How to set up as an independent contractor in New Zealand

Are you ready to jump into the unknown and take charge of your career?

Then New Zealand — with its stunning natural beauty, adventurous Kiwi spirit, and thriving startup culture — is the ideal place to start your self-employed journey.

Before you get started, though, you’ll need to understand how to:

• Register your business in New Zealand

• Avoid misclassification as an employee

• Create compliant contracts that protect you

• Invoice and collect payments from around the world

In this guide, we’ll cover all these things. We’ll also help you navigate your tax obligations as a self-employed worker, and discuss some of the other risks and liabilities you should be aware of.

First, it’s important to clarify how New Zealand defines independent contractors.

What is an independent contractor according to New Zealand’s law?

Independent contractors are workers who provide paid services to another party. However, they are classified differently to employees, and are not entitled to the same benefits. It’s important to be correctly classified, as otherwise you can receive penalties and fines.

See also: Why businesses hire contractors vs. international employees

To help determine if a worker is a contractor or an employee, New Zealand’s legal system applies four established threshold tests:

• The intention test

• The control vs. independence test

• The integration test

• The fundamental/economic reality test

These tests look at the nature of the working relationship, and take into account key factors such as:

• Whether the worker is allowed to subcontract work

• Who carries the exposure to financial risk

• Who provides the tools and equipment for the job

• Who sets the price and controls the work

• The exclusivity of the arrangement

If you’re unsure about your status, you can contact the Employment Mediation Service for clarification.

Business registration in New Zealand

To work as an independent contractor in New Zealand, you’ll need to choose a legal structure for your business. Some of the most popular models include:

• Sole trader: A simple structure that is ideal for independent, individual contractors. You have full control of the enterprise, although there is no legal separation between you (the owner) and the business; you are personally responsible for all its debts and liabilities.

• Partnership: A simple partnership agreement. Again, there is no legal separation between the individual and the business; you and your partners are personally responsible for any debts and liabilities.

• Company: A formal, legal entity that is separate from you, the individual. All income and losses are attributed to the company as opposed to you personally.

There are pros and cons to each structure, but most independent contractors choose the sole trader model, as it is fairly simple to set up and operate. If you’re unsure, the Ministry of Business, Innovation & Employment (MBIE) has a quick, handy test you can take to identify the most suitable structure. 

If you do opt for the sole trader model, you’ll need to choose a business name and acquire a RealMe login. This will allow you to prove your identity and access multiple government business portals. You’ll then need to apply for a New Zealand Business Number (NZBN), which will help simplify your business dealings.

How do I get paid as an independent contractor in New Zealand?

As an independent contractor, it’s down to you to handle your invoices and payment collection. Unfortunately, this means billing each client individually and collecting payment through their preferred payment method — which can be inefficient and time-consuming.

Some of the most common ways to collect payments include:

• Bank transfers

• Direct deposits

• Paper checks

• Money orders

• Virtual wallets

• Digital transfer services like PayPal and Wise

These methods all have their own pros and cons. For instance, bank and digital transfers can be pretty quick, but often come with hefty service fees. And if you have clients in other countries besides New Zealand, the payment collection process can be even more complicated.

Alternatively, you can use a trusted solution like Remote. Our platform is a simple, secure, and reliable way to get paid quickly in New Zealand dollars (NZD) — and with no hidden fees. Learn more about how our platform can help.

Independent contractor taxes in New Zealand

As an independent contractor, you’re responsible for paying your own taxes and social contributions. Like most countries, New Zealand has a progressive income tax rate that indicates how much you will owe.

If you are a sole trader, you pay personal income tax on your business profits using your individual IRD number. You do not need to fill out a separate tax return.

Note that, if you paid over NZ$5,000 at the end of the previous tax year, you will need to pay provisional tax in the current tax year. This means that you will pay the money you owe in installments, rather than in one lump sum.

Under the Accident Compensation Act, you’ll also need to pay ACC levies once a year (usually in July or August). How much you will pay depends on your revenue, and the type of work you do.

On the plus side, you can claim tax deductions for multiple business expenses, such as:

• Rent and utility bills for business premises

• Insurance premiums

• Advertising and marketing costs

• Education and training

• Uniforms and equipment

• Travel costs

• Membership of professional associations

GST information for independent contractors in New Zealand

In New Zealand, the goods and services tax (GST) acts as a value added tax for goods and services. The standard GST rate is 15%.

