Issued
2012

Revised IR10 financial statements summary

Article on the revised IR10 financial statements summary which comes into effect from the 2012-13 income year.

The IR10 Accounts information form has been through some significant changes. It’s now known as the IR10 Financial statements summary and comes into effect from the 2012-13 income year.

Background

The IR10 Accounts information form was designed as a short form of financial statement so taxpayers would not have to file a full set of financial accounts with Inland Revenue. Inland Revenue uses information from the IR10 for analytical purposes (such as tax compliance risk, policy and strategic research).

It also has an ancillary purpose of capturing useful business information, which is used by Statistics New Zealand for the Annual Enterprise Survey. This data set helps support whole-of-Government decision-making (for example, the Budget and interest rates-setting) and provides crucial economic indicators for use by wider Government and other researchers (such as the Treasury and the Reserve Bank). If IR10 information were not available, Statistics New Zealand would have to survey an additional 30,000 businesses to gather this information.

The form was developed in the early 1990s and has not been updated since. It is primarily completed as an attachment to a number of mandatory tax returns (which have business income), but the IR10 form itself is not mandatory, and taxpayers can chose to send in financial statements instead. It is Inland Revenue's preference that an IR10 is filed rather than sending in financial statements. It is widely accepted throughout the tax community (including Inland Revenue) that there have been numerous problems with the old IR10 forms. It was out-dated, sometimes unclear and ill-suited for analytical purposes, both for Inland Revenue and external stakeholders. The changes being introduced seek to address these problems for taxpayers, their agents and Inland Revenue.

Key features

The major changes in the IR10 form include:

  • aligning the form with the taxpayer’s financial statements so there is greater consistency between the two. This will make it easier for taxpayers, tax agents and accountants to translate their own or their clients’ financial statements into an IR10 form
  • discarding boxes that are not fit-for-purpose, and replacing them with boxes that contain more useful variables (from a statistical and risk analytics sense) that are not currently captured in the IR10 form
  • re-labelling some boxes so the scope of the information requested provides more useful information. For example, the previous balance sheet item "Land and buildings" has been split under the new IR10 into separate items "Land" and "Buildings".

The new IR10 form also includes boxes that allow a more accurate disclosure of income not previously accommodated in the old IR10 form, for example, Box 26: Exceptional items and Box 53: Untaxed realised gains/ receipts.

A revised and improved IR10 guide

The IR10 guide has also been updated to underscore the importance of the information being gathered, the purpose of the IR10 form, and to ensure that it is clear what information is required of taxpayers and their agents. The following tables summarise the changes.

Relabelled boxes
2011-12 income year and earlier years
(old IR10)
2012-13 income year onwards
(new IR10)
8 Dividends 8 Dividends received
9 Rental and lease payments 9 Rental, lease and licence income
12 Bad debts (written off) 12 Bad debts
13 Depreciation 52 Tax depreciation
17 Interest expenses 15 Interest expense
18 Legal expenses 16 Professional and consulting fee
20 Rental and lease payments 18 Rental, lease and licence payments
23 Salaries and wages 22 Salaries and wages paid to employees
24 Sub-contractor payments 23 Contractor and sub-contractor payments
31 Bank accounts 31 Cash and deposits
37 Land and buildings 36 Land
42 Shares and debentures 40 Shares/ownership interests
47 Bank accounts 46 Current loans
50 Term liabilities 49 Non-current liabilities
53 Current account closing balance 58 Current account year-end balance
54 Total proprietor or shareholder funds 51 Owners' equity
55 Deductible loss on disposal of fixed assets 59 Tax-deductible loss on disposal of fixed assets
56 Capital gain on disposal of fixed assets 53 Untaxed realised gains/receipts