Good record keeping is more than just good practice; it is a legal requirement under New Zealand tax law and a key part of managing compliance risk.
The Inland Revenue Department (IRD) requires businesses to keep sufficient records to support the figures reported in their tax returns. This includes documentation showing income, expenses, assets, and liabilities, along with any calculations and workings used to prepare returns.
The 7-Year Rule
A core requirement is that most tax records must be retained for at least seven years from the end of the income year they relate to. This applies broadly across all taxes, including income tax, GST, and PAYE. Businesses should ensure records are accessible for this entire period, as IRD can request them during a review or audit.
Importantly, the seven-year rule applies regardless of whether records are kept in paper or electronic format. Digital storage is acceptable, provided records remain complete, legible, and readily available for IRD inspection.
What Records Do You Need to Keep?
The IRD’s guidance makes it clear that businesses must retain all records of income and expenditure, including:
- invoices and receipts
- bank statements and cash records
- GST tax invoices and return workings
- wage and PAYE records
- asset purchase and depreciation documentation
The key principle is simple: you must be able to demonstrate how every figure in your tax return was calculated.
Additional Considerations
Records must generally be kept in English or Te Reo Māori, unless specific approval is obtained from IRD. Where records are stored electronically or offshore (including cloud systems), businesses must ensure they remain accessible and compliant with IRD requirements.
Longer retention periods may apply in certain situations. For example, property-related records should typically be retained until at least seven years after disposal, as they may be required to support cost base and tax positions.
Why It Matters
Failure to maintain adequate records can have serious consequences. If the IRD reviews a return and supporting documentation is unavailable, deductions may be denied and assessments adjusted, often not in the taxpayer’s favour.
Maintaining a clear and consistent record retention policy not only supports compliance but also improves efficiency, reduces stress during audits, and ensures your business can substantiate its tax position with confidence.
