Frequently Asked Questions
Sole Trader vs Company
One question that is always coming up is what the pros and cons of a Sole Trader structure vs a Company Structure are. Here is some more information about what each of these structures involves:
Company: The business has one or more owners and is a separate legal entity, you can have investors or changes within the shareholders. The losses are not generally held against the owners. Unless you give a personal guarantee, you are not personally liable for company debts. However, as a director, if your actions are seen as careless you may be liable for company losses.
What are the compliance obligations that come with a company? Prepare financial accounts, file a tax return, file a return with the Company’s Office, pay the company’s ACC invoice and keep your business information up to date on the NZBN register.
Sole Trader: You can only have one owner, if you want to sell the business, then it can get difficult, and you may need help from a professional advisor. You are personally responsible for any losses or debts. This could mean that your personal assets are at risk as you are responsible for all income and losses.
What are the compliance obligations for a sole trader? File a tax return, pay your ACC invoice, and keep your key business information up to date on the NZBN register.
GST - When to Register?
Registering for GST is not a must just because you start a business. You only need to start thinking about registering if you have had a turnover of at least $60,000 in the last 12 months or if your business forecast predicts that you will reach $60,000 in the next 12 months. Another reason you may be thinking about registering for GST is that you want to add it to the cost of goods and services you sell.
What does GST involve?
You need to choose how often you file your GST returns, this can be monthly, two-monthly, or six-monthly. We often suggest that you choose the two-monthly filing, this will help with your time management (coding the expenses and remembering what they were for), as well as help with your cash flow, so you don’t get a massive bill every 6 months. The two-monthly option also gives you a chance to see how your finances are tracking and see if any changes need to be made.
Now that you are paying GST, you need to start charging your customers GST, file your returns when you agreed to, pay any GST you may owe at the end of the period and keep a record of your GST.
Home office and vehicle expenses what can I claim?
Home office
You can claim some of your household expenses as part of your business if you use a home office. This is done by taking the square meters of your home and garage, and then working out the size of your home office. From here we can claim a portion of your household expenses like; phone, internet, power, rates, house insurance, and interest paid on your mortgage. Depending on your business and what you use for your home office, change the percentages of what is claimable.
Vehicle
If your vehicle is solely used for business purposes, then you can claim the full running costs. However, if you split the use between business and personal there are three options to consider for claiming vehicle expenses; keep a logbook, claim 25% of the running costs or add up the actual costs. The kilometre rate for your vehicle’s mileage is 95 cents per Km (new rate for 2022-2023 income tax year) for the first 14,000 Km travelled in a year. If you go over that distance, then the rate drops.
Payroll where do I begin?
Cost vs Value – what is included in payroll and how much do you have to know?
Payroll can seem straightforward and easy, however, there are many factors that need to be considered for your individual business’s payroll. How many people will be getting paid and how often? Are you aware of legislation like the Holidays Act 2003? How to manage all types of leave such as annual leave, sick leave, alternative leave, parental leave, and a few other less common ones. Minimum entitlements for employees as well as taxes that the employer is responsible for.
Time – Is this something you can manage, or would it be a better use of your time for us to do it for you?
Is payroll something that you are passionate about and want to learn? How best is your time spent, would your business benefit more from having you working in it or on it? If you are brand new to being a business owner, payroll may be the last thing you want to worry about. Payroll is something that you don’t want to get wrong, as it affects people’s livelihoods. That doesn’t mean you shouldn’t manage your payroll, but maybe let the experts manage it for you until you have the time and headspace to take this on. Payroll can be very time-consuming depending on what is involved within it, as payroll can range from ‘short and sweet’ to a ‘mammoth task’ you just need to decide where your time is best spent.
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"It was such a daunting thought going into our sharemilking business for the first time! Dairy farming and managing staff is so natural to us but the business start up, accountancy and payroll software were so foreign and we didn't know where to start.
Shelley from My Mobile Accountant has been and still is a valuable part of our business. No question is too silly our every question is answered with friendly, professional advice given. Shelley has patiently talked us through our accountancy needs and more, while making us feel very relaxed about the process.
We highly recommend My Mobile Accountant."
Future Farming Ltd - Tracey James & Nathan Bird