How to register as a sole trader in New Zealand

Published Wednesday 27 May 2026

Table of contents

• What is a sole trader?
• Sole trader vs other business structures
• Pros and cons of being a sole trader
• How to become a sole trader in NZ
• Tax and financial obligations
• Manage your sole trader finances with confidence
• FAQs on registering as a sole trader

Key takeaways

• You don't need to formally register to become a sole trader in New Zealand. You simply start trading and meet your tax and compliance obligations with Inland Revenue and ACC.
• The key steps include getting an IRD number, notifying Inland Revenue, checking whether you need to register for GST, setting up ACC, and applying for an NZBN.
• Understanding your ongoing tax obligations early, including income tax, provisional tax, and record-keeping requirements, helps you avoid surprises and stay compliant from day one.
• Comparing business structures before you start helps you confirm that sole trader is the right fit for your situation, your risk tolerance, and your growth plans.

What is a sole trader?

A sole trader is a person who runs a business on their own, without a separate legal entity. It's the simplest business structure in New Zealand, and it's how most freelancers, contractors, and small service businesses get started.

You and your business are legally the same. You keep all the profits, make all the decisions, and take on all the liability. If the business takes on debt, your personal assets (including your home) could be at risk.

A common misconception is that you need to formally "register" to become a sole trader, but there's no legal requirement to do so. You simply start trading. The steps in this guide cover the tax and compliance obligations you'll need to meet once you're operating, such as notifying Inland Revenue and setting up ACC cover.

The word "sole" refers to ownership, not workforce size. You can still hire employees as a sole trader.

Sole trader vs other business structures

The main difference between a sole trader and a company is that a sole trader has unlimited personal liability, while a company is a separate legal entity that limits liability to the business. The comparison below covers the factors that matter most.

Sole trader:

• Liability: you're personally liable for all business debts, and creditors can pursue your personal assets.
• Tax treatment: business income is taxed at your personal income tax rates through your individual IR3 return.
• Setup cost: free. No registration fees or legal costs to get started.
• Compliance burden: minimal. No annual returns to file with the Companies Office.
• Decision-making: you have full control over every business decision.

Company:

• Liability: the company is a separate legal entity, so your personal assets are generally protected from business debts.
• Tax treatment: the company pays tax at the flat company rate of 28%, and you pay personal tax on any salary or dividends you draw.
• Setup cost: $10 to incorporate online, plus an annual return fee of $49.74 (plus GST).
• Compliance burden: higher. You must file annual returns, maintain a registered office, and keep company records.
• Decision-making: directors make decisions, which may include other people if you bring in shareholders.

You can learn more about company structures on the Companies Register website.

Two other structures are worth considering before you decide. A partnership lets two or more people share ownership, profits, and liability. A trust holds assets on behalf of beneficiaries and can offer asset protection, but involves higher setup and compliance costs. For most people starting out on their own, sole trader is the simplest path.

Pros and cons of being a sole trader

The main advantages of being a sole trader are simplicity, full control, and lower costs. The main disadvantages are unlimited personal liability and limited access to funding. Weigh up the following before you decide.

Pros

• No setup costs: there are no registration fees or legal costs to start trading, unlike companies that pay annual filing fees.
• Full profit ownership: all business profits belong to you, though losses do too.
• Simple tax: your business income flows through your personal tax return, so there's only one set of accounts to manage.
• Complete control: you make every decision without needing approval from directors or shareholders.
• Government benefit access: you may be eligible for parental leave and other benefits available to self-employed people.

Cons

• Personal liability: your personal assets, including your home, back any business debts if the business can't pay.
• ACC levy responsibility: you pay levies for yourself, and for any employees you hire.
• Limited funding options: bringing in investors or raising capital typically requires changing to a company structure.
• Harder to sell: selling your business takes more planning, especially if it relies on your specific skills or relationships.

How to become a sole trader in NZ

Becoming a sole trader in New Zealand is free, and most of the process happens online. Follow these eight steps to meet your tax and compliance obligations.

Step 1: Get an IRD number

Most New Zealand residents already have an IRD number from previous employment, banking, or KiwiSaver. If you already have one, you can skip this step.

If you don't have an IRD number, apply through Inland Revenue before you start trading. You'll need it for all tax-related obligations.

Step 2: Tell Inland Revenue you're a sole trader

This is the core step. Log in to myIR, go to "My business," and register your sole trader activity. Inland Revenue will ask for your business type, industry, and expected income.

If you're a contractor receiving income where tax has already been deducted (schedular payments), you may also need to complete an IR330C form to declare your tax rate. This applies to industries like construction, IT contracting, and some professional services.

When you notify Inland Revenue, they automatically share your details with ACC to set up your accident cover.

Step 3: Register for GST (if required)

Goods and Services Tax (GST) registration is mandatory if your business turnover was at least $60,000 in the last 12 months, or you expect to reach that threshold within the next 12 months. Register through Inland Revenue to avoid penalties.

If you earn under $60,000, you can still register voluntarily. This lets you claim back GST on business expenses, which can be worthwhile if you have significant startup costs.

