IR10 Filling in the boxes

Tick “Yes” only if the customer has more than one line of business, not just several different divisions of the same business.

Here are some examples:

• Customer has a window cleaning business and a painting contractor business—tick “Yes”.

• Customer has a supermarket with an alcohol division, a fruit and vegetable division, a delicatessen division and a general grocery division—tick “No”.

• Customer has two gift shops, but uses one return—tick “No”.

Complete only one IR10 for each return.

 This is the gross income from the sale of goods or services as shown in the profit and loss statement. It is also referred to as turnover. Include management fees and commissions if this is the main source of income. Include gross salaries, wages and schedular payments if it is the only income. If there is trading income and gross income such as salary, wages and schedular payments, include them in Box 10 (other income).

This is the total stock on hand, including raw materials, livestock, grain or produce used in the business, work in progress and finished goods at the beginning of the year.

The opening stock figure will generally be the same as the closing stock shown in last year’s comparative figures in the balance sheet (statement of financial position). If the figure cannot be obtained from this source check the cost of goods sold in the profit and loss statement.

Work in progress represents the value of work started but not completed. In manufacturing, it is partly finished goods, while in a contracting business, it is incomplete contracts.

If the business provides a service, rather than selling goods, there may be no stock.

Enter the total amount of purchases and other direct costs as shown in the profit and loss statement. Sometimes, only the cost of goods sold is shown in the profit and loss statement.

In these cases, add closing stock to the cost of goods sold and deduct opening stock. The answer should be treated as purchases, although it may include other direct costs. Direct costs (labour and other) of a business that provides services should be treated as purchases. Do not include purchases of assets where the proceeds of sale of the assets have been included in Box 26 (exceptional items).

This is the total stock on hand, including raw materials, livestock, grain or produce used in the business on hand, work in progress and finished goods at the end of the year.

Work in progress represents the value of work started but not completed. In manufacturing, it is partly finished goods, while in a contracting business, it is incomplete contracts.

If the business provides a service, rather than selling goods, there may be no stock. To find the closing stock figure, check the profit and loss statement or current assets in the balance sheet.

If the turnover of the business is not more than $1.3 million in the income year and if a reasonable estimate of the value of the closing stock is less than $10,000, the opening stock can be used as the closing stock (refer section EB 23 of the Income Tax Act 2007).

Enter the total amount of gross profit as shown in the profit and loss statement. The gross profit figure is determined by taking sales and/or services and then deducting the cost of goods sold. The cost of goods sold is calculated by adding opening stock and purchases (including other direct costs) and then deducting closing stock.

If the gross profit figure is a loss, put a minus sign in the last box. If the opening stock, purchases and closing stock figures cannot be obtained insert the sales and/or services figure shown in Box 2 into Box 6.

Enter the amount of interest income/finance income of the business. You can find this figure in the profit and loss statement. Include interest income from finance leases.

Enter the amount of dividends received as shown in the profit and loss statement, including inter-group dividends. You can gross up the dividends to the extent that they are taxable and the imputation credits are available to satisfy the business’s income or tax liability. Or you can account for the taxable dividends on a net basis and make a tax adjustment for any imputation credits. Businesses that must prepare general purpose financial statements that comply with generally accepted accounting principles (GAAP) must account for imputation credits on a net basis as required by International Financial Reporting Standards (IFRS).

Enter the amount of gross rental, lease, licence and hire income before expenses as shown in the profit and loss statement. Include income from land, buildings, vehicles, fishing quotas and stud fees. Licence income includes franchise fees and royalties. If licence income or hiring activities are part of normal business activities the income should be included in Box 2 (sales and/or services). Don’t include income from hire purchase and finance lease agreements, but show the interest portion of these receipts in Box 7 (interest received).

Enter all other income shown in the profit and loss statement that has not been included in Boxes 2 and 6 to 9. This includes any taxable property income. Include salary, wages and schedular payments that have been included in the profit and loss statement where they have not already been recorded in Box 2 (sales and/or services). Do not include exceptional items that must be included in Box 26.

