Company & trust accounts (IR4) + Xero

Company income tax (IR4) explained

A New Zealand company is a separate taxpayer with its own IRD number, and it files an IR4 income tax return each year. Company profits are taxed at a flat 28%, regardless of how much the company earns. That flat rate is one reason people incorporate, but it isn't the whole story.

The 28% is the company's tax. What you personally pay depends on how you take money out, whether as a shareholder salary (taxed at your personal rates) or as dividends (which carry imputation credits for the tax the company already paid). Getting that mix right is where most of the planning value sits.

We prepare the IR4, reconcile it back to your financial statements, and make sure the income, expenses, and shareholder transactions all line up. A clean IR4 starts with clean accounts, which is why the two go hand in hand.

Annual financial statements

Every active company needs annual financial statements: a profit and loss showing what the business earned and spent, and a balance sheet showing what it owns and owes at year-end. These aren't just a compliance formality. They're the document your IR4 is built on, the thing your bank asks for when you want finance, and the clearest picture of how the business is actually doing.

Preparing them properly involves more than printing a report out of your software:

• Reconciling every bank and credit account so the figures are real
• Recording asset purchases and applying depreciation
• Sorting out the shareholder current account, the running tally of money you've put in or taken out
• Year-end adjustments for accruals, prepayments, and stock
• Making sure GST and the accounts agree

We turn your records into statements that are accurate, IRD-ready, and genuinely useful to you, with a short plain-English summary so you understand the numbers rather than just receiving them.

Trust returns and the new disclosure rules

If you have a family or investment trust, it files an IR6 return. Trusts are taxed on income they retain, while income distributed to beneficiaries is generally taxed in the beneficiaries' hands. The mechanics aren't complicated once they're set up, but they need doing consistently each year.

The bigger change in recent years has been tightened disclosure. Trusts that earn income now generally have to report far more detail to IRD, including financial statements prepared to a minimum standard, settlements, distributions, and information about settlors and beneficiaries. IRD is using this to see how trusts are used across the wider tax system, and the trustee rate has also moved in line with the top personal rate.

• Annual IR6 trust income tax return
• Financial statements meeting the minimum-standards rules
• Disclosure of settlements, distributions, and connected parties

We handle the return and the disclosures together so nothing is missed, and flag if your trust structure is creating cost or complexity that no longer earns its keep. This is general information, not personalised advice. Trust rules are detailed, so confirm your situation with us or check ird.govt.nz.

Setting up Xero properly

Good software makes everything downstream easier, but only if it's set up correctly from the start. A rushed Xero setup creates a year of miscoded transactions that someone has to untangle at year-end, which is slow and expensive. A clean setup means GST returns more or less prepare themselves and year-end is a quick wash-up.

Setting Xero up properly means getting these right:

• A sensible chart of accounts matched to how your business actually works, not a generic default
• Bank feeds connected so transactions flow in automatically
• GST settings matched to your registration and accounting basis
• Bank rules to auto-code recurring transactions
• Invoicing and payment reminders configured so you get paid faster

We'll set Xero up from scratch or tidy an existing file that's drifted, then show you the handful of things you need to do day to day. We're Xero-friendly by default, so if you already have a file, just share it and we'll work from there. Our Xero setup basics guide covers the essentials.

Shareholder salaries and dividends

How you pay yourself out of your company is one of the few genuine levers you have over your overall tax. The company pays 28% on profit; your personal rates step up as your income rises. Balancing shareholder salary against dividends and retained profit is where sensible planning earns its fee.

The pieces in play:

• Shareholder salary: a way to allocate company profit to you, taxed at your personal marginal rates. Useful for matching income to lower-rate bands.
• Dividends: distributions of company profit. They carry imputation credits for the 28% the company already paid, so you're not taxed twice, you're topped up to your personal rate.
• Retained profit: leaving money in the company, taxed at 28%, for reinvestment.

The right mix depends on your personal income, how much cash you need to draw, and your plans for the business. We model it each year rather than copying last year's number, because your circumstances change. The aim is the legitimate, lowest-friction result, never anything that wouldn't stand up to scrutiny. See imputation credits explained for how the credit mechanism works.

Keeping the company tax-efficient

Tax efficiency isn't about clever schemes. It's about getting the ordinary things right, consistently, so you never pay more than you should or wear avoidable interest and penalties. For most companies the gains come from a handful of unglamorous habits.

• Claiming every legitimate expense, including depreciation on assets and home-office or vehicle costs where they apply
• Timing asset purchases and major costs sensibly around year-end
• Setting the right salary/dividend split each year
• Keeping provisional tax aligned to real profit so you don't overpay or wear use-of-money interest
• Using the shareholder current account correctly to avoid deemed-dividend traps

We review these as part of preparing your accounts, not as a separate billable extra, and tell you in plain English where there's a sensible saving and where there isn't. The honest answer is sometimes "you're already doing this well", which is worth knowing too.

Fixed-fee pricing

Company and trust work is priced as a fixed annual fee, set after a free review of your structure and records. You know the cost before we begin, and it doesn't move because a job turned out to be fiddly.

• Company accounts + IR4, including financial statements
• Trust returns (IR6) with the required disclosures
• Xero setup as a one-off, or bundled into an ongoing package
• Combined packages covering accounts, GST, and provisional tax for one predictable price

If your structure is heavier than it needs to be, we'll tell you, because the cheapest compliance is often a simpler setup.

Book a free review

Book a free 20-minute review and we'll look at your company or trust, the state of your Xero file, and where the year-end work sits. You'll get a clear scope and a fixed-fee quote, with no obligation and no upsell.

This page is general information, not personalised tax advice. Company and trust rules are detailed and change over time, so confirm your situation with us or check ird.govt.nz. In plain English: companies pay 28% on profit and file an IR4, trusts file an IR6 with fuller disclosure now, and a clean Xero setup makes the whole year cheaper.