Records of income and expenses
It's important you keep accurate and complete records of your income and expenses for 7 years.
Records of income
You should keep these records of your income and expenses:
- tax invoices –everybody keeps these. It's important to keep them if you're registered for GST and you’re invoicing a customer, client or another GST registered person
- other invoices
- credit card sales – you’ll need to keep all copies of the vouchers and voucher schedules
- debit notes –if you're registered for GST and the price of your goods or services goes up after you issue your original tax invoice, you must provide clearly marked debit notes to your customers
- credit notes –if you're registered for GST and the price of your goods or services drops after you issue your original tax invoice, you must provide clearly marked credit notes to your customers
- cash register tape –you’ll need to keep this if your business makes a lot of cash sales and does not have to issue tax invoices for each sale. Record all cash sales on the tape.
Records of expenses
Records of expenses should include:
- tax invoices for purchases of more than $50 if you want to claim these in your GST return. You must get them when you buy goods or services for a business
- evidence of payment, for example invoices, cash sale dockets and till receipts
- evidence of credit card purchases, including credit card vouchers, payment receipts and monthly statements. Also keep the invoice issued at the time of purchase.
You need to keep your banking records. These are your cheque book stubs, bank deposit book and statements. You also need to clearly show the personal use money you take out of and put into your business account.
It can be helpful to keep separate bank accounts just for your business dealings and tax payments.
Records you need to keep
Bank records are:
- cheque book stubs showing full details for cheque you have used
- deposit books
- bank statements for your business and private accounts.
Using your bank statement helps
Having your bank statement sent on the last day of each month can help you:
- prepare your GST returns
- reconcile the details in your cashbook.
Recording money you take out and put into your business account
Clearly show any money you:
- withdraw from your business account for personal use as ‘personal drawings'
- you put into the business from your own personal funds as ‘personal funds introduced’.
You must keep all relevant paper records, for example bank statements. You need do this even if you're storing records on a computer or using electronic banking services.
You must keep records of all your PAYE deductions, which include:
- wagebook information
- copies of PAYE payment information
- tax code declaration (IR330) forms completed by employees
- tax rate notification for contractors (IR330C) forms completed by contractors
- letters from us requesting you change your employees tax code
- letters from us requesting you change a contractor's tax rate
- a copy of any written agreements to treat a payment to a contractor as a voluntary schedular payment that you make a deduction from
- copies of certificate of exemptions
- copies of tailored tax codes
- copies of tailored tax rate certificates.
Credit and debit notes
When they’re used
A seller must issue a credit or debit note if the price of goods or services changes after they’ve issued a tax invoice or filed a return.
- If the price goes down, the seller issues a credit note.
- If the price goes up, the seller issues a debit note.
It does not matter whether the buyer has already paid for the goods or services.
A seller can combine a credit or debit note with a tax invoice. But the invoice must be for different goods or services than the credit or debit note.
The seller must include the credit or debit note in the GST return that covers the period the credit or debit note was issued.
A seller issues a credit note when a buyer:
- cancels an order
- returns faulty goods and the seller agrees to give them a credit.
A seller issues a debit note when:
- a seller undercharges by mistake
- a buyer adds more items to their order.
What they must show
A credit or debit note must show:
- the words ‘credit note’ or ‘debit note’ in a prominent place
- the name (or trade name) and GST number of the seller
- the name and address of the buyer
- the date it was issued
- a brief explanation of why it was issued
- the words ‘copy only’ if it’s a duplicate credit or debit note
- the information in list A or list B.
· price of goods or services shown on the original tax invoice (including GST)
· correct price of goods or services (including GST)
· difference between the two prices
· GST on the difference.
· where the original price included GST, show the differences between the original and the correct prices
· statement that the difference includes GST.
You’ll need to keep record books like wage, deposit, petty cash and cash books. These help you complete your return. We use them when we want to check your accounts.
There should be a wage book for each tax year showing each employee:
- on their own page
- working for you at the start of the year
- who started employment with you during the year.
Details you need in your wage book
- Total gross earnings, including taxable allowances (the amount before PAYE is deducted).
- Amount of earnings not liable for ACC earner levy.
- The amount of PAYE deducted (taking into account any tax credits for payroll giving donations).
- Any payroll giving donations and tax credits for them.
- Child support deductions.
- Student loan deductions.
- KiwiSaver employee deductions.
- KiwiSaver employer contributions (gross).
- Net KiwiSaver employer contributions.
- Other superannuation contributions.
- ESCT (employer superannuation contribution tax).
- The taxable value of any employee share scheme (ESS) benefit.
- The total tax, plus student loan and child support, deducted from the ESS benefit (if any).
- The value of tax-free reimbursing allowances.
- Any advanced pay.
- Any personal service rehabilitation payment.
- Employees who receive an extra pay that's taxed at less than 17.5 cents in the dollar.
Wage book summaries
Summarise the details for each employee at the end of each deduction payment period. This will be either:
- twice monthly or monthly, depending on your yearly PAYE deducted
- every payday if you're a payday filer.
Keep a summary sheet for each payment period showing these totals:
- gross wages
- PAYE deducted, taking into account any tax credits for payroll giving donations
- any payroll giving donations and tax credits for them
- child support deductions
- student loan deductions
- KiwiSaver employee deductions
- net KiwiSaver employer contributions
- the taxable value of any employee share scheme (ESS) benefit
- the total tax, plus student loan and child support, deducted from the ESS benefit (if any).
When you put your deposit book together, we’ll need to see entries showing the:
- deposit date
- payer’s name (this is who gave you the funds)
- the amount of each deposit.
In your deposit book, show if the funds were:
- credit card dockets
Use your cashbook to record what your business sells and buys. It should show how transactions were made, including:
- direct credit
- internet banking
- telephone banking
- automatic teller machines.
Petty cash books
Your petty cash book shows the cash available for day to day expenses and what it was spent on, for example milk, tea, postage and taxi fares.
Computer record keeping for audit
If you’re using computers to store records and for accounting, check
- what records to keep
- how to store them
- what data formats we can use.
Important instructions around business records
If you’re using computer based records and accounting systems, they must:
- confirm your tax liability
- be in English, unless we've approved another language
- contain the necessary information, required by law
- be kept for at least 7 years (it’s the same rule for paper or electronic media)
- must be retrievable and readable at all times (good backup procedures can help here).
What records to keep
As well as your computer based business records, you'll also need to keep these extra records for computer assisted audits:
- Electronic accounting or transaction level records. These include the general ledger, other journals and subsidiary account books.
- Charts and codes of accounts, accounting instruction manuals, and system and program documentation explaining your accounting system.
- Record layouts. These are for the files you’ve kept. If your systems change, we may ask to see your old and new record layouts.
Computer system upgrades, replacements and data
When you install or upgrade a computerised accounting system, you will need to check:
- that the new system can retrieve and read data from the old system
- if data needs to be updated before it can be retrieved and read by the new system
- costs to change data. It may be better if you pay a third party to change your data or print hard copies of the old data.
You can keep your electronic data on CD Rom, DVD, floppy disk or some tapes.
If we need to do an audit, we can also download from any of these to our own computers. Transfer by cable or by USB memory stick between personal computers is also an option.
The best format for saving and storing your data is:
- delimited (use tab, pipe or comma delimited)
- MS Access
- DBF file
- print file
You should document how you copy data onto disk, cartridge or tape. We will also need a record layout, the record length and the block size, if supplied on tape. Send this with the data.