When you operate a business, each year you are required to prepare financial reports showing all of the business income and expenditure incurred which will result in an overall net profit or loss for the year. If your business makes a profit you will pay income tax on this profit in your income tax return – if you’ve got wages income as well the profit will be added to this and you will be taxed based on your overall tax rate. If your business makes a loss, the loss will most often be included in your personal income tax return – if you’ve wages income you will possibly receive a tax refund from IRD. Please note it depends on the type of business structure you have as to whether or not losses can be used personally.