When you're self-employed or running a small business, a basic understanding of key tax types and levies will make your life much easier — even if you outsource all or most of the work to a tax or bookkeeping expert.
Everyone who earns money in New Zealand must pay income tax, including businesses, contractors and the self-employed. Taxable income can come from a variety of sources, including wages, salary, profit, interest payments and dividends. If you’re:
You’ll also need to include either a copy of your business’s financial records, or a form summarising your income and expenses (IR10).
You can file all your returns online, or download the forms you need from the Inland Revenue website (external link) .
Income tax and provisional tax are the same tax — provisional tax is just a way of pre-paying your annual tax bill in several instalments. Inland Revenue will tell you if you need to pay in this way.
Goods and services tax (GST) is added to the price of most products and services. If you’re GST registered, you can claim back the GST you pay on goods or services you buy for your business. You can also charge GST (15%) on what you sell — this is collecting it on the government’s behalf.
As soon as you think you’ll earn more than $60,000 in 12 months, you have to register for GST. You can choose to file returns monthly, every two months, or every six months.
If you don't think you'll turn over that much, it's up to you whether or not to register. One benefit of voluntary registration is you might be able to claim a GST refund, eg if you have a lot of expenses but not much income. Once you've registered, you have to complete regular GST returns.
Do you know the basics of taxes and levies for businesses? Take this quiz to find out.
ACC levies fund claims for injuries suffered by all New Zealanders.
If you’re self-employed or a small business owner, you’ll pay an ACC Work levy every year. It’s used to fund ACC claims for work-related injuries. You’re also responsible for deducting your employees’ ACC Earners’ levy from their wages. This is used to fund non-work related injuries.
PAYE (pay as you earn) is tax deducted from your employees' wages or salary. PAYE is deducted before you pay your employees, and you pay it to Inland Revenue on their behalf each month.
ESCT is the tax you take off the cash contributions you make to employees' superannuation accounts, including KiwiSaver. The rate of ESCT to deduct can vary for each staff member.
If you have staff, you can choose to pay allowances to cover the cost of things like accommodation, meals and clothing, eg uniforms or safety gear. Some are taxable via PAYE and some are tax-free.
FBT applies to things like:
FBT doesn't apply to things already taxed for the employee, like:
These aren’t taxes, but are other payments that may be taken from your employees' wages or salary at payroll time. These include KiwiSaver, student loans and, if you’re told to do so by Inland Revenue, child support.
There may also be voluntary payments employees ask you to make on their behalf, like donations to a charity.