This is an easy-to-follow checklist you can use when setting up as a sole trader. It will also help you if you are already a sole trader and want to check you have set yourself up correctly or are thinking of hiring people.
There are four areas that are important to understand when you’re a sole trader.
If you’ve decided to start a business, you need to register with certain government agencies when you begin. We’ve outlined who to register with and how to do it.
To register as a sole trader, you must have an IRD number and advise IR you are working for yourself.
I do not have an IRD number:
How to apply for an IRD number(external link)— Inland Revenue
I already have an IRD number and I need to tell IR I have started working for myself as a sole trader:
myIR(external link) — Inland Revenue
Register for GST (if applicable)
Do I need to register for GST(external link) — Inland Revenue
Registering for GST(external link) — Inland Revenue
As a sole trader, you will automatically receive ACC cover if you are injured. You need to register and set up MyACC business account to pay your levies when the time comes.
Register for your MyACC business account
• Register with a RealMe, Google or Microsoft account.
Having a NZBN is recommended, as it reassures potential suppliers, customers and clients that you are a business. Having one will also make it easier for you to interact with government agencies and other businesses.
As a sole trader, you are responsible for completing your own taxes. You will need to keep track of your income and your business expenses so you can accurately calculate all taxes due.
Paying your tax all at once
Complete your individual income tax return - IR3(external link) — Inland Revenue
Splitting up your tax payments
Provisional tax(external link) — Inland Revenue
Tax pooling(external link) — Inland Revenue
Additional tax help
A tax deduction is a claimable expense item that is related to your business income. You claim these expenses on your IR3 tax return each year.
Types of business expenses(external link) — Inland Revenue
Expenses of a sole trader and record keeping(external link) — Inland Revenue
If you think you will earn more than $60,000 per financial year, you will need to file GST returns.
File your GST return(external link) — Inland Revenue
All self-employed or small business owners must pay an ACC Work levy each year. ACC levies cover injuries that happen at work, at home, on the sports field and when you’re out and about.
You will receive your ACC Levy invoice by post or email once you have filed your tax return.
If you have an outstanding student loan, and you earn over the annual threshold of $22,182, then you must make repayments on your student loan.
myIR(external link) — Inland Revenue
If you think KiwiSaver is not for you because you’re self-employed, you’re probably missing out on thousands of dollars in government contributions.
KiwiSaver benefits(external link) — Inland Revenue
Joining KiwiSaver if I’m self-employed or not working(external link) — Inland Revenue
Business paperwork is a standard part of any business practice. We’ve outlined the business paperwork you need to do to be compliant and provide resources to help you both understand and keep on top of it.
When you’re in business, you’re required to keep accurate and complete records for at least 7 years. This can include banking information, financial accounts, invoices and other contractual information.
For details on statutory record keeping obligations read the business.govt.nz website and additional resources at Inland Revenue.
Record keeping(external link) — Inland Revenue
Tips for payments
You might be about to grow your business. One way to handle growth is to hire staff to help manage business operations. We’ve outlined what you need to do when you’ve decided you want to hire staff.
If you have employees, you must deduct PAYE (pay as you earn) tax from their wages.
PAYE calculator(external link) — Inland Revenue
FBT is a tax on non-cash benefits you provide to your employees.
Types of fringe benefits(external link) — Inland Revenue
File a fringe benefit tax return(external link) — Inland Revenue
When you’re deep in the day-to-day of running your business, it can be hard to keep track of the bigger picture. Or maybe these tasks are simply not your cup of tea. Seeking advice from different sources can give you a fresh perspective on your business. Consider getting help from:
Seeking advice from an accountant or bookkeeper can free up time for you to focus on what you do best – your job.
We want to continue to improve our content for sole traders in New Zealand. Let us know if this checklist was helpful, or if there is anything else you would like to see in the feedback box below. Or you can email us with your comments or questions.