Running a small business in New Zealand comes with plenty of responsibility, and tax is a big one. If you’re just getting started or trying to tidy up your finances, it’s helpful to understand what tax might apply and when it’s due.

The tax on a small business in New Zealand depends on a few factors: your business structure, how much money you make, and whether you’re GST registered.

Income Tax – The Basics

If you’re a sole trader, you’ll pay tax as an individual. That means your business income is included in your tax return, and you’re taxed based on the same brackets as salary earners. The first $14,000 you earn is taxed at 10.5%, but it increases from there (click here to see the current rates from IRD). Once your income goes over $70,000, you’ll pay 33% on that portion.

If your business is structured as a company, the tax rate is 28%. That applies to the company’s profit, not the money you pay yourself. Any salary you take is taxed at your rate. Dividends are taxed, too, but that’s another topic.

Provisional Tax

If your total tax bill is more than $5,000 at the end of the year, you’ll usually need to start paying provisional tax. That means estimating your tax and paying it in instalments during the year ahead, rather than waiting until the end of the year. It may not be very clear, but it helps avoid a big bill simultaneously.

What About GST?

GST (Goods and Services Tax) is separate from income tax. If your business earns over $60,000 in 12 months, you must register for GST. That means adding 15% to your invoices, collecting that money on behalf of the IRD, and filing regular GST returns – usually every two months.

Some businesses register voluntarily before they reach $60,000 – especially if they have GST-registered clients or expenses. It’s worth talking to your accountant before deciding either way.

Other Considerations

• You must manage PAYE (Pay As You Earn) and KiwiSaver contributions if you employ staff.
• If you sell assets, you might have capital gains tax to consider (depending on what they are).
• ACC levies are also part of the equation based on your industry and income level.

If you’re unsure what applies to your business, or surprise tax bills have caught you out in the past, you can talk with your accountant, or book a quick chat here. Sorting out your tax isn’t just about staying compliant – it’s about making confident business decisions without second-guessing the numbers.

NZ Business Coach – helping business owners across New Zealand understand their numbers and stay in control.