Accounting basis
The rule deciding when sales and purchases go into a GST return. The main options are payments, invoice and hybrid basis.
RESOURCES / PLAIN ENGLISH
New Zealand accounting & tax glossary.
Clear, short definitions for the terms you may see in Xero, myIR, financial reports or conversations with your accountant.
50 TERMS
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GST
GST terms
14 TERMS
Exempt supply
A supply that is not subject to GST and is not included in a GST return. Residential rent and many financial services are common examples.
Filing frequency
How often you submit GST returns: monthly, two-monthly or six-monthly. Eligibility depends partly on annual sales.
GST adjustment
A correction made when GST claimed or returned needs to change—for example, because something has both business and private use.
GST return
The periodic calculation filed with Inland Revenue showing GST collected on sales, GST claimed on purchases, and the net amount payable or refundable.
Input tax
GST that a registered person may claim on eligible goods and services used to make taxable supplies.
Invoice basis
A GST accounting basis that generally recognises a sale or purchase at the earlier of invoicing or payment. This can create GST to pay before a customer pays you.
Output tax
GST charged on taxable supplies. It is included as GST collected when preparing the GST return.
Payments basis
A GST accounting basis that generally recognises sales when customers pay and purchases when you pay suppliers. Turnover eligibility rules apply.
Taxable activity
An activity carried on continuously or regularly that involves supplying goods or services for payment. It is broader than simply having a registered business.
Taxable supply
A supply made as part of a taxable activity that is subject to GST—usually at 15%, although some supplies are zero-rated.
Taxable supply information
The information kept to support GST on sales and purchases. It replaced the older statutory “tax invoice” requirements from 1 April 2023.
Taxable period
The month, two-month or six-month period covered by a GST return.
Zero-rated supply
A taxable supply charged at 0% GST when specific requirements are met. Certain exports and land transactions can qualify.
INCOME TAX
Income-tax terms
11 TERMS
Balance date
The final day of an entity’s financial year. Most New Zealand businesses use 31 March.
Deductible expense
A cost that can be deducted when calculating taxable income, provided it has the required connection to earning income and is not private, capital or otherwise excluded.
Income-tax return
The information filed with Inland Revenue to calculate an individual’s or entity’s taxable income and income-tax liability.
IR3
The individual income-tax return commonly used by sole traders and individuals with income that is not fully taxed before they receive it.
IR4
The annual income-tax return for most New Zealand companies.
IR6
The annual income-tax return used for trusts and estates.
IR7
The annual income-tax return used for partnerships and look-through companies, with income generally allocated to partners or owners.
Provisional tax
Income tax paid during the year when the expected year-end tax bill is sufficiently large. It spreads payments across instalment dates.
Residual income tax
Income tax for the year after subtracting tax credits such as PAYE and other tax deducted at source. It helps determine provisional-tax obligations.
Terminal tax
The remaining income tax payable for a completed tax year after provisional tax and other credits have been applied.
Taxable income
Income remaining after allowable deductions and adjustments. Income-tax rates are applied to this amount.
ENTITIES
Business-structure terms
09 TERMS
Company
A legal entity separate from its shareholders. It generally files an IR4 return and pays tax on its own taxable income.
Estate
The assets, liabilities and income administered after a person dies. An estate may need its own IRD number and IR6 returns.
Look-through company (LTC)
A company that has elected for qualifying income, expenses and tax credits to flow through to its owners for income-tax purposes. It remains a company legally.
Partnership
Two or more people or entities carrying on business together. The partnership generally files an IR7, while each partner returns their share.
Shareholder current account
An accounting record of money introduced, withdrawn, paid or owed between a company and a shareholder.
Shareholder salary
An amount allocated or paid by a close company to a shareholder-employee for work performed. The tax treatment depends on how it is paid and documented.
Sole trader
An individual trading in their own name. Business profit is generally included in the individual’s IR3 rather than taxed in a separate company.
Trust
A legal relationship where trustees hold and manage property for beneficiaries or a permitted purpose. Tax treatment depends on how income is retained or distributed.
Trustee
The person or company legally responsible for administering trust property according to the trust deed and applicable law.
PAYROLL
Payroll terms
06 TERMS
ESCT
Employer superannuation contribution tax. Employers generally deduct it from employer contributions to schemes such as KiwiSaver.
Gross pay
An employee’s pay before PAYE, KiwiSaver, student-loan deductions and other deductions are taken out.
KiwiSaver
A voluntary work-based retirement savings scheme involving employee deductions and, where required, employer contributions.
Net pay
The amount paid to an employee after PAYE and other authorised deductions.
Payday filing
Employment information reported to Inland Revenue each payday rather than through an end-of-month employer schedule.
PAYE
Pay As You Earn. Tax generally deducted from salary or wages and paid to Inland Revenue by the employer.
ACCOUNTING
Accounting & Xero terms
10 TERMS
Accounts payable
Amounts the business owes to suppliers for goods or services already received.
Accounts receivable
Amounts customers owe the business for goods or services already supplied.
Bank reconciliation
Matching transactions in the accounting records to the bank statement so missing, duplicated or incorrect entries can be found.
Bookkeeping
Recording and organising everyday financial transactions such as sales, expenses, invoices, bills and bank payments.
Cash flow
The movement of money into and out of a business. A profitable business can still have cash-flow problems if money arrives too late.
Chart of accounts
The organised list of categories used in accounting software to record income, expenses, assets, liabilities and equity.
Management reports
Financial reports prepared during the year to help owners understand performance, cash flow and decisions—not only meet tax obligations.
Profit and loss statement
A report showing income, expenses and the resulting profit or loss over a period.
Reconciliation
Checking one set of records against another and explaining any difference—for example, comparing the bank balance in Xero with the bank statement.
Xero
Cloud accounting software used to record transactions, send invoices, reconcile bank accounts, run payroll and prepare financial reports.
General information only.
Definitions have been simplified for readability and may not cover
every exception. For advice about your circumstances,
book a free introductory chat.
GST terminology is based on
Inland Revenue guidance ↗
.
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