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IR3B
April 2019
Schedule of business income
Before you fill in this form read the notes on pages 3 and 4.
Attach this form to your income tax return and keep a copy for your records.
Year ended 31 March
Your name IRD number
(8 digit numbers start in the second box )
Type of business
1. Sales
1
Cost of sales
2. Opening stock
2
3. Purchases
3
4. Closing stock
4
5. Add Box 2 and Box 3 and subtract
Box4. Print the answer in Box 5.
5
6. Subtract Box 5 from Box 1. Print the
answer in Box 6.
6
7. Other income
7
8. Total gross income. Add Box 6 and
Box 7. Print the answer in Box 8.
8
Expenses
9. Accident compensation levies paid to ACC
9
10. Advertising
10
11. Bad debts
11
12. Communication
12
13. Depreciation
13
14. Entertainment
14
15. Home office
15
16. Insurance
16
17. Interest
17
18. Legal and accounting
18
19. Motor vehicle
19
20. Power
20
21. Rent and rates
21
22. Repairs and maintenance
22
23. Salary and wages
23
24. Travel and accommodation
24
25. Other expenses
(Show type)
25
26. Total expenses. Add up all the expenses above and print the answer in Box 26.
26
27. Subtract Box 26 from Box 8 and print the answer in Box 27.
27
28. Gain or loss on disposal of fixed assets (put any loss in brackets).
28
29.
Net income. If Box 28 is a credit, add Box 28 to Box 27 and print the answer in Box 29.
If Box 28 is negative, subtract Box 28 from Box 27 and print the answer in Box 29.
29
RESET FORMRESET FORM
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If you're in business you can use this schedule instead of completing
a set of financial accounts. Partnerships and estates can also use this
schedule. Staple it to the top of page 3 of your tax return.
Balance date
If your balance date is 31 March, work out your income and
expenses for the income year from 1 April to 31 March. If you're not
sure, contact your tax agent, or call us on 0800 377 774.
Record keeping
You must keep:
- books of accounts to record income, expenses, payments, wages,
assets and liabilities
- bank statements, invoices, receipts, and any other documents to
support entries in your account books.
You must keep your records for seven years. Keep all receipts and
invoices with your records in case we ask to see them later.
Motor vehicle records
If you use your car for business you must apportion your running
costs between business and private use.
To work out the business portion of the running costs, keep a
logbook for three months. You can then use the results for the next
three years, provided the business use of the car doesn't change by
more than 20%.
For each business trip write down in your logbook:
- the date
- the distance travelled for each business trip
- the reason for the trip.
Use the difference between the odometer readings for the start
and end of the three months to work out the percentage of vehicle
expenses you can claim.
Example
Distance travelled for business 912 km
Total distance travelled in three months 1,600 km
912
= 57%
1,600
In this case 57% of vehicle expenses can be claimed as a business
expense.
If you don't keep records for your vehicle we limit your claim for the
expenses and depreciation to a maximum of 25%.
Expenses when running a business from home
If you've set aside part of your home for business purposes, you
may be able to claim a portion of the costs of running your business
from home.
To claim these costs you have to set aside an area principally for
your business, such as an office or a storage area, and keep records
of the expenses you're claiming.
Work out the amount of expenses you can claim according to the
proportion of the floor area set aside for your business.
Expenses you can claim include insurance, rates, power and
mortgage interest payments.
You can also claim:
- a portion of the depreciation on your home and on some capital
items used principally for business purposes in your home eg
acomputer or office furniture and fittings
- up to 50% deduction for your domestic telephone line rental. If
you have both a commercial and a domestic line rental you can
claim the full cost of the commercial line but you can't claim any
portion of the domestic line.
Our booklet Smart business (IR320) explains how to calculate a
claim. You can order a copy at www.ird.govt.nz or by calling our
0800 self-service on 0800 257 773.
GST (Goods and services tax)
If you're registered for GST, don't include the GST portion of your
income and expenses when working out the net profit on this form.
Show the GST on your income and expenses in your GST returns.
If you aren't registered for GST include the total income and
expenses, including GST, when working out your net profit.
Filling in the IR3B
Sales - Box 1
This is the total sales or income earned from your main business
activity.
Cost of sales - Boxes 2 to 4
Opening stock is measured at the start of the income year (usually
1 April) and closing stock is measured at the end of the year (usually
31 March). "Purchases" is the cost of buying or producing goods for
sale.
Other income - Box 7
This is sales or income earned from sources other than your main
business activity, eg, interest on the business bank account.
Schedular payments
Don't include schedular payments on the IR3B. Show any income
with tax from schedular payments deducted in your tax return. See
your tax return guide for notes about schedular payments.
Expenses
Only the expenses you incur in generating your business income
are deductible for tax purposes. Apportion or exclude any personal
expenses incurred.
