A Guide to Using Xero for Your New Zealand IR10 Form

Tax season can feel like a marathon. You know the information is in your records, but pulling it together for the IRD can be tricky. If you're managing a trust or estate in New Zealand, you'll need to file an IR10 form. The good news is that if you've been using Xero throughout the year, you've already done most of the heavy lifting.

The challenge isn't redoing your books; it's converting your Xero data into the exact format the IRD expects. This guide will walk you through how to take your tidy Xero records and use them to fill out your IR10 form effortlessly.

Prep Before You Start: Making Xero Ready for IR10

Before diving into the IR10 form, a little preparation in Xero will make the process much smoother. The goal is simple: clean data in, correct tax returns out. Here's a quick checklist to follow:

1. Clean Up Everything: This is a non-negotiable first step. Go to your dashboard and reconcile every bank account, credit card, and loan account up to your balance date (usually March 31st). Every transaction needs to be accounted for, as unreconciled accounts lead to incomplete reports and errors.
2. Check Your Chart of Accounts: Your chart of accounts is the list of categories you use to record income and expenses. A clean and organized list makes tax time much easier. For example, keeping separate accounts for rent, power, and insurance is better than lumping everything into a generic 'Overheads' bucket.
3. Review Your Spending: Run a report for the year showing all income and expenses. Does anything look strange? A sudden spike in office expenses might mean you accidentally miscategorized a large purchase. This is also a good time to spot any personal spending that was mistakenly paid from a business account.

Where to Find the Right Numbers in Xero

Xero doesn't generate a completed IR10 form for you, but it does provide reports that contain all the numbers you need. You will primarily use two main reports:

• Profit and Loss Report (P&L): This is your main tool. It summarizes income and expenses over a specific period. This report provides the figures for most of the income and expense boxes on the IR10.
• Balance Sheet: This report is a snapshot of your financial position on a single day, showing what you own (assets) and what you owe (liabilities) on your balance date. You'll use this for sections of the IR10 that ask about asset values or loan balances.

You can find both of these reports under the Accounting menu in Xero, then Reports. Before you run them, make sure to set the correct date range for your financial year (e.g., April 1st to March 31st).

Connecting Xero to the IR10 Form

Income Section (Boxes 15-20)

• Total Sales Income: Grab this from the "Revenue" or "Sales" line at the top of your Xero Profit and Loss report. This is your total income before any expenses are deducted.
• Interest Earned: If the trust or estate earned interest, you'll find an "Interest Income" line in your P&L. That's your number.
• Miscellaneous Income: Any other income should also be clearly listed in your P&L report.

Expenses Section (Boxes 21-35)

This is where your tidy Chart of Accounts pays off. Go through each expense line item on the IR10 and find the corresponding total from your Xero P&L report.

• Purchases and Cost of Goods Sold: This figure usually appears near the top of your Profit and Loss report, directly under your revenue.
• Bad Debts, Insurance, Interest Paid, Rent: Each of these key expenses on the IR10 should have a matching account total on your Profit and Loss report.
• Depreciation: This is an important one. If you use Xero's fixed asset register, it will calculate depreciation for you, and the total will appear on your P&L. If not, you or your accountant will need to calculate it manually based on asset values and the correct IRD rates.
• General Expenses: The IR10 has a line for "Other expenses." This is a catch-all for items that don't fit into other specific categories. You might group totals like "Printing and Stationery," "General Expenses," and "Software Subscriptions" from your P&L here. You will need to attach a schedule detailing what this total is made up of.

A Few Things to Look Out For

Using Xero is a great way to manage your finances, but it's a tool, not a replacement for financial expertise. Here are some common mistakes to avoid:

• Private Use Adjustments: Did you use a business vehicle for personal trips? Was your business mobile phone also for personal use? You cannot claim 100% of these costs as a business expense. You must estimate the percentage of business use and only claim that portion. For example, if a vehicle costs $5,000 per year to run and is used 80% for business, you can only claim $4,000. This is a manual calculation you must do outside of Xero before entering the final figure on your IR10.
• Drawings Are Not an Expense: When a trustee or beneficiary takes money from the business for personal use, it's called "Drawings." This is not a business expense and does not go on your Profit and Loss report or the IR10. Instead, drawings are a reduction in equity and are reflected on your Balance Sheet.
• Know When to Ask for Help: If your trust has complex income sources, such as from overseas or investments, or if you simply feel out of your depth, it is always best to consult an accountant or tax agent. They can review your Xero data and ensure everything is filed correctly. Seeking professional advice is a smart move to ensure compliance and avoid overpaying tax.

By keeping your Xero records clean and knowing which reports to use, filling out the IR10 becomes much simpler. You have all the data at your fingertips; it's just a matter of putting it in the right place.