Located in the southwestern Pacific Ocean, New Zealand is an archipelago with hundreds of islands. While this island nation may be small, it has a thriving and developed business environment, especially for entrepreneurs. As of 2017, New Zealand had over 400,000 self-employed workers. If you’re looking to set up as a sole trader in New Zealand, here’s what you should know.
Disclaimer: This article is not a substitute for legal advice. Consult official websites or seek professional guidance for support.
Who are sole traders in New Zealand?
The sole trader is the most simple and straightforward business structure. If you’re someone who wants to have full control over your business, without too many reporting requirements, then you’ll want to operate as a sole trader!
Your personal self and your sole trader operation are closely linked. You’re the sole owner of your business, and your profits are part of your personal finances. Being a sole trader is a flexible way to work, and it’s a common structure for Kiwi freelancers.
As a sole trader, you can claim business expenses against your business income. But you’ll also be personally responsible for debts and liabilities.
The New Zealand government provides financial support for New Zealanders getting into self-employment. If you’re out of work and considering becoming self-employed, you may qualify for a self-employment start up payment to assist with start-up costs or a Flexi-wage weekly benefit payment to support your business and living costs.
Registering as a sole trader
Setting up as a sole trader in New Zealand is a simple process. In most cases, there’s no paperwork needed—you don’t need to complete any registrations with the government to get started, just start working.
A prerequisite for operating as a sole trader is an IRD number from the Inland Revenue Department. You likely already have one if you’ve ever earned income in New Zealand. If you don’t have one yet, it’s free to apply. Once you have an IRD number, login to the myIR platform and send a secure message to let the government know you’ve started working for yourself.
When you earn more than NZ$60,000 in a year, you’ll need to register for the Goods and Services Tax (GST). You’ll register with Inland Revenue. Once you’re registered, you’ll need to start charging and paying GST. Persons who are required to be registered for GST charge the tax at 15% on their supply unless the supply is not a taxable supply or it is a zero-rated or exempt supply
Optionally, you can register for a NZ Business Number. With a NZBN identifier, you’re officially registered in a searchable database of New Zealand businesses, which adds authenticity to your operation and makes it easier for other businesses to collect important operational information (called Primary Business Data) about you. This can speed up interactions with customers and suppliers. NZBNs are free to obtain.
For registration you will need:
- Your IRD number
- Proof of identity: New Zealand drivers license or a passport. Alternative options are accepted if you don’t have either.
Sole traders can apply online for their NZBN using their RealMe account.
Depending on what your work is, you may also need industry-specific or region-specific licenses and permits. For example, you may need a license if you’ll be producing food products and a permit from the Department of Conservation if you’ll be working with wildlife. You can start with the government’s Compliance Matters tool for central government regulations.
If you employ people to work in your sole trader operation, including your spouse or partner, you may need to register as an employer with Inland Revenue.
Finally, it’s also common for contractors to obtain liability insurance and other insurance, depending on your industry. Insurance cover protects you if you are sued or you make a professional mistake.
Choose your business name
Under a sole trader business structure, you can trade under your legal name or under a business name. For example, you may trade under the name ‘Jessica Smith’ or ‘Jessica Smith Copywriting’. By choosing a business name, you can brand your operations more uniquely and separate it from your personal identity. Use the ONECheck service to see if your desired name is available.
At this stage, it’s also a good time to register a website domain and create a brand logo to further build your professional authority.
Taxes
Taxation in New Zealand is collected at a national level by the Inland Revenue Department (IRD). As a sole trader you will use your personal IRD number to report income.
You pay income tax on the net profit you make from your sole trader operations. Income gets reported on your personal IR3 return.
In your first year of business, you can elect to prepay income tax in advance, instead of paying during the normal tax season in the following year. Paying in advance can get you a special 6.7% early payment discount. This could be a good strategy if you have enough cash flow.
As a self-employed individual, you’ll also be automatically enrolled in New Zealand’s ACC CoverPlus program, which will provide weekly compensation if you have an accident and can't work. After your first year in business, you’ll be invoiced for the ACC levy once a year.
Getting paid in New Zealand
In New Zealand you might get paid by postal order, cash, cheque or bank deposit. You can use Deel’s guide on how to invoice a client. Plus, if your clients are set up on Deel, you can take advantage of automatic invoicing and withdrawals in over 120 currencies, including crypto.
Looking to hire independent contractors in New Zealand? Here's how you can do it compliantly.
Official links and resources
Questions to ask before you start — business.govt.nz
Becoming a sole trader — business.govt.nz
Insurance cover for contractors — business.govt.nz
