How to Register as a Sole Trader in NZ: IRD, NZBN and GST Steps

Becoming a sole trader is the simplest way to start a business in New Zealand, and it is how most freelancers, contractors and tradespeople begin. There is a catch in the wording, though: unlike a company, a sole trader is never “registered” anywhere. There is no sole trader register and nothing to file with the Companies Office. Setting up properly means telling Inland Revenue you are self-employed, sorting your tax obligations, and putting a few basics in place before you start invoicing. This guide walks through each step.

What a sole trader actually is

As a sole trader, you are the business. There is no legal separation between you and your business, so you make every decision, you keep all the profit after tax, and you are personally responsible for every debt and obligation the business takes on. That last point is called unlimited liability, and it is the main trade-off of the structure. A company shields your personal assets behind limited liability, but it costs more to run and comes with directors’ duties and annual returns. A sole trader has almost no setup cost and very little paperwork, which is why it suits testing an idea, freelancing, contracting and small trades businesses.

You can trade under your own name or choose a trading name. A trading name gives you no legal protection and does not stop anyone else using the same name. Only a registered trade mark does that.

Step 1: Make sure you have an IRD number

You will use your own personal IRD number for your business tax. If you have ever worked, received a benefit or had a student loan in New Zealand, you already have one. If not, apply through Inland Revenue with proof of identity, such as a passport or driver licence. You cannot be paid properly, open some accounts or register for GST without it.

Step 2: Tell Inland Revenue you are self-employed

This is the step that replaces “registration”. Inland Revenue needs to know you are earning income that tax is not deducted from. Sign in to myIR, Inland Revenue’s online service, and add self-employed income (sometimes shown as registering a business or starting self-employment). You will be asked what your business does, when you started trading and roughly what you expect to earn.

From that point you file an individual tax return, the IR3, each year, declaring your business income and expenses alongside any other income. If you use a tax agent, your filing deadline is extended, which is one reason many sole traders use an accountant from the start.

Step 3: Get a New Zealand Business Number

A NZBN is a unique identifier for your business. It is free for sole traders, you apply online through the NZBN register with your IRD number, and it is not compulsory. It is still worth having: it makes invoicing look professional, lets customers and suppliers verify your business details, and speeds up dealings with banks, government agencies and larger clients, many of whom ask for it.

Step 4: Register for GST if your turnover requires it

You must register for GST if your turnover is, or is expected to be, more than $60,000 in any 12 month period. Registration is through myIR. If you are under the threshold you can still register voluntarily, which lets you claim back the GST on your business expenses, at the cost of charging GST on everything you sell and filing regular returns. Our GST registration guide works through that decision and the registration process in detail.

Do not drift over the threshold unregistered. Inland Revenue can backdate your registration, which means owing GST on income you have already spent, plus penalties.

Step 5: Check your trading name

If you plan to trade under a name other than your own, check it is safe to use before you print anything. business.govt.nz’s ONECheck tool searches company names, trade marks, domains and social media handles in one place. A name that infringes an existing trade mark can force an expensive rebrand later, so the two minutes this takes is worth it.

Step 6: If you hire anyone, register as an employer

The moment you take on an employee, you must register with Inland Revenue as an employer, deduct PAYE and other deductions from their pay, and file payroll information each payday. Hiring contractors instead is simpler, but the person must genuinely be a contractor. Calling an employee a contractor to avoid PAYE is a fast route to penalties.

A sole trader doing her business paperwork in a workshop

Your tax obligations as a sole trader

Income tax on your profit

You pay income tax on your net profit: your business income minus your claimable expenses. That profit is added to any other income you earn, such as wages from a part time job, and taxed at the personal income tax rates. There is no separate sole trader tax rate. Our NZ tax rates guide sets out the current brackets and how they apply.

Nothing is deducted as you go, which is the single biggest adjustment for people used to a salary. Set money aside from every payment you receive. A separate savings account holding roughly a quarter to a third of your income for tax is a common and sensible habit.

Provisional tax

After your first year, if the tax left to pay on your return (your residual income tax) is more than $5,000, you become a provisional taxpayer the following year. Provisional tax is the same income tax paid in advance, in instalments across the year instead of one lump sum. For most sole traders on a standard balance date the instalments fall due on 28 August, 15 January and 7 May. Inland Revenue will tell you the amounts, but they are based on your previous year’s income, so a quieter year can still come with instalments sized for a busier one. Talk to Inland Revenue or your accountant about the estimation option if your income drops.

