Self-Employed Tax in New Zealand

New Zealand's tax system treats sole traders as individuals: business profit flows directly to the personal IR3 return and is taxed at the same progressive rates that apply to wages and salary. There is no separate small-business tax rate for sole traders and no company tax return unless the business chooses to incorporate. Inland Revenue Te Tari Taake administers income tax, GST, and provisional tax; the Accident Compensation Corporation (ACC) runs the separate work-injury and earner-levy scheme.

What income tax rates apply to sole traders in 2025/26?

For the tax year running 1 April 2025 to 31 March 2026, individual marginal rates apply to every dollar of taxable income, including sole-trader net profit. The rates shown below took effect from 1 April 2025 following the National Government's 2024 tax-cut adjustments to lower-bracket thresholds [SC1].

A sole trader with NZD 90,000 net profit pays roughly: NZD 1,638 (10.5% bracket) + NZD 6,633 (17.5% bracket) + NZD 7,380 (30% bracket) + NZD 3,927 (33% on the slice from NZD 78,101 to NZD 90,000) = approximately NZD 19,578 income tax before ACC levies. Rates are marginal, not flat - only the income within each band is taxed at that band's rate [SC1].

How does the IR3 return work for sole traders?

Self-employed sole traders file the Individual income tax return IR3, which covers all income for the April-March tax year. The return reports gross business income, claims allowable expenses to arrive at net profit, and calculates any residual income tax owing or refund due [SC2].

The filing deadline for self-filed returns is 7 July following the end of the tax year. Taxpayers who engage a tax agent can access Inland Revenue's agent-extension scheme, which pushes the deadline out to 31 March of the following year in most cases. Returns are lodged through the myIR online portal; paper returns remain available but are increasingly rare.

Allowable deductions reduce gross income to net profit. Inland Revenue recognises expenses that are incurred in earning business income and are not capital in nature [SC4]. Common categories include: cost of goods sold and direct materials; vehicle running costs (apportioned by a logbook if the vehicle is used privately); travel expenses for business purposes; rent and utilities for dedicated business premises; professional fees (accountants, solicitors); bank charges and interest on business borrowings; insurance premiums; and depreciation on business assets under Inland Revenue's prescribed depreciation rates.

How does home-office deduction work?

Sole traders who work from home can claim a proportion of household costs against business income using one of two methods [SC5].

The square metre rate method allows a simplified claim using a rate set annually by Inland Revenue. For the 2024/25 income year (the most recently published rate as at June 2026) the rate was NZD 55.60 per square metre of dedicated business area. The formula is: (mortgage interest or rent x business area / total floor area) + (business square metres x the rate). The business area must be set aside and used mainly for business.

The actual cost method apportions real household expenses - rates, insurance, power, mortgage interest (not principal) - by the fraction of floor area used for business and the proportion of time that area is used for business. Detailed records are required.

In both cases, depreciation on the dwelling itself cannot be claimed; business equipment within the home office (desk, computer) can be depreciated separately.

When does provisional tax apply and how is it calculated?

Provisional tax is a system for paying income tax in instalments during the year rather than as a single end-of-year lump sum. It applies when a taxpayer's residual income tax (RIT) - the net income tax after credits but before provisional tax payments - exceeded NZD 5,000 in the prior year [SC3].

For a sole trader with a standard 31 March balance date, three instalments are due: 28 August, 15 January, and 7 May. Three options exist for calculating each instalment amount:

• Standard option (default): Each of the three instalments equals one-third of the prior year's RIT increased by 5%. This 5% uplift is intended to reflect income growth and avoids Use of Money Interest charges as long as the total paid meets the uplifted threshold. Taxpayers who have not yet filed the prior-year return at the first instalment date use an alternative uplift of 10% on the year before that.
• Estimation option: The taxpayer estimates their current-year RIT and pays one-third of that estimate at each instalment date. If the estimate proves too low, Inland Revenue charges Use of Money Interest (UOMI) on the shortfall from the date each instalment was due.
• Accounting Income Method (AIM): Available to businesses with turnover under NZD 5 million that use AIM-capable accounting software. Payments follow the GST return cycle (typically every two months) and are based on actual taxable profit in each period, so the taxpayer only pays when the business earns a profit. AIM eliminates UOMI risk but requires compatible software [SC3].

First-year self-employed individuals generally do not pay provisional tax until after their first IR3 has been filed and a RIT above NZD 5,000 is established.

What ACC levies do self-employed people pay?

The Accident Compensation Corporation funds New Zealand's universal no-fault accident compensation scheme through levies on all earners. Self-employed people pay two levies directly to ACC after filing their IR3 [SC6]:

• Earner Levy: A flat rate applied to all earners. For 2025/26 (1 April 2025 to 31 March 2026) the rate is NZD 1.67 per NZD 100 (1.67%) of liable income, up to a maximum of NZD 152,790 liable earnings. The maximum Earner Levy payable for 2025/26 is NZD 2,551.59.
• Work Levy: Funds the Work Account covering injuries sustained at work. The rate varies by ACC Classification Unit, which reflects the injury risk profile of the self-employed person's industry. Low-risk occupations (office-based, consulting) attract lower rates; higher-risk industries (construction, agriculture, fishing) attract materially higher rates. ACC invoices the Work Levy annually based on the income reported on the IR3.
• Working Safer Levy: A small additional levy collected alongside the Work Levy to fund WorkSafe New Zealand. The rate is NZD 0.08 per NZD 100 of liable income.

ACC levies are generally not deductible against income tax. Levy invoices arrive from ACC typically between August and October following the end of the tax year.

When must a sole trader register for GST?

Goods and Services Tax at a flat rate of 15% applies broadly in New Zealand under the Goods and Services Tax Act 1985. Registration is compulsory when a sole trader's annual taxable turnover reaches or is expected to reach NZD 60,000 within 12 months [SC7]. Turnover is assessed on a rolling 12-month look-back and look-forward basis.

Voluntary registration below NZD 60,000 is permitted and can be advantageous for traders who supply GST-registered businesses (the customer can claim the GST back) or who incur significant GST on their own purchases.

Once registered, sole traders charge GST at 15% on taxable supplies and file periodic returns through myIR. Most registrants file two-monthly returns; businesses with turnover under NZD 500,000 may opt for six-monthly returns. Returns and payment are due by the 28th of the month following the end of the period.

Is KiwiSaver compulsory for self-employed people?

No. KiwiSaver is entirely voluntary for self-employed sole traders. There is no automatic enrolment and no employer contribution, because the sole trader has no employer. A self-employed person who joins KiwiSaver makes contributions directly to their chosen provider and may qualify for the annual government Member Tax Credit of up to NZD 521 by contributing at least NZD 1,042 per year [SC8]. Contributions are not tax-deductible for the self-employed.

New Zealand Superannuation - the universal flat-rate state pension payable from age 65 - does not depend on KiwiSaver or prior contribution history.

For specific guidance on IR3 filing, provisional tax instalments, ACC classification queries, and GST registration, the appropriate starting point is the New Zealand country overview and then a qualified tax professional registered with the New Zealand Institute of Chartered Accountants (CA ANZ) or authorised by Inland Revenue as a tax agent.