For information and reference only – not to be submitted as your own work.
Prepared under the guidance of
Dr. Sophie McAllister – Victoria University of Wellington, New Zealand
Dr. Sophie specialises in MBA finance assignments involving financial performance, investment decisions, budgeting and business analytics. View Dr. Sophie McAllister’s profile
This extract shows how a strong answer to the CA Program Tax (NZ) case study (TAXNZ, Term 4 2026, Assessment 1, 40 marks) is put together. The company is a fictional Nelson ceramics business: a New Zealand tax-resident close company with a 31 March balance date and an accounting profit before tax of $486,000 for the year ended 31 March 2026. The owners want taxable income kept as low as the law allows.
Only four of the nine Task 1 items and the Task 2 dividend calculation are worked in full. The rest are method pointers, so treat this as a reference for structure and reasoning. For the step-by-step approach, read our guide on how to reconcile accounting profit to taxable income in NZ, and for a different tax paper see this Level 7 taxation sample.
How the reconciliation is set out
Start at accounting profit, then take each item in turn: add back what was expensed but is not deductible this year, deduct what is deductible but was not expensed. Show nil adjustments as a line with a reason. All amounts are assumed to be GST-exclusive, because the brief extract does not say otherwise.
Each line needs three things: the accounting entry, the tax rule, and the arithmetic. Markers award the rule and the working separately, so a correct figure with no reasoning loses marks.
Task 1: items worked in full
| Item | In accounting profit | Tax position and working | Adjustment |
|---|---|---|---|
| 4. New kiln | Depreciation $9,000 | Diminishing value 10%, available for use 1 May 2025, so 11 months. $72,000 × 10% × 11/12 = $6,600 | +$9,000 − $6,600 = +$2,400 |
| 5. Old kiln sold | Loss $2,000 | No depreciation in the year of disposal. Depreciation loss = adjusted tax value $11,500 − sale price $7,000 = $4,500 | +$2,000 − $4,500 = −$2,500 |
| 7. Trade debt | Expense $9,500 | Written off 15 May 2026, after the 31 March 2026 balance date, so not deductible in this year | +$9,500 |
| 9. Accounting fees | $6,300 year-end accrual; $4,800 reversal and payment net to nil | $4,800 relates to work done this year and is deductible. $6,300 is for work not yet performed | +$6,300 − $4,800 = +$1,500 |
Item 4: new kiln
Inland Revenue counts part-months as whole months and apportions the annual amount by months of use. Using the straight-line rate instead would give $72,000 × 7% × 11/12 = $4,620. Because the owners want the lower taxable income, diminishing value is the better election this year. Investment Boost is ignored, as the brief instructs.
Item 5: old kiln
The sale price of $7,000 is below both cost and adjusted tax value, so there is no depreciation recovery. The original cost of $40,000 is a distractor. Inland Revenue states that depreciation cannot be claimed in the year an asset is disposed of, and the loss is measured against adjusted tax value (Income Tax Act 2007, ss EE 11 and EE 44 to EE 48). If your brief also shows accounting depreciation on the old kiln for April to September, add that back too.
Item 7: trade debt
The debtor’s liquidation in March 2026 shows the debt was bad, but the deduction turns on when it was written off. Inland Revenue’s public ruling BR Pub 18/07 says a write-off must occur within the income year and cannot be backdated. The expense is therefore added back and becomes deductible in the year ending 31 March 2027 (s DB 31).
Item 9: accounting fees
A fee is generally deductible in the year the work is done, not when it is accrued. The Taxation Review Authority applied that approach to accounting fees accrued before the work was performed. Here the prior-year accrual relates to work done and paid for this year, so it is deducted. The new accrual is added back and is claimed next year.
Partial reconciliation
| Line | Amount |
|---|---|
| Accounting profit before tax | $486,000 |
| Item 4: depreciation difference | +$2,400 |
| Item 5: old kiln loss difference | −$2,500 |
| Item 7: bad debt added back | +$9,500 |
| Item 9: accounting fees | +$1,500 |
| Subtotal after items 4, 5, 7 and 9 | $496,900 |
| Items 1, 2, 3, 6 and 8 | Complete using the pointers below |
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Task 1: method pointers for the other items
| Item | How to approach it |
|---|---|
| 1. Competition prize | Decide whether the prize is income of the business or a one-off windfall, linking it to the product range. State the test you apply, then adjust only if it is not already in profit. |
| 2. Landlord incentive | A payment to a tenant for taking a lease is taxed under s CC 1B and spread evenly by month over the lease term under s EI 4B. Compare the amount already in profit with the months falling in this income year. |
| 3. Conference trip | Separate the business and private elements, including the partner and the extra nights, and disallow the private part. FBT and dividend consequences are excluded by the brief. |
| 6. Maintenance contract | Test the prepayment rule in s EA 3, then check Inland Revenue’s Determination E12, which excuses some service-contract prepayments by amount and by months remaining after balance date. |
| 8. Trading stock | Cite s EB 23 (valuing closing stock under $10,000). Check both conditions in the Inland Revenue guidance (sales and estimated closing stock), then decide whether opening value can stand in for closing value. |
Task 2: final dividend
The $90,000 total cash allocation includes the RWT paid to Inland Revenue, so it is the cash dividend before RWT is withheld. The maximum imputation ratio is 28/72, which is 28 cents of credit for each 72 cents of cash dividend. Resident withholding tax on dividends is 33% of the gross dividend, less the imputation credits attached.
