How much does it cost to hire an accountant for a small business?

Even in your average small business (1-3 employees, less than $500k turnover) there will be a broad range of options for accounting and finance including getting specialise setup, tax structuring advice, finance systems and processes together with the everyday bookkeeping and accounting functions.

Is an accountant needed for a small business?

An accountant can offer comprehensive startup and ongoing small business advice, while making sure tax compliance is prepared and filed with the relevant authorities on time.

What is the role of an accountant in a small business?

Being a business owner can be a tough job, and it’s good to have a trusted advisor to lean on in times of complexity or uncertainty. An accountant will be able to help you navigate your business through these times, and help keep compliant with relevant tax authorities.

Xero is an integrated accounting platform that can complete all small business invoicing, receipts, bank transactions and reporting for the IRD. Being cloud based means your advisers can have access to your information in real time.

Is Xero Accounting any good?

Xero is a great tool for small businesses as it gives you real time access to the financial data of your business - information we couldn’t imagine being in business without.

How do Contractors and Freelancers Pay Tax?

Being a Freelancer or Contractor means you’re responsible for your business and your tax.

Income Tax is the tax on your income you have earned, less any deductible expenses. Individuals and Companies file annually with Inland Revenue to determine tax payable. Typically contractors and freelancers will be individuals and this income will be taxed at the following rates for the 2018 year:

Tax Rates for Contractors and Freelancers

Source: Google / Wikipedia

The Big Three

Freelancers and Contractors pay tax in three ways:

Withholding Tax
Provisional Tax
Terminal Tax

Withholding Tax - has become more prevalent recently with the introduction of tax changes for contractors working with labour-hire firms. This means that more tax is being directly withheld from the contractor and paid directly to the IRD.

Provisional Tax - is the tax you pay in advance of completing your tax return for the year. This is based off your net taxable income from last year and falls on two/three dates during the year:

If registered for GST on six monthly basis: 28 October, 15 May
If not registered for GST, or on two monthly basis: 28 August, 15 January, 15 May

Terminal Tax - once your tax return has been calculated and the above two taxes have been deducted, there will either be a refund or tax payable. There is a large gap between the end of the financial year and payment of Terminal Tax.

Making it Easier

We find matching tax payments with business activity to be the easiest way for contractors to manage their tax. This usually means either they contribute a % of their income (see effective tax rates above) as its earned into a savings account, or paid straight to the IRD. Some clients also setup weekly or monthly automatic payments to pay down large amounts over time.

Got a Question?

Please get in touch if you have a question:

Contact Us

simon@accountech.co.nz

Disclaimer: Information provided to the best of the authors knowledge at time of publication. Laws are subject to change and independent advice should be sought. The above information is general in nature and should not be construed or relied on as a recommendation.