Illustrative/composite client situation: the owner of an active New Zealand company sees an overdrawn shareholder current account in draft accounts. Company-to-owner payments, personal spending and money introduced have been recorded during the year, but the owner cannot explain the balance. “Can we just clear it at year end?” they ask. This is not a real Pillar client or a claimed service outcome; no amount or tax treatment is assumed.
The useful starting point is the transaction history. A closing balance tells you where the ledger ended, but not which payments created a loan, when that happened, or whether every credit has supporting evidence.
Establish whose balance it is
Inland Revenue describes a shareholder current account as the net record of funds a shareholder has lent to, withdrawn from or borrowed from a company. When withdrawals or borrowing exceed funds lent, the account is overdrawn and the company is lending to the shareholder. This can happen during the year, even if the final balance is only established after year end.
Confirm the legal company, shareholder, account and period. Keep different shareholders and entities identifiable. Agree the opening balance to the previous accounts and supporting schedule, and note any unresolved prior-year difference. Check the software’s sign convention before interpreting a debit or a minus sign.
Rebuild the movements with dates and documents
Prepare a working schedule showing each date, payment or credit, bank reference, ledger entry, supporting document and running balance. Mark unexplained items for review. Compare money introduced with the bank evidence; distinguish owner drawings and private spending from business costs the owner may have paid personally.
Where the ledger contains salary, dividend, interest or other credits, identify the records supporting their nature, amount and effective date. Do not create or backdate a credit merely because it produces a preferred closing balance. A description entered in accounting software does not establish authorisation or tax treatment.
This schedule is a preparation tool for the accountant, not a calculation of the correct taxable amount. Inland Revenue’s record-keeping guidance supports retaining the underlying cash and non-cash records. The separate profit and cash-flow article looks at the whole business’s cash movements; this review concerns the specific owner-company balance.
Separate the balance check from the tax review
Inland Revenue’s current-account guidance identifies interest, withholding/reporting and possible FBT or dividend questions. IS 24/09 considers common issues for New Zealand resident close companies. Whether those issues apply depends on the people, company, arrangement and dates. The article does not set an interest rate or recommend salary, dividends, repayment, forgiveness or another treatment.
Company status also matters. The 2026 Act commentary, with the company-loans section on pages 10 to 13 of its PDF, explains an enacted rule concerning loans outstanding when a company is removed from the register. It applies to removals on or after 4 December 2025 and can require a base price adjustment six months after removal. Restoration and amalgamation exceptions need checking. Closing or removing a company must not be assumed to make its shareholder loan disappear without tax consequences. Tell the accountant about any removal, restoration or proposed closure; this is a separate review from reconciling an active company’s ledger.
Prepare for a useful first discussion
Bring prior accounts and shareholder schedules, the current transaction report, relevant bank evidence, loan terms, existing interest calculations, supporting credit records and any company-status notices. Include the dates and documents behind unresolved items. Begin an enquiry with the record categories and question, then agree an appropriate channel for detailed financial documents.
Pillar’s tax and compliance service is a starting point for defining this review. When you contact Pillar, explain the year involved, what you cannot reconcile and any approaching decision. A Pillar accountant must verify individual facts and applicable rules before confirming treatment; legal rights or insolvency issues may also require a lawyer or relevant specialist. The owner remains responsible for business decisions.