REPORT ON PROGRESS
Shareholder Current Account Explained
If you run a company in NZ, you need to understand your Shareholder Current Account. Here’s what it is, why it matters, and how to keep it in order.
What Is a Shareholder Current Account? A Plain-English Explanation
If you’re running a company, this is something you need to understand — and the sooner the better.
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The Shareholder Current Account tracks the financial relationship between you and your company. It records whether the company owes you money, or whether you owe the company money.
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IRD requires this account to be in a credit position — meaning the company owes you, not the other way around. If it goes the other way (a debit balance), the company is required to charge you interest on the amount you owe.
How it gets out of hand
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The most common problem is business owners taking more money out of the company than they’ve put in or been allocated through a salary or dividend. This creates a debit balance, and with compounding interest, it can grow quickly.
When you put your own money into the business to get it started (seed money), that goes into the Shareholder Current Account. Once the business starts making money, you can take that back out tax-free — but only up to the amount you originally put in. Anything beyond that needs to be structured as a salary or dividend.
Getting this right from the start is strongly recommended.