area or storage place where they can be referred to easily. While this is usually a nuisance to most business owners it is much better keeping records handy rather than trying to reconstruct what happened many years before should the IRD require verification of any matter.

If you are making any claims for tax purposes these records will enable you to verify your payments and income so records such as receipts and copies of invoices etc will come in handy.

One of the main reasons therefore for keeping good business records is to comply with the requirements of Tax Law.