A guide for small business

• Who needs to register financial documents with the Companies Office?
• When should financial documents be prepared and filed?
• What financial documents are required?
• Who should prepare your accounts?
• Should financial documents be audited?
• Non-active companies
• IRD requirements Top

Who needs to register financial documents with the Companies Office?

You do not need to register any financial documents with the Companies Office each year unless your company:
 

1. Has issued securities to the public (which includes raising money from the public, seeking public investment or seeking public participation in a project, all through a registered prospectus)
2. Is an overseas company that is incorporated outside New Zealand and carries on business in New Zealand
3. Is a subsidiary of a company or body corporate incorporated outside New Zealand

4. Is a “large” company that has between 25% and 50% of its shares (that is, below the level qualifying the company as a subsidiary under 3 above) held or controlled by:

   1. a company or body corporate incorporated outside New Zealand or a subsidiary of such company or body corporate; or
   2. an individual (individuals) not “ordinarily resident” ¹ in New Zealand.
      
       

¹ The term “ordinarily resident” means, in summary, domiciled in New Zealand (by birth or later decision) or is living in New Zealand which is where the person usually lives and has been living during the past twelve months, allowing for occasional absences overseas.

If your company is caught by either 4a or 4b, the “large” test is applied.  A “large” company is defined as having at least two of the following three characteristics:

• It, and any subsidiaries, have assets at balance date stated in the (consolidated) statement of financial position exceeding NZ$10M;
• It, and any subsidiaries, in the relevant accounting period had a total turnover exceeding NZ$20M; or
• It, and any subsidiaries, had at balance date fifty or more full time employees.

Note | A company that does not need to file financial statements with the Companies Office still has to prepare these for Inland Revenue.

A company that has had a previous filing obligation under the Financial Reporting Act 1993, but which may no longer need to file financial statements per the above requirements, should still communicate their current status with the Registrar of Companies so we may update our records.

Companies and other entities that fall into any of these categories must meet more stringent accounting standards and must register certain documents with the Companies Office.  You will find more detailed information in the rest of this note.

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When should financial documents be prepared and filed?

All companies have a 12 month financial year.  For most businesses the financial year begins on 1 April and ends on 31 March (the end of the financial year is known as the balance date).

If necessary you can apply to the Inland Revenue to change the start and finish (balance) date of your financial year to suit the special circumstances of your business.

If you have just formed a company, the first balance date must be no later than 15 months after the date of incorporation.

Documents must be prepared within five months and filed within 20 working days.

What financial documents are needed?

Here is a list (using first the familiar name and then the new name that brings New Zealand in line with international accounting standards):

• A Balance Sheet (now called a Statement of Financial Position)
• A Profit and Loss Statement (now called a Statement of Financial Performance) or,
• An Income and Expenditure statement, if you are not trading for profit.

The accounts will also include an Asset Register (also known as a Depreciation Schedule) that sets out:

• A list of what the company owns (such as vehicles, computers, other office equipment, etc.)
• What the company originally paid for the item
• The current depreciated value of the item.

All the accounts must:

• Comply with the form of and directions as to the preparation of financial statements prescribed in the Financial Reporting Order 1994
• Be signed and dated by two directors (or, if the company has only one director, by that director).

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Who should prepare your accounts?

It is possible to produce your own accounts (it helps to be knowledgeable about accounting and tax issues).  However, most small business owners and managers prefer to concentrate on their core business activities and delegate this specialist task to an accountant or professional bookkeeper.

Should financial documents be audited?

The person drawing up the accounts (such as a chartered accountant or bookkeeper) will typically include a disclaimer to the effect that the tax returns were drawn up on the basis of documents supplied to them by the company, and that they have not checked the accuracy of these documents.

An audit is a thorough examination of a company’s financial records and typically involves a chartered accountant working through them to ensure they are a true and accurate reflection of the company's financial position.

If your company is required to file Financial Statements with the Companies Office, a copy of the auditor’s report must be attached.

For companies that are not required to file with the Companies Office, unless the shareholders resolve unanimously at the annual meeting not to appoint an auditor, there is a general obligation to have financial statements audited.

An audit of your company’s records will cost more but provides more financial transparency to shareholders and other stakeholders (such as lenders, suppliers and potential investors), and the security that its financial position has been checked by a chartered accountant.

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Non-active companies

Companies that would normally file but have been non-active for the financial year may file a Non-active declaration.  Read more about non-active declarations.

IRD requirements

At the end of each financial year you need to produce financial documents for Inland Revenue.  These should be filed within five months of your balance date (or, if all the shareholders of the company agree, within nine months of the balance date).

Learn more from these two useful Inland Revenue publications:

Business Taxes: An overview IR740

Smart business IR320: An introductory guide for businesses
 

Your accountant and solicitor will be able to answer any further questions you might have and help you to comply with your and your company’s legal obligations.