When working multiple jobs as a freelancer or contractor, it’s important to be aware of various aspects such as claiming expenses, paying taxes, and ACC levies. Here’s what you need to know to navigate these requirements effectively.
Are you a gig worker?
Gig workers are part of a flexible and on-demand workforce who undertake various short-term jobs (gigs), and can be anyone from part-timers looking to earn extra money from a second or side job to full-time freelancers. The gig economy extends across most industries and roles.
Traditionally, the term “gig economy” referred to using online platforms like Uber and Fiverr to take on small jobs – but now it’s quite common for people to refer to their casual short-term jobs as “gigs” as well. The same rules that apply to gig workers also apply to contractors, freelancers, self-employed individuals, and casual workers.
Services provided may include:
- Personal services such as cleaning, moving, or DIY tasks.
- Skilled manual work, such as plumbing, building, or electrical work.
- Administrative work like data entry or “click work.”
- Creative or IT work, such as writing, graphic design, or web development.
- Professional work such as consultancy, legal advice, or accounting services.
- Delivery or courier services.
- Driving or taxi services.
Gigs are often infrequent, and many casual workers only work once or twice a month. Gig work usually supplements some other form of income and is not a significant portion of total income. This type of work is increasingly popular among young people and is a growing form of self-employment.
Pros
- A range of options and diversity in work
- Flexibility in both payment and working hours
- Ability to easily quit a position if it doesn’t suit you
Cons
- Lack of coverage under employment agreements, resulting in:
- No assurance of government minimums, such as minimum wage
- Absence of sick pay or paid leave
- No job security
- Frequent need to search for new jobs
- Often low pay
Quick tips to make your life easier
There’s further information regarding these points below, but if you’re pressed for time, here’s a summary:
- You are responsible for paying taxes on all your jobs. Make sure to set aside money for tax from each paycheck, unless your withholding tax is being managed by a labor hire company or the correct tax deductions are being made at the source.
- When filing your tax return, select the appropriate BIC (Business Industry Classification) code for the activity you spend the most time on. This code, along with your earnings, determines your ACC levy. Consult with ACC to understand the jobs you’re undertaking and estimate your ACC levies accurately. This allows you to set aside the required funds as you earn. Note that ACC may charge the levy based on the activity with the highest levy rate.
- If you expect to earn over $60,000 in the upcoming tax year or if you charge GST, you must register for GST. This also enables you to claim a credit for the GST paid on most of your business expenses.
- You can claim deductions for the business expenses incurred while working. However, it’s crucial to maintain meticulous records and retain all your receipts.
- Tax agents or accountants are knowledgeable about the expenses you can claim, and utilising their services may save you money. Accounting software can also assist in managing your records and tracking taxes.
- Many casual workers operate as sole traders, conducting business on their own. As a sole trader, you can obtain a free New Zealand Business Number (NZBN), a unique identifier available to all businesses in New Zealand. It can save you time and money by allowing you to share and update your business information with other businesses, including those you engage in casual work for.
How to pay your tax when you work multiple jobs
A significant number of individuals who engage in casual or gig work as self-employed individuals operate as sole traders. Establishing yourself as a sole trader does not require any formal procedures or legal processes. However, there are alternative business structures available, and you can utilise our Choose Business Structure tool to assist you in making a decision.
If you’re new to freelancing, this might be your first experience in handling your own taxes.
For tax purposes, the rules that apply to you are the same as those for contractors or self-employed individuals.
It’s important to start off on the right foot to avoid unfavourable circumstances. Here’s some valuable information to help you ensure a proper start from the beginning.
What you need to know
As a sole trader, it is typical to utilise your personal IRD number for paying income tax and GST.
When completing a tax return or registering for GST with Inland Revenue, you are required to select a Business Industry Classification (BIC) code. This code represents the nature of your business activity and determines your ACC levy. If you are self-employed and engaged in multiple jobs, select the BIC code that corresponds to the activity in which you invest the majority of your time.
Find your BIC code — Business Description
Income tax – the forms
IR3
- Sole traders need to complete an IR3 income tax return at the end of each tax year.
- Your net profit – what you earn after deducting work expenses – is subject to taxation based on your IRD number and your annual income.
- You must report all earnings from all sources on the IR3 return.
- If your earnings have tax withheld at the source, such as schedular payments (see below), make sure to include them in the relevant sections of your IR3 return (either in the fields pre-filled by Inland Revenue or on the summary of earnings).
Video: Income and provisional tax — Inland Revenue
Tip
You must complete a separate IR330C form for each distinct activity and source of income.
IR330C
- If you secure employment through a recruitment company or another labour-hire business, they are obligated to deduct income tax from your earnings. They will request you to complete a tax rate notification form (IR330C), which enables them to deduct tax at a rate of your choosing.
- To determine your tax rate, you can utilise Inland Revenue’s tax rate estimator for contractors.
- As a contractor not engaged through a labour-hire business, you have the option, with the payer’s consent, to have tax deducted from your payments at a rate you select. If you opt or are required to have tax deducted, complete the IR330C form and submit it to your payer. You can choose any rate for the tax deduction, ranging from 10% to 100%.
- Selecting the appropriate tax rate reduces the likelihood of owing taxes at the end of the tax year.