Step 4: Set up ACC

ACC (Accident Compensation Corporation) cover is mandatory for all self-employed people in New Zealand. You receive weekly compensation if an accident prevents you from working.

Your ACC cover is set up automatically through the CoverPlus programme when you notify Inland Revenue. Your levies are calculated based on your industry risk level and annual earnings. Your first invoice arrives after you file your tax return.

Register for MyACC for Business to verify your details and manage your levies online.

Step 5: Apply for an NZBN

A New Zealand Business Number (NZBN) is a unique identifier for your business. It's free and voluntary, but it's useful for credibility, invoicing, and interacting with government agencies and other businesses.

You can apply for an NZBN through the NZBN register. The process takes a few minutes online.

Step 6: Register as an employer (if applicable)

If you plan to hire employees, you'll need to register as an employer with Inland Revenue. This sets you up to handle PAYE, KiwiSaver employer contributions, and employer superannuation contribution tax (ESCT).

You may also need to register for fringe benefit tax (FBT) if you provide employees with benefits like company vehicles. Keep all employment records for at least seven years.

Step 7: Check licences, permits, and qualifications

Some businesses need licences or permits from central or local government to operate legally. Common examples include food licences, alcohol licences, and building consents.

Certain professions also require qualifications or registrations. Electricians need to register with the Electrical Workers Registration Board. Plumbers and gasfitters register with the Plumbers, Gasfitters and Drainlayers Board. Physiotherapists need a current practising certificate.

Check the Compliance Matters tool or your local council for requirements specific to your industry.

Step 8: Choose and protect your business name

As a sole trader, you can trade under your own name or choose a separate business name. Using a business name doesn't create a separate legal entity, but it helps you build a distinct brand.

If you choose a business name, you can register it through the Companies Office to protect it from use by other businesses. This is optional but recommended if you want to establish brand recognition.

Tax and financial obligations

Once you're set up, you'll have ongoing tax responsibilities to stay on top of. Understanding these early helps you plan your cash flow and avoid unexpected bills.

Income tax for sole traders

As a sole trader, your business income is taxed at personal income tax rates. You report your income and expenses on an IR3 individual tax return at the end of each tax year (31 March).

You can claim deductions for legitimate business expenses, including office costs, vehicle use, and professional fees. Keep clear records of all income and expenses throughout the year.

Provisional tax

If your residual income tax is more than $5,000 at the end of the tax year, you'll likely need to pay provisional tax the following year. This means paying your estimated tax in instalments throughout the year, rather than in one lump sum.

Provisional tax typically applies from your second year of trading. Inland Revenue offers several calculation methods to help you estimate your payments.

Record-keeping requirements

You must keep accurate records of all business income, expenses, and transactions for at least seven years. This includes invoices, receipts, bank statements, and tax returns.

Good record-keeping makes tax time easier and helps you track how your business is performing. Accounting software can automate much of this work, from bank feeds to expense categorisation.

KiwiSaver and student loans

As a sole trader, KiwiSaver contributions are voluntary. Unlike employees, you don't receive an employer contribution. You can make voluntary contributions directly to your KiwiSaver provider at any time.

If you have a student loan, your repayment obligations continue as a sole trader. Repayments are calculated as part of your provisional tax, based on your annual income.

Manage your sole trader finances with confidence

Setting up as a sole trader is just the beginning. Staying on top of your finances, from tracking daily expenses to filing your tax returns on time, is what keeps your business running smoothly.

Xero accounting software is built for sole traders and small businesses. It automates bank reconciliation, invoicing, and expense tracking so you can spend less time on the books and more time on the work that matters.

Find an accountant or bookkeeper who uses Xero to get expert support from day one, or get one month free.

FAQs on registering as a sole trader

These questions cover the most common concerns about sole trader registration, tax, and compliance in New Zealand.

Is it mandatory to register as a sole trader in NZ?

No, there's no formal registration process. You simply start trading and then meet your tax obligations, such as notifying Inland Revenue and registering for GST if your turnover exceeds $60,000.

What is the difference between a sole trader and a company?

A sole trader and their business are legally the same entity, so you're personally liable for all debts. A company is a separate legal entity with limited liability, but it involves higher setup costs, annual compliance, and a flat 28% company tax rate.

Do sole traders need to register for GST?

Yes, once your turnover reaches $60,000 in any 12-month period. Below that threshold, registration is voluntary but can be worthwhile if you want to claim GST back on business purchases.

Do sole traders pay provisional tax?

Yes, if your residual income tax exceeds $5,000 at the end of the tax year. This typically starts from your second year of trading and spreads your payments across the year in instalments.

Can a foreign national become a sole trader in NZ?

Yes, provided you have a valid visa that permits you to work in New Zealand. You'll need an IRD number, and the same tax and compliance obligations apply regardless of citizenship.

Do I need a separate bank account as a sole trader?

It's not legally required, but it's strongly recommended. Keeping business and personal finances separate makes it much easier to track expenses, prepare your tax return, and understand how your business is performing.