This figure includes all income shown in Boxes 6 to 10. It should be equal to the total income shown in the profit and loss statement, excluding exceptional items. If the total income is a loss, put a minus sign in the last box.

Enter the total amount of bad debts written off for financial accounting purposes. Don’t include doubtful debts or debt collection fees.

Enter the total amount of accounting depreciation and amortisation as shown in the profit and loss statement. Where tax depreciation rates were adopted for accounting purposes this figure will be the same as Box 52.

Enter the insurance premiums that were treated as an expense for financial accounting purposes. Do not include ACC levies, which should be included in Box 22 (salaries and wages paid to employees).

Enter the total amount of interest expense/finance expense as shown in the profit and loss statement.

Professional fees include accounting, legal fees and taxation advice. Consulting fees include: management advice, financial advisory fees, assistance with feasibility studies, and advice concerning mergers, acquisitions, financing and restructuring. This expense categorisation includes all fees that have been expensed, but not capitalised to the balance sheet.

Enter the total amount of rates paid to local authorities that were treated as an expense for financial accounting purposes.

Enter the total amount of rental, hire, lease and licence payments as shown in the financial statements. Don’t net these expenses against rental, lease and licence income (Box 9). Rental, hire and lease payments can be made for items such as buildings, vehicles and equipment. Licence payments include franchise fees, royalties and licence fees.

Enter the total amount of repairs and maintenance expenditure as shown in the financial statements.

Enter the total amount of research and development expenditure that has been treated as an expense in the financial statements. The expenditure should include all scientific and technological research and development.

For this expense, “associated persons” has the same meaning as in subpart YB of the Income Tax Act 2007. For more guidance please refer to A guide to associated persons definitions for income tax purposes (IR620).

“Associated persons” can include persons and entities, for example, individuals, companies, trustees, partnerships and limited partnerships.

Enter the total amount of remuneration, which has been treated as an expense in the financial statements and paid for services performed by the owner of the business (including sole trader) and/or associated persons. In a small family owned business the remuneration includes regular payments of salaries and wages as well as lump sum payments (whether PAYE was deducted or not). It also includes management fees (whether paid to individuals or associated persons) and directors’ fees paid to associated persons. For a widely owned business (such as a listed company) and/or an overseas owned business, the associated persons’ remuneration will consist of management fees paid to associated persons.

For simplicity, you can exclude indirect remuneration such as ACC levies, FBT and employer contributions to superannuation/KiwiSaver from the associated persons’ remuneration. These exclusions are to minimise compliance costs arising from apportionment.

Instead, you can enter these indirect remuneration expenses in the “Other expenses” box on your IR10.

Remuneration in this context does not include dividends, drawings, interest or royalties.

Enter the total amount of salaries and wages paid to employees that have been treated as an expense in the financial statements. Salaries and wages include PAYE, bonuses and other indirect employment costs such as KiwiSaver contributions and ACC levies. They do not include associated persons’ remuneration.

Enter the total amount of contractor and sub-contractor payments shown in the financial statements. These payments include agricultural and construction subcontractors, schedular payments, relief taxi and courier drivers, temporary contractors (“temps”), and labour-only contractors. Do not include associated persons’ remuneration and salaries and wages paid to employees.

Include any other expenses in the profit and loss statement that have not been included in Boxes 4 and 12 to 23.

This is the sum of all expenses shown in Boxes 12 to 24.

These are large income and/or expense items that do not arise as a result of normal business operations and are not expected to recur. In particular, the following six income and/or expense categories are exceptional items:

1. Results from the sale or disposal of the business or a significant part of it

2. Results from natural disasters, that is, Acts of God

3. Major restructuring costs paid or provided for

4. Major impairments or write-offs

5. Reversal of major impairments, write-offs or restructuring provisions

6. Large one-off non-operational receipts.

For the purposes of this disclosure, only disclose exceptional items if the income and/or expense items in the above six categories total more than 5% of turnover.

