Everything small business owners need to know about record keeping.

In New Zealand, small business owners must keep detailed and accurate records to meet income tax and GST obligations. Good record-keeping not only simplifies tax time but also supports better decision-making and ensures compliance with legal requirements. Here’s a breakdown of what records you should keep, particularly around income tax and GST:

1. General Requirements

For tax purposes, all business records must be kept for at least seven years. These include:

• Invoices and receipts (both sales and purchases)

• Bank statements

• Wage books or payroll records

• Cashbooks and journals

• GST records

• Asset and liability records

• Details of any business income and expenses

2. Receipts and Invoices Based on Transaction Size

Transactions Under $50

• For transactions under $50, you don't need a tax invoice. However, it's still important to keep some form of record (e.g., receipt or log entry) to track the expense.

Transactions Between $50 and $1,000

• A simplified tax invoice is required for GST purposes. This should include:

  • Name and GST number of the supplier

  • Date of the invoice

  • Description of the goods or services provided

  • Total amount paid, inclusive of GST

  • The words “Tax Invoice”

Transactions Over $1,000

• For larger purchases over $1,000, a full tax invoice is required. In addition to the simplified invoice requirements, this should also include:

  • The buyer’s name and address

  • Quantity of goods or services provided

Credit Card and EFTPOS Receipts

• While these receipts are not sufficient on their own, they should be retained as supporting evidence alongside the tax invoice.

3. Electronic Record-Keeping

Electronic records are acceptable in New Zealand, provided they are easily accessible and can be readily converted into a paper format if required. With the rise of accounting and payroll software, many businesses now manage their records digitally, but it's essential to use Inland Revenue-approved service providers for storing data offshore. Always ensure backups are in place to prevent data loss ​(Tax Technical - Inland Revenue NZ)​(Inland Revenue - Te Tari Taake).

4. Records for Specific Transactions

• Petty Cash: Keep a petty cash book to log small transactions and receipts for individual purchases, even those under $50.

• Wages: Payroll records should include details on employee wages, deductions, and any tax obligations such as PAYE (Pay As You Earn).

• Capital Expenditure: Document all major purchases of assets such as vehicles, equipment, or machinery. These records will help when claiming depreciation or calculating capital gains tax.

5. Business Mileage and Travel Expenses

For vehicle-related expenses, keep detailed records of business mileage, including:

• Date of travel

• Purpose of the trip

• Distance traveled

6. GST Record-Keeping

If you're registered for GST, you’ll need to track GST on all sales and purchases. Ensure you keep:

• Copies of tax invoices for both sales and purchases

• Records of adjustments (e.g., for private use of business assets)

• Details of GST claimed on purchases and GST charged on sales

7. Managing Bank Records When Switching Banks

If you decide to switch banks or close a business account, it's essential to download and save all historical statements before losing access. Banks typically provide access to statements through online portals, but after closing the account, this access may be restricted. Here's what you can do:

• Download Statements: Ensure you download bank statements, credit card records, and any other financial documents before closing the account. Save them in a secure location, either digitally or physically, for at least seven years.

• Verify Transactions: Check that all transactions are properly recorded, particularly in the final months before account closure, and reconcile these with your internal accounting records.

• Contact the Bank: If access is already lost, contact your bank and request copies of historical records. Some banks may charge a fee for retrieving old statements.

It's critical to keep all bank records for tax and auditing purposes, even after a bank switch. Having these on hand helps avoid gaps in financial documentation, especially during an IRD audit.

6. Company and Trust Specific Records

For companies and trusts, certain records must be retained to meet legal and regulatory obligations in New Zealand. These records not only serve compliance purposes but also help during audits or when demonstrating transparency to shareholders and beneficiaries.

Company Records

Under New Zealand law, companies are required to keep specific documents as part of their record-keeping, including:

• Minutes of Meetings and Resolutions: Maintain records of all director and shareholder meetings, along with written resolutions. These documents provide evidence of key decisions and must be retained for at least seven years.

• Share Register: This is a record of all shareholders, their shareholdings, and any transfers of shares. The share register must be kept up-to-date and stored indefinitely.

• Constitution and Legal Documents: If the company has a constitution, it must be kept along with other foundational documents, including certificates of incorporation.

• Financial Statements: Full financial reports must be filed annually, in accordance with the Companies Act, and retained for seven years. These should include balance sheets, income statements, and any notes explaining accounting policies used​.

Trust Records

For trusts, the following documents should be retained to ensure smooth operation and to protect the trust’s legal standing:

• Trust Deeds and Amendments: The original trust deed, along with any amendments or variations, should be kept indefinitely.

• Minutes of Trustee Meetings: Trustees are responsible for recording minutes of all meetings where trust-related decisions are made.

• Beneficiary Records: Keep a detailed record of beneficiaries, including their entitlements and distributions.

• Asset Records: Maintain documentation of all assets owned by the trust, including any asset transfers to or from the trust.

Both companies and trusts have distinct obligations, and ensuring you retain the right records is key to staying compliant with New Zealand law.

Why Is Good Record-Keeping So Important?

Maintaining accurate records is vital for proving your business expenses and income if you're audited by Inland Revenue. Additionally, good record-keeping helps you monitor the financial health of your business, claim tax deductions, and stay on top of cash flow.

For further details, you can explore resources on the IRD website and Business.govt.nz.