GST returns

If you are GST registered you charge 15% GST on your sales, file GST returns monthly, two-monthly or six-monthly depending on what you chose at registration, pay Inland Revenue the GST you collected minus the GST you paid on business purchases, and keep the paperwork to support both sides.

ACC levies

Employees have ACC levies deducted from their pay. Sole traders pay their own. ACC invoices you after your first tax return as a self-employed person, and the amount is based on your liable earnings and the risk level of your industry. Many sole traders are surprised by the first invoice simply because nobody warned them it was coming. Budget for it from day one. You can also apply for CoverPlus Extra, which lets you agree a level of cover in advance, so a claim pays out on the agreed amount rather than your most recent earnings.

KiwiSaver

Nobody contributes to KiwiSaver for you when you are self-employed. Joining is voluntary, and contributions are made directly to your scheme provider rather than through payroll. Whether it is worth contributing, and how much, depends on your cash flow and retirement plans.

Running the business day to day

Keep business and personal money separate

You and your business are legally the same person, but you should still run a separate bank account for the business. It makes tracking income and expenses straightforward, keeps your tax return simple, and gives you an honest picture of whether the business is actually making money.

Keep records for 7 years

Inland Revenue requires you to keep your business records for at least 7 years, in English or te reo Māori. That covers invoices you send and receive, bank statements, receipts, contracts and vehicle records. Accounting software makes this painless and prepares most of your GST and end of year figures as you go, but a disciplined spreadsheet works when you are starting out.

Claim the expenses you are entitled to

You can claim expenses that are incurred in earning your business income, and only the business portion of anything shared with private use. Common claims include vehicle costs, a home office portion of rent or mortgage interest, power and internet, phone costs, tools and equipment, accounting and legal fees, and business insurance. Our guide to claiming business expenses in NZ covers what qualifies and how to apportion shared costs.

Common mistakes new sole traders make

Not putting money aside for tax, then facing a first-year bill with nothing saved
Being caught out by provisional tax in year two, when instalments land on top of the first year’s terminal tax
Forgetting ACC levies exist until the first invoice arrives
Mixing personal and business spending in one account, making the tax return a reconstruction job
Crossing the $60,000 GST threshold without registering, and owing backdated GST
Trading under a name that infringes someone else’s trade mark

Sole trader or company?

Stay a sole trader while the business is small, the risk is low and simplicity matters. Review the structure when profits grow well past what you need to live on (a company pays a flat 28% tax rate, while a sole trader’s top personal rate is 39%), when you take on real liability risk, when you hire several staff, or when you want to bring in a co-owner or sell the business. Changing later is normal and not difficult, but it is a new structure with new registrations, so time it deliberately. If you are still deciding whether to start at all, our guide to starting your own business in NZ covers the wider groundwork.

Frequently asked questions

Do sole traders have to register in New Zealand?

Not with a central register. There is no sole trader registration and nothing to file with the Companies Office. You do need to tell Inland Revenue you are self-employed through myIR, and you must register for GST once your turnover passes $60,000 in a 12 month period.

How much does it cost to set up as a sole trader?

Effectively nothing. There is no setup fee, a NZBN is free, and GST registration is free. Your real costs are optional ones such as accounting software or an accountant.

What tax do sole traders pay?

Income tax on net profit at the personal tax rates, through an annual IR3 return. If your residual tax is more than $5,000 you also pay provisional tax in instalments the following year. GST applies on top of that if you are registered, and ACC levies are invoiced separately.

Can a sole trader employ staff?

Yes. You must register with Inland Revenue as an employer, deduct PAYE from wages and meet payday filing obligations.

Can I change from a sole trader to a company later?

Yes, and many businesses do as they grow. The company is a new legal entity, so it needs its own IRD number, registrations and bank accounts, and business assets and contracts move across to it.

Sources

Inland Revenue, Self-employed and sole traders guidance, and Provisional tax: https://www.ird.govt.nz/provisional-tax
Inland Revenue, Tax toolbox and record keeping guidance: https://www.ird.govt.nz
business.govt.nz, Choosing a business structure and ONECheck: https://www.business.govt.nz
New Zealand Business Number register: https://www.nzbn.govt.nz

Disclaimer

This article is general information about setting up as a sole trader in New Zealand. It is not tax, accounting or legal advice for your individual situation. Tax rules change, so confirm your obligations with Inland Revenue or a tax adviser before you start trading.