From claiming expenses to paying tax and ACC levies, here’s what you need to know if you’re a freelancer or contractor working in temporary jobs.
Gig workers are part of a flexible and on-demand workforce who do multiple short-term jobs (gigs), and 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 pretty common for people to call their casual short-term jobs ‘gigs’ too. The same rules that apply to gig workers apply to contractors, freelancers, self-employed people and casual workers.
Services provided may include:
Gigs are often infrequent, and many casual workers only work once or twice a month. Gig work usually supplements some other form of income and isn’t a significant portion of total income. This kind of work is increasingly chosen by young people, and is a growing type of self-employment.
There’s more information on all these points below, but if you’re short on time, here’s a summary:
Many self-employed people taking on casual or gig work are sole traders. You don’t need to do anything formal to set up as a sole trader – there’s no legal process to go through. 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 account for your own tax.
For tax purposes, the rules that apply to you are the same as those for contractors or self-employed people.
It’s easy to get into a bad situation if you don’t start out right. Here’s some useful information to help you get it right from the beginning.
Starting a business (external link) — Inland Revenue
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.
Find your BIC code (external link) — Business Description
Video: Income and provisional tax (external link) — Inland Revenue
Contractors receiving schedular payments (external link) — Inland Revenue
Tax rate estimator for contractors (external link) — Inland Revenue
Download the IR330C form (external link) — Inland Revenue
Income tax rates (external link) — Inland Revenue
Secondary tax codes (external link) — Inland Revenue
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.
Register for GST (external link) — Inland Revenue
Video: Registering for GST (external link) — Inland Revenue
Many of your business expenses can be offset against your business income to help reduce your tax bill. There is work involved though – you’ll need to keep good records, and make sure you keep your receipts.
We have information on claiming expenses that will help you understand what you can claim for and how to do it.
Video: Claiming business expenses (external link) — Inland Revenue
Steve has a number of gigs – he’s a freelance blog writer, drives for a ride-sharing company, works as a bike courier, and sometimes delivers takeaways.
Here are some of the business expenses he could claim for his various jobs:
Steve is careful to keep all his receipts, and makes sure his paperwork is in order. He keeps a vehicle logbook, and makes sure he logs the mileage for every trip he makes, and which company he’s making it for.
Steve will pay tax on his total income minus the business expenses he claims – his profit – so the more expenses he claims, the less tax he’ll have to pay.
Vehicle logbook template (external link) — Inland Revenue
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 income), the Working Safer levy (currently 8c per $100 of your liable income), and the Work levy which goes in to the Work Account to fund injuries that happen at work (this differs for every business).
You’ll be invoiced by ACC once a year - most people receive their invoices between mid-July and mid- August.
Find your BIC code (external link) — Business Description
Call ACC on 0508 426 837 if you have questions about which code to choose.
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.