How does tax work for New Zealand sole traders?

As a New Zealand sole trader, you pay income tax on your net profit — that is, your total business income minus all allowable business expenses. You report this on an IR3 Individual Income Tax Return each year. You also pay the ACC Earners' Levy (1.60% in 2024/25) on your liable earnings up to NZ$139,384. Unlike PAYE employees, no tax is automatically deducted from your payments — you are responsible for setting money aside and paying your tax bill, which may include provisional tax instalments if your residual income tax exceeds NZ$5,000. New Zealand's income tax rates are progressive: starting at 10.5% on income up to NZ$14,000 and rising to 39% on income above NZ$180,000. There is no tax-free threshold (unlike Australia's NZ$18,200 equivalent).

• Tax on net profit (income minus allowable expenses)
• No tax-free threshold — tax starts from the first dollar
• Five progressive tax bands: 10.5% to 39%
• ACC Earners' Levy: 1.60% up to NZ$139,384
• Self-responsible for setting aside tax — no automatic deduction