NZ sole traders: The complete guide to getting started

There are several different business structures to choose from in New Zealand, and sole trader is one of them. It’s the most simple option –  as a sole trader you operate as a business by yourself – you keep all the profits, but you also incur all the losses. 

No you don’t need to register to become a sole trader, all you need to do is start trading (selling goods or services). 

That said, you will need to have a personal Inland Revenue Department (IRD) number so that you can pay tax. Get in touch with IR if you don’t already have one.  

You don’t need to register but you may need to tick a few boxes before you start trading as a sole trader:

• You must register for GST with the IRD if your business earns $60,000+ a year or is likely to in the next 12 months. 

• If you’re planning to employ people you must register with the IRD as an employer.

• You’ll need to pay ACC levies and will be automatically enrolled in ACC’s CoverPlus. You’ll pay levies based on what type of work you do, so it’s a good idea to check with ACC to make sure they have your details right. You’ll get your first ACC invoice after you’ve filed a self employed tax return. 

You can also register a business name with the IRD, and you must have in place all the licenses, permits and qualifications required to do your work. 

You don’t need an NZ Business Number or NZBN to start trading, but it can be a good idea to get one. You’ll need an NZBN if you plan to do any work with the government, but they can also be handy if you’re not. 

This number will link to all your information, like trading name, phone number and email, and may speed up your dealings with other businesses by allowing them to look up your information. 

When you’re an employee earning PAYE income your employer sorts your tax (and much more). When you’re a sole trader it’s your job. 

• File an income tax return with the IRD using your IRD number by 7 July every year. This covers the previous financial year (01 April – 30 March). To get ready for this it’s a good idea to record all your income and expenses throughout the year, using a programme like Xero, Hnry or MYOB. You can file your tax return online by yourself but it may be a good idea to hire an accountant to help make sure you do this right 

• Pay ACC levies once a year. You can create an account on the ACC website to figure out how much you owe and pay online, or ACC will send you an invoice. When you’re a PAYE worker your employer will do this automatically. 

• File GST returns: if you’re GST registered you’ll need to file a GST return with the IRD. (You’ll need to include GST of 15% GST on your invoices, and pay that amount to the IRD, minus whatever GST you’ve been charged by other businesses). 

• Make student loan repayments. If you’ve got a loan, you can check what you owe and make payments online via myIR (the IRD’s online portal). When you’re a PAYE worker your employer will do this automatically. 

• Make Kiwisaver contributions. As a sole trader if you don’t make Kiwisaver contributions, no one will. You can set these up with your provider either regularly, or as one off payments when you have the cash. 

All of the above payments are a lot to manage as a sole trader, especially if you’re new to paying your own tax. If you’re feeling a little lost, we recommend speaking to an accountant - or to the IRD for help meeting your obligations. 

Being a sole trader is super simple. It's great for those who’re freelancing or starting their first business, or working as a contractor for another business. 

Starting and running a company is a little more complicated, but there are advantages. Since a company is a separate legal entity, it may reduce your financial liability for the business’s debts. 

• Easy and cheaper to get started. 

• Paying tax is generally a little easier. 

• Any investments or loans will be taken under your name. 

• If you get into trouble financially you are liable for all of the business’s debts.