How much tax do I pay?

As a sole trader in New Zealand, you pay personal income tax on your net profit. The amount depends on how much you earn NZ uses a progressive tax system, meaning different portions of your income are taxed at different rates.

Current personal income tax rates (from 31 July 2024)

These thresholds were updated on 31 July 2024 and apply from the 2024–25 tax year onwards.

How is your taxable income calculated?

As a sole trader, you pay tax on your net profit — that's your total business income minus your allowable business expenses. This figure is then combined with any other income you earned during the year (wages, rental income, interest, etc.) to give your total taxable income.

Example:

You earned $65,000 from your business, and claimed $10,000 in expenses. Your taxable profit is $55,000.

Tax on $55,000:

• 10.5% on the first $15,600 = $1,638
• 17.5% on $15,601–$53,500 = $6,633
• 30% on $53,501–$55,000 = $450

Total tax: $8,721

ACC earner's levy

In addition to income tax, sole traders also pay an ACC earner's levy. This is charged on your liable earnings (up to a maximum) and funds New Zealand's accident compensation scheme. The rate changes slightly each year — check acc.co.nz for the current rate.

Independent earner tax credit (IETC)

If your income is between $24,000 and $48,000 and you don't receive Working for Families or a student allowance, you may be eligible for the Independent Earner Tax Credit of up to $520 per year.

What about GST?

GST is separate from income tax. If you're GST-registered, you collect 15% GST from customers and return it to IRD — this money is not your income and doesn't affect your tax calculation.

💡 Lodg calculates your expected tax bill automatically based on your income and expenses, so you're never caught short at tax time.

Source: ird.govt.nz — Tax rates for individuals | ird.govt.nz — Work out tax on your yearly income