If the net exceptional items are a negative amount, put a minus sign in the last box.

This is the total of Box 11 (total income) less Box 25 (total expenses) and then adding Box 26 (exceptional items) if it is a positive amount, or deducting Box 26 if it is a negative amount. The net profit/loss before tax should be the same as the net profit/loss before tax shown in the profit and loss statement. If there is a net loss before tax, put a minus sign in the last box.

These are the total of all the adjustments that are required to go from the net profit/loss before tax as shown in Box 27 to the total current year taxable profit/loss as shown in Box 29. The tax adjustments figure may be positive (add to net profit) or negative (deduct from net profit). If it is negative put a minus sign after Box 28. If there is no difference between Box 27 and Box 29 leave Box 28 blank.

Examples of common causes of tax adjustments are differences between accounting and tax depreciation, tax depreciation recovered, capital gains and losses on sale of assets, provisions not incurred at balance date, tax-exempt inter-company dividends and non-deductible expenditure such as entertainment.

Tax adjustments may also be required for items not included in the profit and loss statement. Examples include imputation credits attached to dividends received, fair dividend rate income and income earned by sole traders that has not been included in the financial statements, for example, interest and dividends.

Enter the taxable profit/loss figure from the tax return. This figure should be equal to the net profit/loss before tax in Box 27 plus or minus the tax adjustments shown in Box 28.

It should be before inter-group company loss offsets and the utilisation of any losses carried forward. The figure should be the same as:

IR3 – Box 27

IR3NR – Box 24

IR4 – Box 24

IR6 – The sum of Box 17B (total income), minus Box 19 (expenses claimed)

IR7 – Box 22

IR8 – Box 8J

IR9 – Box 15

If there is a tax loss for the current year, put a minus sign in the last box.

Enter the total amount of all accounts receivable and debtors, which is the amount the debtors owe the business at the end of the period as shown in the balance sheet.

Enter the total amount of all bank accounts in funds as shown in the balance sheet. Include all funds on short-term deposit (that is, less than one year), cash on hand, funds with building societies, stock firms and other financiers.

Include any other current assets shown in the balance sheet that have not been included in Boxes 30 or 31. This should include closing stock (inventory), work in progress, and the balance of the owners’ current account where they owe funds to the business.

Enter the accounting book value (net of depreciation) of vehicles as shown in the balance sheet and associated notes to the accounts. Vehicles include boats, trailers, motorbikes, tractors, caravans, aircraft and helicopters, as well as cars and trucks.

Enter the accounting book value (net of depreciation) of plant and machinery as shown in the balance sheet and associated notes to the accounts. Don’t include anything already included in Box 33 (vehicles).

Enter the accounting book value (net of depreciation) of furniture and fittings as shown in the balance sheet and associated notes to the accounts. Include chattels and office equipment.

Enter the total value of land as shown in the balance sheet and associated notes to the accounts. Typically, the value will be the cost or a re-valued amount.

Enter the accounting book value (net of depreciation) of buildings as shown in the balance sheet and associated notes to the accounts. Buildings include residential houses, factories, office buildings, barns and car parking buildings.

Include the accounting book value (net of depreciation) of any other fixed assets in the balance sheet that have not been included in Boxes 33 to 37.

Enter the total book value (net of depreciation and/or amortisation) of intangible assets as shown in the balance sheet and associated notes to the accounts. Common examples of intangible assets include goodwill paid when a business is purchased, computer software, patents, trademarks and Resource Management Act consents. It also includes the rights to use intangible assets.

Include any other assets shown in the balance sheet that have not been included in Boxes 30 to 41.

This is the total of all entries made in Boxes 30 to 42. It should be the same amount as the total of assets shown in the balance sheet.

Enter the amount of provisions as shown in the balance sheet and associated notes to the accounts. A provision is generally to provide for estimated expenditure that it is anticipated the business will have to pay in the future. Examples include re-structuring, redundancy, and bonuses.

