Under the New Zealand Companies Act 1993, overseas investors whose NZ business has total revenue exceeding $11 million in each of the two preceding accounting periods, or total assets exceeding $22 million, may be required to prepare audited financial statements and file them with the Companies Office within five months of their balance date.
This obligation is often identified later than it should be and when that happens, the cost and complexity of meeting it increases significantly.
At BVO Audit, we regularly work with overseas investors and advisors who weren’t aware these requirements applied to them. This article explains when the obligations apply, why they’re often identified late, and what you can do to get ahead of them.
Who does this apply to?
These obligations apply to any large overseas-owned business carrying on business in New Zealand, whether that’s a property investment or a trading business.
When investing in New Zealand, most overseas investors focus on acquisition costs, financing, tax obligations and ongoing management.
What is sometimes overlooked are the financial reporting and audit requirements that may apply once a business or property is held through a New Zealand entity.
Under the New Zealand Companies Act 1993, a large overseas company that carries on business in New Zealand is required to prepare financial statements and have them audited by a qualified auditor.
A company’s New Zealand business is considered “large” if, in each of the two preceding accounting periods, either:
- total assets of the New Zealand business exceed $22 million, or
- total revenue of the New Zealand business exceeds $11 million.
These thresholds were updated in January 2022 under the Financial Reporting (Inflation Adjustments) Regulations 2021.
Why are these obligations sometimes identified late?
There’s no automatic notification or prompt when a business investment crosses the relevant threshold. Investors often rely on their professional advisor, whether that’s an accountant, tax advisor or legal advisor, to identify the obligation and advise them of the requirements.
In practice, we regularly work with clients who weren’t aware of these requirements until some time after the investment was made. By that point, reporting systems and processes are often already in place and they may not have been set up with audit requirements in mind.
Why timing matters
We recently worked with a client whose advisor identified the audit requirement before the audit process began. Because their financial statements had already been prepared under Generally Accepted Accounting Principles (GAAP), the audit process was straightforward and efficient.
Had the reporting requirements been identified later, additional work would have been required to reconstruct historical information and prepare comparative financial data.
When obligations are identified after reporting is already set up, it can mean revisiting:
- historical financial records
- prior reporting periods
- property or business documentation
To provide the comparative figures required in financial statements, book values under GAAP need to be determined at the start of the comparative period. For example, for a 30 June 2024 balance date, that could mean establishing GAAP book values as at 1 July 2022. Reconstructing this information retrospectively takes considerably more time and cost than getting it right from the beginning.
What about documentation?
For larger property holdings and commercial operations, audit requirements extend beyond the client’s own accounting records. Property managers, operations teams and other third parties often hold documentation needed during the audit process; lease agreements, maintenance records, rental schedules, supplier contracts and the like. Ensuring these records are accessible and well maintained ahead of time is one of the practical steps that makes the audit process significantly smoother.
Filing obligations and deadlines
Audited financial statements must be filed with the Companies Office within five months of the balance date. For example:
- Balance date 31 March → filing due by 31 August
- Balance date 30 June → filing due by 30 November
- Balance date 31 December → filing due by 31 May
This timeline means the audit process needs to begin well before the filing deadline making early identification of the obligation even more important.
What to do next
The smoothest audit processes usually begin well before the audit itself.
If you are an overseas investor with New Zealand business or property interests, or an accountant or financial advisor acting for overseas-owned interests, the most useful thing you can do is identify any obligations early, ideally before reporting systems and processes are set up.
A conversation before reporting is established is often much easier, and considerably less expensive, than revisiting information several years later.
Get in touch with the BVO Audit team for a no-obligation chat about your circumstances.
Author: Alex Houghton, Director, BVO Audit.