Accident compensation levies - Box 9
Include ACC levy payments for self-employment and as an
employer, and any interest charged.
Bad debts - Box 11
Show any debts not recovered which are actually written off.
Communication - Box 12
Includes telephone, mobile phone, fax and postage costs.
Depreciation - Box 13
This is the total tax deductible depreciation claimed for all business
assets. For more information see page 3.
Entertainment - Box 14
Some business entertainment expenses are only 50% deductible. For
more information read our booklet Entertainment expenses (IR268)
- it will also tell you which expenses are fully deductible. You can
order a copy at www.ird.govt.nz or by calling our 0800self-service
on 0800257 773.
Insurance - Box 16
Include all business insurance premiums. Exclude premiums for
private assets or personal life insurance. Claim premiums for loss of
earnings in your return.
Interest - Box 17
Include interest charged on bank accounts, hire purchase
agreements or term loans. Don't include loan repayments.
Notes
The information on this form is based on current tax laws at the time of printing.
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Legal and accounting - Box 18
Include all deductible legal, accounting and solicitors' fees paid.
Don't include the costs of setting up a business.
Motor vehicle - Box 19
Claim all running costs and apportion for private use. Show
depreciation separately in the box provided on page 1.
Salary and wages - Box 23
This is the total paid to employees and shareholders - include
directors' fees, bonuses and lump sums.
Don't include drawings from the business - these aren't deductible.
Other expenses - Box 25
Show any other deductible expense not covered by the above items,
stating type and amount.
Gain or loss on disposal of fixed assets - Box 28
This is the difference between the amount an asset is sold for (the
sale price), and the adjusted tax value (the written down value or
depreciated book value).
This is the lesser of:
- the cost price less the adjusted tax value, or
- the sale price less the adjusted tax value.
This is to calculate the depreciation recovered. If the sale price is the
lesser figure and the sale price is less than the depreciated value, the
loss on sale is deductible except for the sale of a building.
Net income - Box 29
To work out your net income, subtract the total expenses from total
gross income, then add or subtract any gain or loss on disposal of
fixed assets. Copy your answer to your tax return.
Depreciation
The assets you use in your business will eventually wear out or go
out of date. They will therefore reduce in value, even though you
maintain and repair them routinely. This gradual reduction in the
value of an asset is called depreciation and can be deducted from
your business income.
You must claim depreciation on assets which are expected to
decline in value and have a lifespan of more than 12 months,
unless you elect not to. Not all assets can be depreciated - land is a
common example.
You must keep a fixed asset register to show assets you are
depreciating. Record the depreciation claimed and the adjusted tax
value of each asset. The adjusted tax value is the asset's cost price
less all depreciation calculated since its purchase.
Depreciation rates and calculating depreciation
The depreciation rates for various assets are set by Inland Revenue.
They are based on the cost and useful life of an asset being
depreciated.
To find the depreciation rate for any asset and calculate the
depreciation claim go to www.ird.govt.nz and select "Work it out".
Or use our booklet General depreciation rates (IR265) available at
www.ird.govt.nz or through our 0800 self-service on 0800 257 773.
You can calculate depreciation either by the diminishing value or
the straight line method. You don't have to use the same method
for all your assets, but you must use the chosen method for the full
income year.
You can change the method for any asset from year to year. If you
do change the method of calculating depreciation, the opening
value of the asset is the current adjusted tax value, not the original
cost.
Pooling assets
You can pool or group low value assets and depreciate them as
though they were a single asset.
The assets you can pool are ones which are not used privately and
which cost $2,000 or less, or have depreciated so their adjusted tax
value is $2,000 or less.
You calculate pool depreciation on the average pool value at a single
rate using the diminishing value method. The rate to use is the
lowest rate applying to any asset in the pool.
Once you have included an asset in the pool, you can segregate it
only if you start to use the asset for private use.
Assets costing $500 or less (including loose tools)
Low-value assets, that is, assets that cost $500 or less, are deductible
in the year they are acquired or created provided:
they aren't purchased from the same supplier at the same time
as other assets to which the same depreciation rate applies
(unless the entire purchase costs $500 or less)
the assets won't become part of an asset that is depreciable,
eg, the cost of materials to build a wall in a factory
they were purchased on or after 19 May 2005 (the threshold
before 19 May 2005 was $200).
For more information read our booklet Depreciation (IR260)
available at www.ird.govt.nz or through our 0800 self-service on
0800257773.
Computer software
The cost of software is a capital expense and must be depreciated.
The cost includes paying for rights to use, purchasing upgrades and
developing inhouse packages.
For more information
If you need more help please call us on 0800 377 774 or read our booklets Smart business (IR320) and Depreciation (IR260).
You can get these booklets and this IR3B form at www.ird.govt.nz or through our 0800 self-service on 0800 257 773.
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