Government support for sole traders includes eligibility for various benefits and programs aimed at assisting you during your business startup, tax payments, and retirement savings.
ACC levies
When you begin your journey as a sole trader, you are automatically enrolled in ACC’s CoverPlus. The amount you pay will depend on the nature of your work and your liable earnings.
You have the option to switch to CoverPlus Extra, which grants you greater flexibility in determining the extent of income coverage provided by ACC. This allows you to lower the levies you are required to pay.
Your initial levy invoice will be issued at the end of your first year in business. Subsequently, you will receive an annual invoice, typically in July or August.
Types of cover for self employed — ACC
KiwiSaver
The KiwiSaver scheme helps you save for your retirement, no matter if you’re an employee, a sole trader, or a contractor. It’s very flexible if you’re self-employed — you get to decide whether you want to join or not, and if you do decide to join, you have the freedom to choose how much and when to contribute. To get started, you’ll need to sign up with a KiwiSaver provider of your choice.
If you contribute a minimum of $1,042.86 per year, the government will pitch in with a $521.43 tax credit. Being a member also grants you access to benefits for first-home buyers.
KiwiSaver if you’re self employed — KiwiSaver
Tax
You have a few options to lower your tax bill, such as deducting expenses and receiving a one-time discount for early tax payments. A good first step is to consider hiring a tax agent, like an accountant, whose expertise can help you save both time and money.
Provisional tax early payment discount
You’re not required to pay your income tax until after the end of the financial year on 31st March. However, if you make an early payment during your first year as a sole trader, contractor, or in a partnership, you might be eligible for a 2% discount.
A tax advisor can guide you through the process and help you secure the discount.
Early payment income tax discount — Inland Revenue
Independent Earner Tax Credit (IETC)
The Independent Earner Tax Credit (IETC) is a benefit available to individuals, including sole traders and contractors, who earn between $24,000 and $48,000 per year after deducting expenses and losses.
What you get
If your income falls between:
- $24,000 to $44,000: You will receive $10 per week ($520 per year).
- $44,001 to $48,000: Your entitlement will decrease by 13 cents for every dollar you earn above $44,000.
To claim your Independent Earner Tax Credit (IETC), you can do so by:
- Filing an individual tax return (IR3).
- Receiving your automatically issued income tax assessment.
If you have a tax advisor, it’s recommended to seek their assistance in completing this process.
Independent Earner Tax Credit — Inland Revenue
Grab a first-year tax discount
Expenses
Expenses refer to the costs you encounter while operating your business on a daily basis. During tax season, your taxable income is calculated by subtracting the expenses you can claim from your profit.
If you conduct your business from home, you may also be eligible to claim a portion of various household expenses, such as mortgage interest, phone line charges, and electricity bills.
What to claim for when you work from home
Benefits
Becoming a contractor, sole trader, or starting a business can have an impact on the Work and Income benefits you receive. If you are receiving income support, your benefit payments typically cease when you begin a full-time business, including going contracting. However, the situation may differ if you have a family. For instance, you might still be eligible for assistance with housing and childcare expenses.
Consult your case manager to understand how your income support will be affected and any additional support>
Working for Families
If you’re working as a sole trader, contractor, or employee, Working for Families can provide assistance in supporting your family. This program is designed for:
- Almost all families with children, earning an annual income of less than $67,000.
- Many families with children, earning up to $81,000 per year.
- Some larger families with higher incomes.
To apply for Working for Families, you can visit the website of Inland Revenue.
Subsidies for preschool and out-of-school care are accessible to many working parents. To determine your eligibility for these subsidies, get in touch with Work and Income.
Working for Families tax credits — Inland Revenue
Childcare subsidy — Work and Income
Flexi-wage subsidy
Flexi-Wage for Self-Employment is a subsidy available to support individuals who wish to start their own businesses in New Zealand.
You may be eligible if you meet the following criteria:
- You or your spouse receive government assistance, such as benefits.
- You are not bankrupt.
- You are a New Zealand citizen or permanent resident.
The amount of support you receive depends on your financial circumstances and the specific requirements of your business. Consult your Work and Income case manager to learn more about the application process.
Flexi-wage — Work and Income
Self-employment — Work and Income
Parental leave
If you or your partner is expecting a baby or assuming permanent responsibility for the care of a child under six, you may be eligible for paid parental leave.
What you get
your parental leave payments will be based on your average weekly earnings, with a maximum of $661.20 per week before tax. If your earnings are lower than this amount or if you experience a financial loss, the minimum payment you’ll receive is $212.00 per week before tax.
How to qualify
You qualify for paid parental leave if you have been self-employed for an average of at least 10 hours per week for a minimum of 26 out of the 52 weeks leading up to your due date or when you assume care of the child.
It’s important to note that your entitlement to parental leave remains unaffected if you decide to cease self-employment either before or during your leave period.
Paid parental leave — Inland Revenue
Grants and funding
Business training and advice grant
This grant provides support for training and advice expenses, which may include utilising a business advisor when you are looking to establish your own business. You can submit an application if you meet the following criteria:
- You or your spouse receive government assistance.
- You are a New Zealand citizen or permanent resident.
- You are intending to pursue or already receiving the Flexi-Wage Self-Employment subsidy.
How to apply — Work and Income
Grants and help for your new business
Capability vouchers
NZTE Capability Development Vouchers are designed to assist business owners, including GST-registered sole traders, in their efforts to expand and enhance their businesses. These vouchers help cover the costs associated with development and training in various areas such as:
- Planning
- Raising capital
- Exporting
- Finance
- Marketing
To be eligible for these vouchers, you will need to undergo an assessment conducted by a regional business partner (RBP). To access the funding, it is important to engage with an advisor from the Regional Business Partner Network and fulfil the necessary criteria, such as being GST-registered and operating a privately owned business. Contact your local RBP to register your business and obtain further information.
Contact details — Regional Business Partner Network
Research and development (R&D)
There are grants available for research and development (R&D) purposes to support the needs of small businesses. Whether you are just starting out, aiming for growth, or already an established R&D performer, these grants can assist you. To determine your eligibility for these grants, you can visit the Callaghan Innovation website.
Callaghan Innovation also provides the following services:
- Innovation skills programs
- Support with research and technology
- Access to innovation networks
R&D Project Grants — Callaghan Innovation
Support for Startups — Callaghan Innovation
Technology and product development assistance — Callaghan Innovation
Innovation skills programmes— Callaghan Innovation
Access to experts — Callaghan Innovation
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