| Step | Working | Result |
|---|---|---|
| Ratio limit on credits | $90,000 × 28/72 | $35,000 |
| (a) Credits attached | Lower of $35,000 and the ICA balance | $20,000 |
| Gross dividend | $90,000 + $20,000 | $110,000 |
| RWT before credits | $110,000 × 33% | $36,300 |
| (b) RWT to withhold | $36,300 − $20,000 | $16,300 |
| Total cash paid to shareholders | $90,000 − $16,300 | $73,700 |
| (c) Cash to each 50% shareholder | $73,700 × 50% | $36,850 |
For (c), the two shareholder-directors each hold 50% of the shares, so each receives $73,700 × 50% = $36,850 in cash, with $10,000 of imputation credits and $8,150 of RWT credited to each. The same logic applies to Inland Revenue’s own example of $72 cash plus $28 credits, which leaves $5 of RWT.
Task 3: approach only
A donation of stock is not a cash gift. The company donation deduction (s DB 41) applies to cash gifts, according to Inland Revenue’s donee guide (IR255). Since 1 April 2024, trading stock given to an approved donee organisation is not deemed sold at market value, so the $8,400 market value is not income. Officials’ policy material describes the donor as receiving a net deduction for the stock’s cost through the trading stock rules, rather than a separate deduction at market value.
For the ethics part, the principle most at risk is integrity, with professional behaviour close behind. The director’s pressure is an intimidation threat. A good response explains the law, declines to claim $8,400, documents the advice, raises it with the board if needed, and considers whether to continue the engagement.
If you want a specialist to check your own working, our accounting assignment help and case study help pages explain how that works. You can also browse the current NZ assignment question bank for similar briefs.
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References
Chartered Accountants Australia and New Zealand. (2025). 2025 update to NZ Code of Ethics on tax planning and related services. https://www.charteredaccountantsanz.com/news-and-analysis/news/2025-update-to-nz-code-of-ethics-on-tax-planning-and-related-services
Chartered Accountants Australia and New Zealand. (n.d.). NZICA rules and Code of Ethics. https://www.charteredaccountantsanz.com/member-services/member-obligations/regulations-and-guidance/new-zealand-regulations/nzica-rules-and-code-of-ethics
Income Tax Act 2007 (NZ). https://www.legislation.govt.nz/act/public/2007/0097/latest/whole.html
Inland Revenue. (n.d.). Disposing of trading stock. https://www.ird.govt.nz/income-tax/income-tax-for-businesses-and-organisations/types-of-business-income/trading-stock/disposing-of-trading-stock
Inland Revenue. (n.d.). Dividends. https://www.ird.govt.nz/pages/campaigns/income-tax/investment-income/dividends
Inland Revenue. (2024). Law change for disposal of or a donation of trading stock to approved donee organisations. https://www.ird.govt.nz/updates/news-folder/2024/law-change-for-disposal-of-or-a-donation-of-trading-stock-to-approved-donee-organisations
Inland Revenue and Treasury. (2024). Disposals of trading stock at below market value [Regulatory impact statement]. https://www.taxpolicy.ird.govt.nz/-/media/2c9dd7b85f7e41b99f7b6d398472af44.ashx
Inland Revenue. (n.d.). Managing depreciation. https://www.ird.govt.nz/income-tax/income-tax-for-businesses-and-organisations/types-of-business-expenses/depreciation/managing-depreciation
Inland Revenue. (n.d.). Maximum imputation ratio. https://www.ird.govt.nz/income-tax/income-tax-for-businesses-and-organisations/income-tax-for-companies/imputation-for-companies/how-imputation-credits-work/maximum-imputation-ratio
Inland Revenue. (n.d.). Work out diminishing value depreciation. https://ird.govt.nz/income-tax/income-tax-for-businesses-and-organisations/types-of-business-expenses/depreciation/claiming-depreciation/work-out-diminishing-value-depreciation
Inland Revenue. (2007). Timing of deduction for accounting services [Case summary, TRA Decision 14/07]. https://www.taxtechnical.ird.govt.nz/case-summaries/2007/timing-of-deduction-for-accounting-services
Inland Revenue. (2018). Public ruling BR Pub 18/07: Writing off debts as bad for income tax and GST. https://www.taxtechnical.ird.govt.nz/-/media/project/ir/tt/pdfs/rulings/public/pub00300-august2018.pdf
Inland Revenue. (2026). IR255 Charitable and donee organisations. https://www.ird.govt.nz/-/media/project/ir/home/documents/forms-and-guides/ir200—ir299/ir255/ir255.pdf
