Contracting in New Zealand: sole trader, GST and provisional tax for Australians

Becoming a sole trader in New Zealand takes an afternoon. Paying the right tax at the right time takes a system, because the bills arrive later than you expect and sometimes two at once.

The short version

• A sole trader uses their personal IRD number. There's no formal registration like an Australian ABN, though an NZBN is recommended [1].
• Register for GST once your turnover reaches, or is expected to reach, NZ$60,000 in 12 months [3].
• If you're paid by schedular payments, you choose a withholding rate on the IR330C. It must be at least 10% [7].
• Your first year has no provisional tax, but it isn't tax free. In year two you can pay year one's tax and year two's provisional tax at the same time [6].
• If you stop running your business in Australia, you need to cancel your ABN [10].

Contractor or employee? Check first

Before you set up anything, make sure you really are a contractor. Some Auckland roles that look like contracts are really jobs, and the label on the paperwork isn't the end of it.

Since 21 February 2026, New Zealand has a "gateway test" [9]. You're treated as a contractor if you meet all of its criteria. They include a written agreement saying you're an independent contractor, freedom to work for others, control over when you work or whether you subcontract, the ability to decline extra work, and a reasonable chance to get independent advice before signing [9]. If any criterion isn't met, the older common law tests apply. Those look at intention, control, integration and if you're really in business on your own account [9].

Getting it wrong can cost you. People wrongly treated as contractors may miss out on annual holidays, sick leave and employer KiwiSaver contributions [9]. If you'd rather have an employment agreement, read working in Auckland: employment agreements, 90-day trials and leave.

Sole trader or company?

Most Australians who freelance from Auckland start as sole traders. If you set up a company, the Companies Office requires at least one director who lives in New Zealand, or who lives in Australia and is a director of an Australian-registered company. Get an accountant's view before you incorporate. Running a company in New Zealand and another in Australia adds tax questions on both sides.

Setting up as a sole trader, step by step

business.govt.nz sets out the steps [1]. Here they are in order, with the Australian bits added.

1. Get your IRD number. Australians arriving in New Zealand can apply online as new arrivals. See your IRD number and tax code.
2. Tell Inland Revenue you're self-employed through myIR [1].
3. Declare your schedular payment rate on the IR330C if your clients pay you schedular payments [1][7].
4. Decide on GST. Register if you expect to earn over NZ$60,000 in 12 months [1][3].
5. Register for MyACC for Business. As a sole trader you automatically get ACC's CoverPlus personal injury cover, and you pay levies through this account [1].
6. Check licences and registrations for your trade or profession [1].
7. Get an NZBN. The New Zealand Business Number is optional for sole traders, but it's recommended and speeds up dealing with government and businesses [1].
8. Open a separate bank account for the business, and a third account for tax money.
9. Check your business name with ONECheck before you print anything [1].

GST: when it kicks in

New Zealand's GST works like Australia's, but with a lower threshold for registering.

When you must register

You must register if you run a taxable activity and your turnover was at least NZ$60,000 in the last 12 months, or you expect it to be at least NZ$60,000 in the next 12 months [3]. You also have to register if you add GST to your prices [3]. You can register voluntarily below the threshold [3]. Starting a business alone doesn't mean you have to register [3].

Compare that with Australia's A$75,000 GST threshold. If you earn a similar amount, you may hit New Zealand's threshold sooner.

How often you file

When you register, you choose how often to file and your accounting basis [4]:

Most solo contractors pick 2-monthly on the payments basis, so you only pay GST on money you've actually received. Six-monthly means less admin, but Inland Revenue warns it can be a big job to account for six months at once [4].

If your clients are in Australia, the GST treatment of services supplied to overseas clients can differ from local work. Ask Inland Revenue or your accountant before you send your first invoice.

Provisional tax: the second-year surprise

There's no PAYE when you're self-employed, unless your clients deduct schedular tax. Instead, Inland Revenue collects tax during the year through provisional tax.

Who pays it

You pay provisional tax if your residual income tax in your last return was more than NZ$5,000 [5]. Residual income tax is roughly the tax left to pay after amounts already deducted. Contractors, landlords and people with overseas income are often caught [5].

Your first year

Using the standard, estimation or ratio options, you generally don't pay provisional tax in your first year [6]. But your first year is not tax free. First-year tax is usually due by 7 February of the following year, or 7 April if you have a tax agent [6].

Here's the trap. In your second year you pay income tax for year one at the same time as provisional tax for year two [6]. Plenty of new contractors only find out when both bills arrive.

The four options

Inland Revenue offers four ways to work it out [5]:

• Standard. Last year's residual income tax plus 5%, usually in three instalments [8]. Good if your income is steady or rising.
• Estimation. You estimate this year's tax. Useful if your income drops, but be realistic.
• Ratio. Linked to your GST returns, so payments match your cashflow.
• AIM (accounting income method). Uses accounting software and you only pay when you make a profit.

The early payment discount

If you pay voluntarily during your first year, you may get an early payment discount. Inland Revenue says the rate for the 2027 income year is 4.25% [6]. To qualify you must be self-employed or a partner, get most of your income from the business, and have had no provisional tax obligation in that year or the four before it [6].

A simple habit avoids all of this: move a fixed share of every payment into a tax account the day it lands.

ACC levies for the self-employed

ACC is New Zealand's no-fault accident cover. As a sole trader you're automatically covered by CoverPlus [1]. Instead of a levy coming off your pay, ACC invoices you for levies based on your earnings and the kind of work you do. The first bill can be large if it covers a full year, so budget for it alongside income tax.

Employers' ACC costs are one reason business.govt.nz suggests contractors add at least 20% to the equivalent salaried rate when setting their price. The uplift also covers leave, public holidays and business costs [2].

Your Australian ABN and Australian clients

Lots of Australians keep working for Australian clients from Auckland. A few things to sort out:

• Your ABN. You need to cancel your ABN if you close your business or stop running it in Australia [10]. If you'll keep carrying on a business in Australia, update your details within 28 days of a change [10].
• Australian GST. Ask your accountant whether you should stay registered. Getting this wrong can cost money on both sides.
• Where you're taxed. Once you're a New Zealand tax resident, income from personal services you perform in Auckland is generally taxed in New Zealand. The Australia–New Zealand double tax agreement helps stop the same income being taxed twice. Your Australian residency is covered in Australian tax residency after moving.
• Super. You stop getting employer super on Australian contracts once you're a sole trader. Read your super while you live overseas.
• Social security. The New Zealand–Australia social security agreement can count time in both countries towards NZ Super or the Age Pension. It doesn't give you New Zealand jobseeker payments in your first two years, so keep a buffer.

Freelancing and want to compare notes on rates or accountants? Join Cooee New Zealand, our Facebook group for Australians in New Zealand.

Sources

1. Becoming a sole trader – business.govt.nz
2. Before you start contracting – business.govt.nz
3. Registering for GST – Inland Revenue
4. Which GST accounting basis and filing frequency should I use? – Inland Revenue
5. Provisional tax – Inland Revenue
6. Paying tax in your first year in business – Inland Revenue
7. Work out and declare my tax rate for schedular payments – Inland Revenue
8. Standard option – Inland Revenue
9. Employee or contractor – Employment New Zealand
10. Register for an Australian Business Number (ABN) – business.gov.au

Keep reading

• Your IRD number and tax code: getting paid right in New Zealand
• Working in Auckland: employment agreements, 90-day trials and leave
• Cost of living in Auckland vs Sydney and Melbourne
• Are you still an Australian tax resident once you move?