As the 7 July tax return deadline approaches in New Zealand, many small business owners, contractors and property investors will be preparing their income tax returns for the financial year ended 31 March
Whether you run a small business, operate as a sole trader, or own rental property, taking time to review your financial position can help ensure your tax return is accurate and tax-efficient. Planning ahead also allows you to identify opportunities to minimise tax and improve your cash flow for the upcoming financial year.
Working with an experienced accountant can help ensure you meet Inland Revenue requirements while making the most of available deductions.
At ANCA Accounting Solutions we work with established businesses across Auckland to help them prepare accurate tax returns and plan confidently for the year ahead.
Why small business tax planning matters
Many business owners only think about tax when it is time to file their return. However, effective tax planning throughout the year can make a significant difference to your financial outcomes.
Reviewing your finances before submitting your small business tax return in New Zealand
allows you to:
- Ensure all eligible expenses are claimed
- Identify potential tax savings
- Maintain compliance with Inland Revenue requirements
- Plan for business growth in the coming year
Below are some practical tax tips to consider when preparing your return.
Tax tips for small business owners in New Zealand
Accrue expenses before 31 March
If you have unpaid bills as of 31 March, they can be recorded as Accounts Payable, helping to reduce your profit and potentially lower your tax for the year. This follows the principle of expenses being recognized when they are incurred, not when they are paid.
Recording these expenses ensures your financial statement accurately reflects all obligations for the period. By capturing unpaid bills, you avoid overstating profit and gain a clearer view of your business’s true financial position.
Xero tip: In Xero, you can record unpaid bills by entering them as a “Bill to Pay.” This keeps your accounts up to date and ensures expenses are included in the correct financial year.
Write off bad debts
If your business has outstanding invoices that you know will not be paid, you can write them off as bad debts. This is an important part of accounting, as it ensures your financial records remain accurate and up to date.
Writing off bad debts means you won’t be taxed on income you never actually received. Income is usually recorded when an invoice is issued not when payment is received so failing to write off uncollectible invoices could result in paying tax on money you won’t get.
Removing bad debts also improves the accuracy of your financial statements, giving a clearer picture of your business’s true income and cash flow.
To claim a bad debt:
- The debt must be written off in your accounts before the end of the financial year.
- You must show reasonable steps were taken to recover the amount
Writing off a debt does not prevent you from continuing to pursue payment or referring the debtor to a collection agency. If payment is eventually received, the amount will be treated as income at that time.
Claim eligible donations
If you have made donations to an approved New Zealand charity, you may be able to claim a 33% tax credit on the donated amount.
Your taxable income must be equal to or greater than the donation amount. Once your income tax return has been filed, you can also submit a Donation Tax Credit return to Inland Revenue.
Your taxable income must be equal to or greater than the donation amount. Once your income tax return has been filed, you can also submit a Donation Tax Credit return to Inland Revenue.
Fixed assets
At the end of each financial year, it is important to review your fixed asset register.
If assets have been:
- disposed of
- damaged
- replaced
- or are no longer used in the business
they may be written off so that any loss on disposal can be claimed as a deduction for the year.
For the 2026 Financial Year, the Investment Boost enables businesses to claim 20% of the cost of new assets immediately as an expense if the asset was purchased after 22 May 2025. Business can continue to claim depreciation on the remaining 80% of the value of the assets. By claiming the 20% upfront deduction, businesses reduce taxable income, freeing up funds to invest in growth that would otherwise be used to pay tax.
You always need to ask yourself the question; is it worth spending $1 to save yourself a maximum of $0.39 (the top tax rate)? For every $1 you spend you save $0.39, so if you purchase an asset that costs you $5,000, you save a maximum of $1,950.
Xero Tip: When registering a new asset in Xero, select the 20% option in the Investment Boost box. This ensures the immediate deduction is applied correctly.
Claim home office expenses
Small business owners working from home can claim a portion of their household expenses in their business. The amount the business owner can claim is based on the percentage of your home that is a dedicated office space.
To calculate your home office deduction, you’ll need to determine:
- The total floor area of your home and
- The total floor area used exclusively for business
You can claim a portion of expenses such as:
- Mortgage interest or rent
- Council rates
- Insurance
- Utilities such as electricity and internet
Get our free home office expense template
We provide a simple, easy-to-use template to help you collate your home office expenses. If you would like a copy, get in touch and we will send it through.
Low-value asset threshold
Running a business means investing in equipment — tools, office furniture, shelving, or even a coffee machine for your home office. The good news? If an item falls under the low-value assets threshold, you may be able to claim the full cost as a tax deduction immediately, rather than depreciating it over several years.
The low-value assets threshold is currently $1,000 (excluding GST). This means that if you purchase an eligible item for your business under this amount, you can write off the entire cost in your tax return.
Common examples of low-value assets include:
- Small tools and equipment
- Office chairs and desks
- Shelving or storage units
- Electronics like printers or coffee machines
Use-of-money interest
If Inland Revenue charges use-of-money interest, it may be claimed as a deductible expense in your tax return.
However, penalties issued by Inland Revenue are not tax deductible and cannot be claimed.
Expenses that are not tax deductible
Not all expenses can be claimed as deductions in your income tax return. Examples of non-deductible expenses include:
- Most clothing, footwear and eyewear unless it is a uniform or protective clothing
- Fines and penalties
- Income tax payments
- GST payments
- Loan principal repayments
Understanding these rules helps ensure your small business tax return remains compliant with Inland Revenue.
Maintain accurate records
Maintaining accurate financial records is essential when preparing your small business tax return in NZ.
Accounting software such as Xero allows businesses to:
- Attach invoices to transactions
- Store important financial documents
- Track income and expenses throughout the year
Keeping records organised makes tax time significantly easier and helps ensure compliance if Inland Revenue requests information.
Planning Ahead for the Next Financial Year
Once your tax returns have been completed, it is a great opportunity to focus on the future of your business.
Consider asking yourself:
- What three key business goals do you want to achieve this year?
- Are these goals SMART (Specific, Measurable, Achievable, Relevant, Time – bound)?
- Can you review your progress quarterly to stay accountable?
- If your goal is to grow your business, Take Action:Let existing clients know you are
- Available for more work
- Encourage satisfied clients to leave a Google review
- Delegate and Automate i.e. improve operational efficiencies so that you can focus on
- High value work
- Hire and surround yourself with the best people
- Accelerate cash and managing cashflow
Strategic planning can significantly improve your business performance over time.
Work With ANCA Accounting Solutions
Preparing your small business income tax returns in New Zealand can be complex, particularly if you run a business, manage rental property, or have multiple income sources.
Partnering with an experienced Chartered Accountant in Auckland can help ensure:
- Your tax return is accurate and compliant with Inland Revenue requirements
- All eligible business deductions are claimed
- Your finances are structured to support long-term growth and profitability
At ANCA Accounting Solutions, we help business owners, contractors, and property investors navigate tax obligations with confidence.
For personalised advice on preparing your small business Income tax return, or to discuss your business goals with our team, contact ANCA Accounting Solutions today.
ANCA Accounting Solutions, supporting Auckland businesses with expert accounting and tax advice.