- The IR330C form refers to schedular payments, which are equivalent to wages or salaries for contractors. Previously, tax on schedular payments was referred to as withholding tax, in fact, your tax code will still be designated as ‘WT’.
- If you are a contractor engaged in an activity mentioned on the IR330C form, and you have duly provided the form to your payer with the appropriate tax rate agreed upon for deduction, it is likely that you won’t need to allocate funds separately for tax payment, but:
- you remain accountable for the following obligations:
- ACC levies (refer to the information below for further details)
- KiwiSaver
- Student loans
- Child support
- you have the option to deduct business expenses, and
- you must file an individual tax return (IR3) at the end of the tax year.
- you remain accountable for the following obligations:
- If your specific activity is not listed on the IR330C form or if the payer does not deduct tax from your earnings, it is important for you to proactively allocate a portion of each payment for your tax obligations. In such cases:
- You are fully responsible for settling all tax liabilities, in addition to the following:
- ACC levies
- KiwiSaver
- Student loans
- Child support
- you have the option to deduct business expenses, and
- you must file an individual tax return (IR3) at the end of the tax year.
- You are fully responsible for settling all tax liabilities, in addition to the following:
- If the payer is obligated to withhold tax but refuses to do so, it is advisable to inform Inland Revenue about the situation.
Contractors receiving schedular payments — Inland Revenue
Tax rate estimator for contractors — Inland Revenue
Download the IR330C form — Inland Revenue
Income tax rates — Inland Revenue
Tax codes for individuals — Inland Revenue
GST
If you anticipate earning over $60,000 in the upcoming 12 months or if you apply GST to your services, it is necessary to inform Inland Revenue that you have become a sole trader and register for GST. By doing so, you become eligible to claim a credit for the GST paid on the majority of your business expenses.
Once registered for GST, you are obligated to file regular GST returns.
Register for GST — Inland Revenue
Video: Registering for GST — Inland Revenue
Claiming business expenses
Many of your business expenses can be deducted from your business income, which helps to lower your tax liability. However, this process requires effort on your part. It is essential to maintain proper records and retain receipts for verification purposes.
Here is detailed information on claiming expenses that will assist you in understanding what expenses are eligible for deduction and the steps to follow when making such claims.
Video: Claiming business expenses — Inland Revenue
Case study
Steve’s side hustle
Steve is engaged in multiple freelance gigs, including blog writing, ride-sharing driving, bike couriering, and occasional food delivery. For each of his jobs, there are various business expenses that he can potentially claim:
- Work-related mobile phones and phone bills can be claimed since Steve utilises a mobile phone across all his gigs.
- As he operates his writing work from home, Steve can claim certain household expenses such as a portion of his rent, insurance, power, home office expenses, and depreciation on items like his laptop and office furniture.
- Being a ride-sharing driver and delivery driver, Steve is eligible to claim deductions on his vehicle expenses. These include petrol, work-related parking expenses, vehicle repairs, maintenance, insurance, and depreciation. However, since he is using a private vehicle for business purposes, he can only claim the proportionate costs based on the percentage of business use. For example, if he uses the vehicle for business activities half of the time, he can only claim half of the vehicle’s running costs.
- As a bike courier, Steve may claim certain bike repairs and maintenance expenses.
- If Steve utilises the services of an accountant or bookkeeper, he can claim their fees.
Steve is diligent in maintaining his receipts and organising his paperwork. He maintains a vehicle logbook, diligently recording the mileage for each trip he undertakes and specifying the company associated with it.
When it comes to taxation, Steve’s liability is determined by his total income minus the business expenses he claims, which equates to his profit. By claiming more expenses, Steve can effectively reduce the amount of tax he will be required to pay.
Vehicle logbook template — Inland Revenue
ACC levies
ACC levies are separate from general tax and cover the cost of injuries caused by accidents.
The Business Industry Classification (BIC) code you provide to Inland Revenue when you file a tax return or register for GST, along with your earnings, forms the basis for your ACC levy.
Inland Revenue shares your BIC code, liable income or payroll, and contact details with ACC. ACC then sends you an invoice for levies based on your business activities.
Certain jobs carry higher risks than others, resulting in some industries paying higher levies.
If you are self-employed, you will pay three levies: the Earners’ levy (currently $1.21 per $100 of liable income, excluding GST), the Working Safer levy (currently 8 cents per $100 of liable income), and the Work levy, which contributes to the Work Account to fund workplace injuries (this levy varies for each business).
ACC will invoice you once a year, typically between mid-July and mid-August. Most people receive their invoices during this period.
Find your BIC code — Business Description
ACC levy guide book [PDF, 1.9MB] — ACC
Fact
If you have multiple jobs, ACC may assign the code of the activity that carries the highest levy rate, regardless of whether it is the role where you spend the most time working.
If you have any questions about which code to select, please contact ACC at 0508 426 837.
Get a NZBN
Obtain a New Zealand Business Number (NZBN), a distinctive identifier accessible to all businesses in New Zealand. Having an NZBN offers several advantages, including the ability to share and update your business information with other businesses, even those for whom you undertake occasional work.
An NZBN establishes your identity as a legitimate New Zealand business and simplifies the process of verifying details for new clients. As more businesses acquire and utilise their NZBN, invoicing and bill payments will become more streamlined. You won’t need to repeatedly provide the same fundamental information, saving both time and money.
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