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Cash Basis vs Accrual Basis Accounting NZ


Cash Basis vs Accrual Basis Accounting NZ


For ordinary sole traders and partnerships there is effectively no provision to file cash based accounts with the Inland Revenue (IRD). Any limited liability companies / partnerships must file accrual based accounts.


However, as a small business you may prepare GST inclusive accounts which effectively matches the physical payments and receipts of cash, with the only additional requirement being to provide for debtors, creditors and closing stock at balance date which haven’t resulted in actual cash transfers.


According to IR10 (refer link) of the IRD, if the business has a turnover of less than $1.3 million and any stock is less than $10,000, then the opening stock balance can be used as the closing stock balance (refer section EB 23 of the Income Tax Act 2007).


If your turnover is greater than $60,000 NZD per annum then you must register for GST (Goods and Services Tax). Where your turnover is less than $500,000 you may file every six months, you can optionally elect to file on a two or monthly basis.


Where you are registered for GST then if your turnover is less then $1.2 million (And projected to be in the next 12 months) then you can use a cash (payments) basis for filing your GST returns. Refer to the following: IRD

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