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Updated: Sep 29, 2022

Learn the basics of becoming a sole trader in New Zealand and comply with the local tax and invoice regulations.


New Zealand, an island country in the Southwest Pacific, is known for its beautiful nature, Maori culture, and champion rugby team. With its highly developed free-market economy and great living conditions, New Zealand is a great place to work and start a life. Many people in New Zealand have chosen the flexibility and independence of self-employment, and you can join them! Here we break down the basics of becoming an independent contractor, known as a sole trader, in New Zealand. The information here should not be used in place of legal counsel and can also largely be found on the New Zealand Government website.


What is a Sole Trader in New Zealand?


A sole trader is someone who starts doing business on their own without registering as a company. This means that self-employed people, like small business owners and contractors, are sole traders. Many people opt for the sole trader classification as it is a cheap and easy option if you want to work for yourself. Startup costs for sole tradership are very low as there are no registration fees. As a sole trader, you have autonomy over your business and get to reap all benefits and income for yourself. However, this also means that you are the only one liable for your business’s debts, which can put your personal assets at risk. It can sometimes be hard to find investors/lenders and grow your sole trading business, so make sure you do proper research and planning before you launch your business.


Registering as a Sole Trader in New Zealand


There is no actual formal registration for sole tradership. Instead, you have to inform the government and tax authorities of your decision to be a sole trader and make sure you have all the proper permits, licenses, etc., for your profession. The process of becoming a sole trader is meant to be quite easy – you really don’t need much to get started. All you must have are:

  1. a personal IRD number for paying income tax and GST

  2. government licenses and permits your business needs

  3. qualifications or registrations for your trade or profession.

In terms of your IRD number, notify the Inland Revenue Department that you have become a sole trader, so you will need to use your IRD for income tax and goods and services tax. You must register for GST if you make over $60,000 (New Zealand dollars) per year. If you would like to speed up interactions with the government, businesses, and customers, you can get a New Zealand Business Number (NZBN). This process is done by setting up a RealMe account (which requires your IRD number and a form of identification). 


Picking out your business’s name and hiring staff


As a sole trader, you are allowed to advertise your business under your name only if that name is not already registered. You could also choose to operate under a name different from your own. Either way, be sure to use the ONECheck tool to see if your business name is already taken. It’s also a good idea to use your chosen business name to create your logo, website, and social media to promote your brand further.

If you would like to hire staff for your business, you can, but you must be registered as an employer with the Inland Revenue Department, and you must meet certain requirements. Check out the New Zealand government’s official site to see how to become an employer and meet regulations.


Taxes for Sole Traders in New Zealand


You will have to pay income tax as a sole trader, but that is usually a very straightforward process. Basically, through your IRD number, your net profits are taxed based on how much you made that year. As a sole trader, you will have to file an IR3 income tax return at the end of every tax year. If you do everything right with your taxes, you can qualify for discounts, but you may be subject to penalties if you cut corners or get things wrong.


As previously stated, you will have to register for GST (Goods and Services Tax) if you make over $60,000 (New Zealand dollars) per year. It is possible you will also have to pay provisional taxes during your second year. This is a way of paying tax through installments throughout the year, with the amount based on your expected profit or GST. You might want to talk to an accountant about helping you to pay all of your provisional tax early in your first year. If you do that, you may qualify for an income tax discount.


Aside from income tax and GST, keep in mind VAT (Value Added Tax). New Zealand’s current VAT rate is 13%, which you must pay to the relevant New Zealand governmental revenue on purchases of most goods and services. 


New Zealand Invoicing Compliance


When doing invoices for your business, remember that New Zealand GST invoices must be issued within 27 days of the supply of the taxable items and must be kept for seven years. Your GST invoices should contain several specific things (according to Alvara):

  1. Name, trading name, address of the supplier, address of the customer

  2. The supplier’s GST number

  3. It must say “Tax Invoice” in print

  4. Date

  5. Description of the taxable items

  6. Taxable amount, GST added, gross amount

  7. If in foreign currency: declare conversion rate

If the invoice is less than $1,000 (NZD), then the customer’s name/address and the GST calculations are not needed.


Receiving Payments in New Zealand via Liquid

Liquid supports payments to New Zealand and 175+ countries worldwide in USD as well as select foreign currencies, including NZD. Payments arrive in 2-5 business days via wire transfer, whether the invoice was sent to an existing Client using Liquid or a Client who is new to Liquid


Invoices in Liquid are in USD by default but can also be sent in New Zealand Dollars and other select foreign currencies, allowing Vendors to receive payment in their local currencies instead of USD. In addition, Work orders / Project Proposals can also be agreed to in NZD and other select foreign currencies in Liquid. 


Liquid charges Clients who initiate payments $3 per US invoice paid and $8 per international invoice paid.

Liquid never charges Vendors to receive payments, even when Vendors are requesting payments from Clients who are not current users of Liquid.


That’s all there is to it!

Now you know the essential parts of becoming a sole trader in New Zealand. The process is actually quite easy and manageable, so you can feel confident in making the jump to self-employment. As long as you plan and think ahead, you’ll have no trouble starting your own business and becoming independent. Don’t be afraid to get started with sole tradership in New Zealand – with the information here, it’ll be smooth sailing!

Ready to invoice your United States-based clients? Try Liquid today

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