Being a gig worker
Gig workers are part of a flexible and on-demand workforce who do multiple short-term jobs (gigs). It can be anyone from part-timers looking to make extra money from a second or side job, to full-time freelancers. The gig economy extends across most industries and roles.
Traditionally, the term ’gig economy’ related to using online platforms like Uber and Fiverr to take on small jobs – but now it’s common for people to call their casual short-term jobs ‘gigs’ too.
This kind of work is increasingly chosen by young people, and is a growing type of self-employment.
The same rules that apply to gig workers apply to contractors, freelancers, self-employed people and casual workers.
Services provided may include:
- personal services like cleaning, moving or DIY tasks
- skilled manual work – for example plumbing, building or electrical
- administrative work like data entry or ‘click work’.
- creative or IT work – for example writing, graphic design or web development
- professional work like consultancy, legal advice or accounting services
- delivery or courier services
- driving or taxi services.
Pros
- Choice and variety in work.
- Flexibility in pay and hours.
- Can easily leave a role if you don’t like it.
Cons
- Gigs are often infrequent, and many casual workers only work once or twice a month.
- You’re not covered by employment agreements, which means no guarantee of government minimums and no sick pay or paid leave.
- No job security.
- Frequent job-hunting.
- Pay is often low – gig work usually supplements some other form of income and isn’t a significant portion of total income.
Paying your tax when you work multiple jobs
Many self-employed people taking on casual or gig work are sole traders. You don’t need to do anything formal or legal to set up as a sole trader.
There are other business structures you can choose – use our Choose Business Structure tool to help you decide.
If you’re new to working as a freelancer, this might be the first time you’ve had to pay your own tax.
For tax purposes, the rules that apply to you are the same as those for contractors or self-employed people.
Here’s some useful information to help you get it right from the beginning.
What you need to know about tax
BIC code
If you’re a sole trader, you normally use your personal IRD number for paying income tax and GST.
When you file a tax return or register for GST with Inland Revenue, you choose a Business Industry Classification (BIC) code. This describes the business activity you do, and is the basis for your ACC levy. If you’re self-employed and work in more than one role, choose the BIC code of the activity you spend the most time doing.
Income tax forms
IR3
Sole traders must file an IR3 income tax return at the end of each tax year. Your net profit is taxed through your IRD number according to how much you’ve earned in your financial year. You need to include all earnings from all sources in the IR3 return.
If the earnings have tax deducted at source, as with schedular payments, make sure you included these in the appropriate places in your IR3 return (in the fields prepopulated by Inland Revenue, or on the summary of earnings).
Complete my individual income tax return - IR3 - Inland Revenue
IR330C
If you find work through a recruitment company or other labour hire business, they are required to deduct income tax from your pay. They will ask you to fill out a tax rate notification form (IR330C), which allows them to deduct tax at a rate you choose.
You need to fill out a separate IR330C for each different activity and source of income.
You can use Inland Revenue’s tax rate estimator for contractors to help work out your tax rate.
If you’re a contractor not working through a labour hire business, you can have tax deducted from your pay at a rate you choose, if the payer agrees. If you have tax deducted from your pay, fill out the IR330C and give it to your payer. You can choose to have tax deducted at any rate, from 10% to 100%.
Choosing the right tax rate means you’re less likely to have a tax bill at the end of the tax year. The IR330C form talks about schedular payments – this is a contractor’s equivalent of wages or salary. Tax on schedular payments used to be known as withholding tax, and your tax code will be WT.
If you’re a contractor doing an activity listed on the IR330C, you’ve submitted your IR330C to the payer with the correct tax rate noted, and the payer has agreed to deduct tax from your pay, you probably won’t need to set money aside to pay tax.
But:
- you’re still responsible for paying ACC levies, KiwiSaver, student loans and child support
- you can deduct business expenses
- you must file an individual tax return (IR3) at the end of the tax year.
If your activity isn’t specified on the IR330C, or the payer doesn’t deduct tax from your income, you should set aside money from each pay for your tax.
You:
- are responsible for paying all taxes, ACC levies, KiwiSaver, student loans and child support
- can deduct business expenses
- must file an individual tax return (IR3) at the end of the tax year.
If the payer is required to withhold your tax but refuses, let Inland Revenue know.
GST
If you expect to earn more than $60,000 in the next 12 months, or you charge GST on your services, you’ll need to tell Inland Revenue you’ve become a sole trader, and you’ll need to register for GST.
You can then claim a credit for the GST you pay on most of your business expenses.
If you are registered for GST, you are required to file regular GST returns.
Claiming business expenses
You can offset many of your business expenses against your business income to help reduce your tax bill. To do this, keep good records and make sure you keep your receipts.
ACC levies
ACC levies are separate from general tax, and cover the cost of injuries caused by accidents.
The business industry classification (BIC) code you provide to Inland Revenue when you file a tax return or register for GST, along with your earnings, is the basis for your ACC levy.
Inland Revenue passes your BIC code, liable income or payroll, and your contact details along to ACC so they can invoice you for levies based on your business activities.
Some jobs have more risks than others, so some industries pay higher levies than others.
As a self-employed person, you’ll pay three levies:
- the Earners’ levy – currently $1.21 per $100 (excluding GST) of your liable incom
- the Working Safer levy – currently 8c per $100 of your liable income
- the Work levy which goes into the Work Account to fund injuries that happen at work (this is different for every business).
ACC will invoice you once a year. Most people receive their invoices between mid-July and mid- August.
ACC codes
When you work in more than one role, ACC may use the code of an activity you undertake that attracts the highest levy rate – even if it isn’t the role in which you spend the most time working. If you have questions about which code to choose, call ACC on 0508 426 837.
Getting a New Zealand Business Number
Get a New Zealand Business Number (NZBN), a unique identifier available to every business in New Zealand. One of the benefits of having an NZBN is that it allows you to share and update your business information with other businesses, including those that you do casual work for.
An NZBN identifies you as a real New Zealand business, and makes it easy for you to check details for new clients.
As more businesses get and use their NZBN, it will become easier to invoice and to pay bills. You won’t have to repeat the same basic information multiple times, saving you time and money.
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