Enter the total amount of all accounts payable (creditors), including all trade creditors as shown in the balance sheet. It is the amount the business owes its suppliers as at the end of the period. Also include expenses that have been accrued at balance date.

Enter the amount of loans outstanding that are re-payable or will have to be re-financed within one year as shown in the balance sheet. Include interest-free loans, loans from the owners of the business, bank overdrafts and amounts owing to stock firms.

Include any current liabilities as shown in the balance sheet that are not shown in Boxes 44 to 46. Current liabilities are liabilities payable within one year. Include the balance of the owners’ current account where the business owes funds to the owner.

Add Boxes 44 to 47 and enter the total here. It should be the same as the total current liabilities shown in the balance sheet.

Enter the total amount of liabilities with a term of more than one year as shown in the balance sheet. Include loans, mortgages or other term borrowing. Don’t include the owners’ current account balance.

This is the total of Boxes 48 and 49. It should be the same as the total of liabilities shown in the balance sheet.

This is the equity or interest that the owners have in the business. With a company it will be the sum of paid-up capital, reserves and retained profits/accumulated losses. With a partnership or sole trader, it will be the sum of capital that has been contributed and retained profits/accumulated losses. With a club or society, it will be accumulated funds and reserves. With a trust or estate, it will be the sum of amounts settled and undistributed profits/accumulated losses. The owners’ equity should be the amount shown in the balance sheet and be equal to total assets shown at Box 43 less total liabilities shown at Box 50.

Owners’ equity is usually a positive figure. However, if accumulated losses exceed the capital of the business it is a debit. If a debit put a minus sign in the last box.

• fixed assets

• depreciable land improvements as specified in schedule 13 of the ITA 2007

• depreciable intangible property as specified in schedule 14 of the ITA 2007

• expenditure on primary industry improvements as specified in schedule 20 of the ITA 2007.

For further information on tax depreciation refer to Depreciation – a guide for business (IR260) available on the Inland Revenue website www.ird.govt.nz. Where tax depreciation rates were adopted for accounting purposes this figure will be the same as Box 13 (accounting depreciation and amortisation). Tax depreciation excludes depreciation on buildings with an estimated useful life of 50 years or more.

This includes all gains and receipts not subject to income tax. These amounts of untaxed gains and/or receipts should be drawn from the financial statements. Common examples of realised untaxed gains/receipts are capital gains on the sale of assets such as land or shares, gifts received and one-off receipts of a capital nature.

Enter the total amount spent during the year on purchasing fixed assets and the costs of commissioning them. You may be able to get this figure from the accounting depreciation summary shown in the notes to the financial statements.

Enter the proceeds from the sale of fixed assets and funds received as a result of scrapping fixed assets. You may have to get this information from the financial records of the business.

Enter the amount of dividends paid to shareholders or credited to their current account during the year (including resident withholding tax). Do not include imputation credits attached to the dividends and dividends that were proposed but not paid at balance date. Include non-cash dividends such as distributions of assets to shareholders or expenditure for the benefit of the shareholders. The dividends paid can generally be obtained from the profit and loss statement or statement of changes in equity.

Enter the total drawings taken from the business by the proprietors or shareholders or partners or beneficiaries. Include all private use adjustments and private expenditure through the business that has not been treated as a dividend or a trust beneficiary distribution. This information will be obtained from the analysis of the proprietor’s or shareholders’ or partners’ or beneficiaries’ current account.

This includes:

• for partnerships – the current accounts of the partners.
• for companies – the current accounts of the shareholders.
• for estates and trusts – the beneficiaries’ current account balances.

For other entities, such as a self-employed person, it includes current accounts of a similar nature. Add together the closing balances of all proprietor or shareholder current accounts. If a debit, put a minus sign in the last box.

Enter the total tax loss on disposal of fixed assets. The loss on disposal can be calculated by taking the difference between written down tax value and sale proceeds. Include the loss arising when fixed assets are scrapped. Do not include depreciation recovered.