Guide on registering as a sole trader in New Zealand

Whether you’re a solo trader or a lone wolf entrepreneur, the sole trader structure offers the easiest path to starting a business in New Zealand. Although some restrictions apply, this popular structure has modest registration requirements and puts you in complete control.

In this post, we’re covering how to become a sole trader business in New Zealand, including registration, obligations, costs, and additional requirements.

What is a sole trader in New Zealand?

As a sole trader, your business and personal finances are intertwined, making you responsible for all income and losses.¹

That’s great when things are going well. But should your business run into trouble, your cash and assets – property, automobiles, shares, etc.– could be on the line.

Nonetheless, this accessible, easy-to-establish business structure appeals to a broad range of professions, from tradies and IT contractors to freelance artists. Small business owners, such as hairdressers and food stall owners, can also become sole traders, even if they have employees.

Companies, on the other hand, are considered separate legal entities. Directors aren’t usually liable for losses should a company go under.¹

Benefits of becoming a sole trader in New Zealand

• Fast setup: Becoming a sole trader is quick and easy, with minimal paperwork required.
• Complete control: As you’re the boss, there’s no need to consult other directors or partners.
• Full profit retention: The sole trader keeps 100% of the profit earned.¹
• Private finances: There’s no requirement to publicly disclose financial records.
• Easy taxation: Business income and expenses are included in your personal finances.¹

The drawbacks of becoming a sole trader in New Zealand

• Personal liability: Your assets may be used to cover business debts.¹
• Hard to sell: Sole trader businesses are often strongly tied to a specific individual, making them difficult to sell.
• Growth limitations: Sole traders may struggle to attract investors or secure business loans, affecting their ability to scale.
• No employee benefits: Sole traders aren’t entitled to employee benefits like sick leave and public holidays.
• Work-life balance: Some sole traders struggle to maintain a healthy work-life balance and adapt an always-on approach to business.

Is it mandatory to register as a Sole Trader in NZ?

Sole traders don’t need to register their business with any government authority. You only need to inform the Inland Revenue Department (IRD) that you have begun working as a sole trader.² That makes it the simplest, most accessible business structure in New Zealand.

Other requirements vary depending on your circumstances. Registering a company in New Zealand, by comparison, requires a mountain of paperwork, including forms, declarations, verifications, and account creations.

How to register as a sole trader in NZ

Follow these steps to start trading solo in New Zealand.

Obtain an IRD number (if you don’t have one)

Sole traders need a personal IRD number and the associated MyIR account.² Most Kiwis already have one from a previous job, a student loan, opening a bank account, or filing tax returns.

Use the Find My IRD tool to check if you’ve got an IRD number already. If not, you must apply for one before you start trading.

Inform the IRD

Inform the IRD of your intention to become a sole trader:

1. Log in to your MyIR account.
2. Click “I want to…”
3. Click “Communicating with IR,” then “Send a message.”
4. Select “This message is not relevant to a specific account.”
5. Select “Other” as the message category.
6. Enter “Notification to become a sole trader.”
7. Click “Send” to submit your application. ²

That’s it. Registering as a sole trader takes a matter of minutes.

Register for GST

Registering for GST is mandatory for sole traders who expect to earn $60,000 or more in the first 12 months of trading.²

GST registration is optional for businesses earning $60,000 or less.³ Electing to register for GST may benefit some sole traders by allowing them to claim back GST on expenses.

After registering for GST, you must file regular GST returns and pay GST on all your taxable activities.⁴

Create a MyACC Account

Kiwi sole traders automatically receive CoverPlus, personal injury cover provided by the Accident Compensation Corporation (ACC). The amount you pay depends on your industry and liable earnings. Sole traders can upgrade to CoverPlus Extra to gain greater control over coverage and reduce the annual fees.

