Tax rates for sole traders

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Forums › Finance and wealth management › Tax rates for sole traders

Paul1977

5039 posts

Uber Geek

#268338 13-Mar-2020 08:55

The business my partner was employed at unexpectedly went into liquidation and closed it's doors, so she is wanting to set up as a sole trade in the same industry.

I'm trying to find info on the IRD website as to what the tax rates for a sole trader are, but aren't having much luck.

Is it the same rates and thresholds as PAYE?

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3522 posts

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#2437318 13-Mar-2020 09:02

Speak to an accountant.🙂

As a sole trader she's going to need one anyway.

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Paul1977

5039 posts

Uber Geek

#2437319 13-Mar-2020 09:03

floydbloke:

Speak to an accountant.🙂

We have an appointment with one this afternoon, just trying to suss out as much as a can beforehand.

BlinkyBill

1443 posts

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#2437336 13-Mar-2020 09:30

Yes, same as individual.

Delphinus

611 posts

Ultimate Geek

#2437338 13-Mar-2020 09:35

Yeah just normal rates, eg https://www.classic.ird.govt.nz/calculators/keyword/incometax/calculator-tax-rate.html

Then add to that your ACC Levy https://www.acc.co.nz/for-business/paying-levies/calculate-your-levies/

I would strongly recommend a self-employed person use ACC Coverplus Extra - you pre-agree on a level of cover so no need to prove income if you are off work (which can be difficult with fluctuating self-employed income).

Accountant should help you with all this anyway.

BlinkyBill

1443 posts

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Inactive user

#2437346 13-Mar-2020 09:42

Inland revenue run some helpful workshops that greatly assist in understanding tax matters, obligations and timings. There is also a useful cash book you can download from the IR website that helps in record keeping. It is useful to attend the workshops and use the cash book.

this assumes the business is a single-person services type of business with no/limited assets.

Geektastic

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#2437413 13-Mar-2020 10:33

Also seek advice from an accountant and/or solicitor on what the best way to set up is. Do not assume a basic sole trader scenario will be the most tax efficient/asset protection efficient method.

darkasdes2

428 posts

Ultimate Geek

#2437417 13-Mar-2020 10:37

Delphinus:

Yeah just normal rates, eg https://www.classic.ird.govt.nz/calculators/keyword/incometax/calculator-tax-rate.html

Then add to that your ACC Levy https://www.acc.co.nz/for-business/paying-levies/calculate-your-levies/

I would strongly recommend a self-employed person use ACC Coverplus Extra - you pre-agree on a level of cover so no need to prove income if you are off work (which can be difficult with fluctuating self-employed income).

Accountant should help you with all this anyway.

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Paul1977

5039 posts

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#2437427 13-Mar-2020 10:51

Thanks everyone.

itxtme

2102 posts

Uber Geek

#2437429 13-Mar-2020 10:51

Dont know industry etc. as far as risk goes or your personal situation ie. do you own a house? If yes to any then the accountant will likely suggest a LLC so your personal assets are *more* protected. Interestingly its actually very easy to do yourself, and will cost you $105.00 to set up. An accountant will probably charge $1000 for the same thing

Paul1977

5039 posts

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#2437447 13-Mar-2020 11:07

itxtme:

Dont know industry etc. as far as risk goes or your personal situation ie. do you own a house? If yes to any then the accountant will likely suggest a LLC so your personal assets are *more* protected. Interestingly its actually very easy to do yourself, and will cost you $105.00 to set up. An accountant will probably charge $1000 for the same thing

She's a hairdresser, so purely a service based industry. She is looking to rent space in an existing salon, so risk is minimal.

BlinkyBill

1443 posts

Uber Geek
Inactive user

#2437460 13-Mar-2020 11:23

itxtme:

Dont know industry etc. as far as risk goes or your personal situation ie. do you own a house? If yes to any then the accountant will likely suggest a LLC so your personal assets are *more* protected. Interestingly its actually very easy to do yourself, and will cost you $105.00 to set up. An accountant will probably charge $1000 for the same thing

In the context described by the OP, protected against what?

itxtme

2102 posts

Uber Geek

#2437467 13-Mar-2020 11:42

Against personal assets being up for grabs if the business fails from creditors.

BlinkyBill

1443 posts

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#2437526 13-Mar-2020 12:57

itxtme:

Against personal assets being up for grabs if the business fails from creditors.

the business is a hairdressing business, providing a service. What creditors are there? It is bad advice to set up an LLC - the benefits are greatly outweighed by the costs and admin effort required. There are thousands of sole traders successfully operating in NZ.

Paul1977

5039 posts

Uber Geek

#2437554 13-Mar-2020 14:04

We'll see what the accountant says, but with minimal overhead and risk I would have thought sole trader would make more sense.

itxtme

2102 posts

Uber Geek

#2437567 13-Mar-2020 15:09

BlinkyBill:

itxtme:

Against personal assets being up for grabs if the business fails from creditors.

the business is a hairdressing business, providing a service. What creditors are there? It is bad advice to set up an LLC - the benefits are greatly outweighed by the costs and admin effort required. There are thousands of sole traders successfully operating in NZ.

Dont be a knob, I gave my opinion and that was before the OP had even stated the profession.

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