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 |