Sole traders must create a MyACC account to pay their levies.²

Declare your tax rate for schedular payments (contractors only)

Contracting sole traders performing certain services in specific sectors may need to declare their tax rate for schedular payments using the IR330C form. Visit the IR website for more information on schedular payments.²

Apply for an NZBN (optional)

The New Zealand Business Number helps Kiwi businesses, including sole traders, improve efficiency and build trust in their brand. This unique 13-digit identifier verifies your business in a publicly accessible database and shares contact details to streamline interactions with government, customers, and suppliers.

Although optional, many New Zealand sole traders elect to obtain an NZBN as the process is quick, easy, and free.²

Register as an employer

Kiwi sole traders can hire employees. If you decide when, where, and how people work for you, then they are considered employees, and you must register as an employer.

Employers are responsible for deducting income tax from wages. You may also need to deduct KiwiSaver, or student/child support loans, from your employees’ wages. An employer must retain payment records for at least 7 years.⁵

The IRD Am I an Employer tool can help you determine whether you classify.

Confirm your licenses, certificates, and qualifications

Sole traders dealing in certain industries may need to obtain permits. For example, a home-based catering business might require a food safety certificate to operate, while a boutique booze-maker might need a liquor license.

Likewise, sole traders providing certain specialised services, such as medical, electrical, or engineering, may need formal qualifications in their respective fields. You can find more detailed information at your Local Government website, relevant industry bodies, and Compliance Matters.

How Wise Business simplifies finances for NZ sole traders

From freelance creatives to IT consultants, many Kiwi sole traders cater to offshore clients. But invoicing overseas customers comes with its own challenges, including sky-high international transaction and foreign exchange fees.

Wise Business can help sole traders reduce cross-border transaction costs through low, transparent pricing and access to the mid-market exchange rate. A Wise Business account allows users to can send, receive, and hold in multiple currencies. Experience hassle-free global transactions by transacting like a local business. Here's what you get with a Wise Business account:

• Free to register — Hold and convert between 40+ currencies. Send to 140+ countries
• Debit cards for you and your team, which you can use in 150+ countries
• Multi-user access for team members, with ways to control and manage permissions
• Pay up to 1,000 recipients at once with the Wise batch payments feature
• Integrate with your favourite cloud accounting solutions like Xero, QuickBooks, and more
• Get account details to receive in 8+ currencies for a one-time fee of 40 NZD

Sign up for the Wise Business account! 🚀

This general advice does not take into account your objectives, financial circumstances or needs and you should consider if it is appropriate for you.

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FAQs About Registering as a Sole Trader in NZ

1. What are the main tax obligations for a sole trader in New Zealand?
Sole traders in New Zealand must pay tax on their income and register for GST if they expect to earn $60,000+ within a 12-month period.⁶

2. Do I need to register a business name as a sole trader?
No. Kiwi sole traders aren’t required to register a business name. However, you can’t advise under your personal name if it's already registered as a trademark in the same industry.²

3. Can I Register as a Sole Trader While Employed?
Kiwis commonly work side hustles as sole traders, such as freelancing or Uber driving, while holding casual, full, or part-time employment.
Check your employment contract to see whether there are any non-compete clauses or other exclusionary conditions. You’ll need to file a tax return for your sole trader income, as this would be earned separately from your employment income.

4. How much does it cost to register as a sole trader in NZ?
As there is no formal registration process for becoming a sole trader, no registration fees apply. Registering for an ACC and NZBN account is also free.

However, sole traders may need to consider other start-up costs, such as marketing, training, insurance, equipment, and stock.

5. What do sole traders do about tax?
Sole traders generally use their personal IRD number to pay income tax and GST. Sole traders must pay income tax by filing an IR3 income tax return at the conclusion of each financial year. The IRD taxes net profit using the sole trader’s personal IRD number.

All earnings must be included in the IR3 return. Sole traders can nominate tax deductions in the appropriate fields.⁶

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Sources

1. Business NZ: Choosing a company structure
2. Business NZ: Becoming a Sole Trader
3. Business NZ: Registering for GST
4. Business NZ: Sole trader checklist
5. IRD Am I an Employer?
6. Business NZ: Working multiple jobs