Small Business Tax in New Zealand

What tax rate does a New Zealand company pay?

A New Zealand company incorporated under the Companies Act 1993 pays income tax at a flat rate of 28% on its net taxable income. This rate has applied since 1 October 2010 and covers companies of all sizes with no lower small-business band. The company files an IR4 Company Income Tax Return via the Inland Revenue Department (IRD) myIR portal, generally due by 7 July following the 31 March income-year end (with extension available through a tax agent). Companies with a non-March balance date file within four months of their own year-end. Profits distributed as dividends carry imputation credits at the 28/72 ratio, eliminating double taxation for New Zealand-resident shareholders. [1]

How are sole traders and partnerships taxed in New Zealand?

Sole traders and general partnerships are tax-transparent -- there is no separate entity-level tax. Profit flows directly to the individual owner and is taxed at personal progressive rates using their individual IRD number. Sole traders file an IR3 Individual Income Tax Return by 7 July each year (or the extended date if using a tax agent). Partnerships file a collective IR7 and issue each partner a summary of their share; each partner then includes that share in their own IR3. The personal tax rates effective from 1 April 2025 are:

Rates apply to the slice of income in each band -- not to total income. A sole trader earning NZD 80,000 pays 10.5% on the first NZD 15,600, 17.5% on the next band, and so on up to 33% on the top slice. [2]

What is the Look-Through Company (LTC) regime?

A Look-Through Company (LTC) is a special company structure under Subpart HB of the Income Tax Act 2007 that combines the limited-liability protection of a company with the tax-transparent treatment of a partnership. Rather than paying company tax at 28%, the LTC's income and losses are attributed directly to its owners in proportion to their shareholdings, and each owner is taxed at their personal marginal rate. Loss flow-through is the key appeal -- start-up losses pass through to owners to offset against their other income.

Eligibility criteria under the 2026 rules [3]:

• No more than 5 look-through counted owners (related parties may be grouped as one)
• All owners must be natural persons or trustees (not ordinary companies, tax charities, or Maori authorities)
• The company must be a New Zealand tax resident
• Only one class of shares with uniform rights

The LTC files an IR7L form to report the allocation of income and losses to each owner. The election is made annually through myIR and replaces the prior Loss-Attributing Qualifying Company (LAQC) regime, which was discontinued on 1 April 2011 due to widespread property-investment abuse.

How does provisional tax work for small businesses?

Provisional tax is New Zealand's mechanism for paying income tax in instalments during the year, rather than as a single end-of-year bill. It applies when a taxpayer's residual income tax (RIT) from the prior year exceeded NZD 5,000. For a taxpayer with a standard 31 March balance date, the standard three payment dates are 28 August, 15 January, and 7 May. [4]

Three main methods are available:

Standard option -- each instalment equals one-third of the prior year's RIT uplifted by 5% (using the return filed before the first instalment date) or 10% (using the return from two years prior). Suitable when income is stable or growing.

Estimation option -- the taxpayer estimates their current-year RIT and pays based on that estimate. Avoids overpayment when income falls, but underpayment attracts use-of-money interest (UOMI).

Accounting Income Method (AIM) -- available to small businesses with annual turnover under NZD 5 million. accounting software listed by IRD for AIM (Xero, MYOB, Hnry, and others) calculates provisional tax based on actual current-period profit, with payments made bi-monthly alongside GST. AIM aligns tax payments with real-time profitability -- if the business makes no profit in a period, no provisional tax is due in that period. [4]

First-year businesses do not pay provisional tax under the standard, estimation, or ratio options during their first year. The AIM option, however, applies from day one of operation.

Use-of-money interest (UOMI) -- if provisional tax is underpaid or paid late, IRD charges interest at the current debit rate of 8.97% per annum (effective 16 January 2026, reduced from 9.89%). Overpaid tax earns interest at the credit rate of 2.25% per annum. Interest is charged from the day after the instalment was due and is not a penalty -- it is a straight time-value charge. [5]

What are the GST rules for New Zealand small businesses?

Goods and Services Tax (GST) is levied at a flat rate of 15% on most supplies of goods and services in New Zealand. GST registration is mandatory once a business's taxable turnover equals or is expected to equal NZD 60,000 in a 12-month period. Voluntary registration below that threshold is permitted and is often worthwhile for businesses buying inputs with GST content. [6]

Once registered, a business must:

• Charge GST on taxable supplies and issue tax invoices
• File GST returns (monthly, two-monthly, or six-monthly depending on turnover and preference)
• Pay to IRD the net GST collected after claiming input-tax credits on business purchases

The three GST accounting bases are invoice basis (recommended for most businesses), payments basis (permitted where turnover is below NZD 2 million), and hybrid basis. Zero-rated supplies (exports, financial services in some contexts, land transactions) and exempt supplies (financial services, residential rents, donated goods) do not carry GST output but have different input-tax credit implications.

What ACC levies does a New Zealand small-business owner pay?

ACC (Accident Compensation Corporation) levies fund New Zealand's no-fault personal injury scheme. Self-employed people and working owners of small businesses pay two levies collected by ACC directly, based on income reported on the IR3 or IR4 [7]:

• Earners' levy -- NZD 1.75 per NZD 100 of liable income (2025/26 rate), collected via your tax return and paid to IRD
• Work levy -- rate varies by industry Classification Unit (CU); invoiced by ACC directly based on your liable income
• Working Safer levy -- NZD 0.08 per NZD 100 of liable income (2025/26 rate)

For 2025/26, liable income is capped at NZD 152,790 per annum and has a minimum threshold of NZD 49,365 (for full-time workers; part-time workers on fewer than 30 hours per week are levied on actual liable income below the minimum). ACC levies are a deductible business expense for income-tax purposes.

Is there a capital gains tax in New Zealand?

New Zealand does not have a broad general capital gains tax (CGT). The sale of most assets -- shares, business goodwill, commercial property -- produces no income tax liability if the owner is not in the business of trading them.

However, the bright-line property rule treats gains from the sale of residential property as taxable income where the property is sold within a set period after acquisition. For property sold on or after 1 July 2024, the bright-line period is 2 years from the bright-line start date (the date of acquisition under the title transfer rules). Properties sold within two years produce a taxable gain unless an exclusion applies. The main exemptions are: the main home exclusion (where the property has been used as your primary residence for more than 50% of the area and more than 50% of the bright-line period), business premises, farmland, and inherited property. [8]

Bright-line gains are taxed as ordinary income at the owner's marginal rate (or at 28% for companies). They are reported on the IR3 or IR4 for the relevant income year. Note that the bright-line period was 5 years for properties acquired between 29 March 2018 and 26 March 2021, and 10 years for properties acquired between 27 March 2021 and 30 June 2024 -- check the acquisition date carefully.

For full coverage of property investment rules, see the New Zealand country overview.

Self-employed owners and company directors navigating this regime should work with a qualified tax professional. The rules around provisional tax timing, LTC elections, and the interaction between ACC levies and personal tax obligations are nuanced and vary with individual circumstances.