What counts
Freelancing, gig apps, selling things you make, reselling for profit and paid side projects all count. So does renting out a room or your home through an app. Selling your own used things, such as clearing out the garage, isn’t taxable.
How it’s taxed
Your profit is added to your other income and taxed at your normal rates. Because your salary has already used up the lower brackets, your side profit is taxed at your top rate. On top of that:
- ACC levies: the earners’ levy, a work levy for your industry and the Working Safer levy, all on your self-employed earnings.
- Student loan repayments: 12% of the extra income, if you have a loan.
- Credits and payments based on income, such as Working for Families or the independent earner tax credit, can fall.
| Part | Amount |
|---|---|
| You keep | $6,807.00 |
| Income tax | $3,000.00 |
| ACC levies (earners’, work and Working Safer) | $193.00 |
| Side profit | $10,000.00 |
About 32% goes in tax and ACC levies, because the profit is taxed at the top rate your salary has already reached. With a student loan, another 12% goes to repayments, so set aside about 44%.
You file an IR3 individual tax return after the tax year ends on 31 March. It’s due by 7 July, or later if you use a tax agent. Try the self-employed tax calculator with your own numbers.
Schedular payments
Some contractors and gig workers get schedular payments, with tax taken off by the payer at a set rate. You can choose your own rate by giving the payer a tax rate notification (IR330C). If the rate is lower than your top tax rate plus the ACC levies, you’ll have more to pay after the year ends.
GST
Register once your sales go over $60,000 in 12 months, or you expect them to. You can register earlier, which lets you claim back GST on your costs but means adding 15% to your prices.
For ride-sharing, food delivery and short-stay accommodation through an app, the app charges 15% GST on your services even if you’re not registered, and passes most of it back to you as a flat-rate credit (8.5%).
Paying the tax
No tax is taken off most side income, so put money aside every time you’re paid, in a separate savings account. If you owe more than $5,000 at the end of a year (your residual income tax), you pay provisional tax in instalments the next year. For a 31 March balance date, they’re usually due on 28 August, 15 January and 7 May.
Expenses you can deduct
Costs you need to earn the income, such as supplies, equipment, fees charged by the app or marketplace, and the business share of your phone, internet, home and vehicle. Keep receipts and records for 7 years.