Setting Yourself Up for Success (Without Overcomplicating It)
You don’t need to register as a business to start trading. Begin by opening a separate bank account for all business-related income and expenses. If you miss a transaction, transfer the exact amount with a clear reference. If you’re only processing a few transactions a year, a cloud-based accounting subscription like Xero might not be necessary. However, for businesses with a higher volume of transactions, Xero offers an excellent all-in-one solution. It simplifies sending invoices, managing receivables and payables, and provides additional tools like payroll filing to streamline your operations.
Tax Basic
Income Tax
Unlike PAYE wages, income from customers hasn’t had tax deducted. You’ll need to declare all income to the IRD at the end of each financial year (1 April–31 March). After your first year, you’ll owe terminal tax based on your net profit (Sales – Expenses). If your profit is high enough, you may have to pay provisional tax instalments during the year, which count toward your end-of-year tax.It’s always best to be on the safe side, especially during periods of growth. Best practice is to set up a separate tax account and transfer a percentage monthly so you’re never caught short when the tax man comes calling. We suggest setting aside around 30% of your profit to cover tax, though exact amounts can vary with NZ’s progressive tax rates. For a more tailored estimate, see our [Tax Calculator], which can help you determine an effective tax rate based on your overall income levels.
Goods & Services Tax (GST)
You’ll need to register for GST as soon as your turnover (total sales, not profit) exceeds $60,000 in any 12-month period. If you’ve passed or expect to pass this threshold, feel free to reach out for guidance or view our [When Do You Need to Register for GST? Understanding the Requirements and Implications for Your Business] blog post for further details.
FAQ’s
Do I need to register for ACC?
No, you don’t need to register directly. ACC will use the details from your tax return filed with the IRD and automatically send you an invoice. ACC levies typically range from 1–2% of your profit, depending on the risk level of your industry.
Do I need to contribute to KiwiSaver?
KiwiSaver contributions are optional for sole traders. You can make contributions via online banking at any time, but there’s no fixed requirement to contribute.
What expenses can I claim?
Deductible expenditure is largely industry-specific; however, the general rule is that if it’s integral to the running of your business, it’s likely deductible. Commonly questioned expenses include:
- Staff drinks or client meetings: 50% deductible as entertainment.
- Business travel expenses (out of town): 100% deductible.
- Physio and other personal wellness related expenses: Non-deductible.
If in doubt, flick us an email or give us a call—we’re happy to help clarify deductibility.
What are the key due dates for provisional and terminal tax? We send timely reminders to all our clients and outline upcoming payments through the year when their annual accounts are processes. To see the full outline of dates throughout a standard financial year see our [Key Dates Calendar].
When should I first consult with a tax professional?
Ideally, as soon as possible. Our first consultation is free and will ensure you’re set up correctly from the start, making end-of-year filing much simpler. While this guide covers the basics, there are many unique situations—come in for a chat, and we’ll help you navigate all deductible expenses specific to your industry.