Questions on how to set up as a software contractor

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sidney

46 posts

Geek

#41434 16-Sep-2009 10:42

I am about to begin a steady software contract, i.e., at least six months of steady work as an independent software contractor. I've done that in the past in the US, but only have worked as a salaried employee since I've been in New Zealand. The contract just appeared, before I had reason to research how people generally set up their solo contracting businesses in this country.

Can anyone provide some hints or links to information on the best practices and standard ways of doing business as an independent contractor here? For example, for tax purposes is it ok to work just as myself or are there strong advantages to setting up some sort of business entity, and if so which kind is best for this purpose? I know how I would keep track of and deduct expenses in the US -- What would be different about that here? One aspect that will be unfamiliar to me is how GST is handled -- I can read up on IRD regulations, but that won't give me tips on how solo independent contractors make the best use of the regulations.

Thanks for any advice or pointers to good sources of information.

bazzer

3310 posts

Uber Geek

Trusted

#256077 16-Sep-2009 12:07

There's a useful guide on the IRD website that you might find helpful. There's actually a ton of useful stuff on there, not just basic rules and regs.

Ragnor

8035 posts

Uber Geek

Trusted

#256336 17-Sep-2009 00:29

Someone posted this advice on the nz dotnet mailing list awhile back in response to a similar question...

1. Talk to an accountant.
2. Setup a company.
3. Setup a family trust.
4. You and your partner could be the trustees.
5. Let Family trust own the company.
6. Family trust will get the profits, which are taxable at a lower rate.
7. Trust can redisribute the profits to share holders this way you can save up to 6% of your tax.
8. Employ youself as an permanent employee. This will set you up for a Kiwi saver
9. Employ others (for minor accounting, administrative work ex. partners, parents, friends, children).
10. This may also set them up for a Kiwisaver 1k startup.
11. If Support staff do not earn more than a certain amount (my guess morr than 26k/yr) they do not get taxed.
12. You have to pay Employe deductions to IRD.
13. You gave to pay GST bimonthly or half yearly depending on how you have set up. An accountant can give you better advice.
14. This may sound complicated to start, but it is not difficult.
15. Many things are tax deductible.
16. Talk to an accountant.

friedCrumpet

268 posts

Ultimate Geek

#256377 17-Sep-2009 08:53

Yeah, just do #1 - the rest of it is just a crap load more paper work - especially if you don't do more than this 6 month contract.

sidney

46 posts

Geek

#256418 17-Sep-2009 10:51

The IRD guides looked very helpful. It looks like if I end up with a permanent job after the six months there will be no need to charge for GST during the six month contract and I have much less paper work as a result. If I did this longer term then I would have to register for GST, do all that paperwork anyeway, and Ragnor's list looks like a very good way to reduce taxes.

Kyanar

3158 posts

Uber Geek

Trusted

Subscriber

#256915 18-Sep-2009 18:55

If you're contracting, don't underestimate the value of indemnity insurance! It might seem expensive, but it'll seem more expensive if you get scapegoated for (or demons forbid, actually cause!) an issue which affects the clients' core business.

I finally have fibre! Had to leave the country to get it though.