If your business earns more than NZ$60,000 in a year (or you think it’s going to), you will need to register for and charge GST. You’ll also need to file your GST returns, pay any GST you owe to the Inland Revenue, and keep your GST records for at least seven years.

Note that, even if you don’t earn this much, you can still opt to register for GST. You might be able to claim a GST refund if you have a lot of expenses, so consider discussing this with a tax professional.

KiwiSaver

In New Zealand, social contributions are not mandatory, but you can still make regular voluntary contributions to your KiwiSaver fund.

Note that, if you contribute at least NZ$1,043 each year before June 30, the government will contribute an additional NZ$521 to your plan.

You can learn more about KiwiSaver here.

Schedular payments

If you work in a particular industry, or perform a certain activity or service, you may be eligible to receive schedular payments. These are different to salary or wage payments, and can be taxed at a flat standard rate, a tailored rate, or even your own custom rate.

If you are eligible to receive schedular payments, you’ll need to track them and determine the best tax rate to use. You can learn more about how to do this — and about schedular payments in general — on the Inland Revenue website.

Liability considerations for independent contractors in New Zealand

As a sole trader, you are personally liable for finance and tax debts, which means your private assets can be forcibly used to settle your business debts. Many independent contractors purchase liability insurance to help mitigate this risk.

There may be specific compliance regulations in your industry or region, too, especially in regards to health and safety and licensing. The MBIE has a dedicated compliance tool that can help you identify any potential blind spots.

It’s also important to cover yourself when drafting and signing agreements with clients. Our legal experts can provide you with fully compliant contract templates, for both New Zealand-based and international clients.

Data privacy and protection

Under New Zealand law, you must protect the data and information you collect about your clients (and your employees, if applicable). The MBIE has created a detailed guide to help you stay compliant.

Accounting requirements for independent contractors in New Zealand

As a sole trader, you do not need to publish financial statements. However, you must keep accurate and complete business records for at least seven years, including:

• Client invoices

• Receipts

• Wage books (if applicable)

• Banking records

• Asset registers

You can keep these records digitally or on paper. You do not need to hire an accountant or bookkeeper to manage these records, but many sole traders use dedicated bookkeeping or accounting tools to simplify the process.

The dangers of contractor misclassification in New Zealand

As we’ve mentioned, independent contractors are classified differently to employees. Many of the protections and benefits employees enjoy do not typically apply to contractors.

As a result, companies may deliberately misclassify you to circumvent their legal obligations (known in New Zealand as a sham contracting arrangement), while at other times, it may happen accidentally. Whether it’s intentional or not, misclassification can result in penalties and fines for both you and your client.

As an independent contractor, you can work with your clients to ensure this doesn’t happen. Discuss your role and responsibilities with them, and review the working arrangement regularly.

If your working relationship changes over time and you become more integrated into a client’s company, you can ask to be converted into an employee.

How do I ask the company I’m working with to convert me to an employee in New Zealand?

Open a dialogue with your client and carefully discuss the risks and benefits of moving to an employer-employee relationship. In particular, be clear about how it can benefit both parties — not just you.

You can even suggest the help of a third-party solution, such as Remote, to ease the transition. Our global employment services help both parties stay compliant by taking care of key HR functions (like payroll management and benefits administration) in line with New Zealand law.

4 ways Remote makes life easier for contractors and their clients

As you can see, there’s a lot to take on board when setting up as an independent contractor. Remote can help you with many of these challenges, allowing you to focus on growing your business and delivering to your clients. Here’s how:

1. International payments in countries around the world

Navigating all of your clients’ different invoicing, approvals, and payments systems can be complicated and time-consuming. And manual methods of invoicing and collecting payments can increase the risk of fees, errors, and delays.

Remote gives you access to a highly secure, streamlined dashboard that makes invoice management and international payments cost-effective and efficient. You can use our platform to get paid in NZD hassle-free, without any hidden fees.

2. Localized in-app contracts and advice

When you draft agreements and contracts for your clients, you run the risk of non-compliance with local labor laws — especially when working with international clients. Remote offers localized contracts tailored to New Zealand laws, ensuring that you stay compliant. Our legal experts can also provide guidance on complex issues, such as local classification and intellectual property protections.

3. Invoicing automation

With Remote, you no longer need to rely on spreadsheets and other manual tools to invoice for payments; we remove many of the inaccuracies and delays caused by archaic processes and manual management. Our platform lets you create invoices, submit them for approval, and subsequently get paid in your local currency without needing to switch to any other tool or software.

4. Tax management

Tax management is notoriously complex work. Remote helps you quickly and efficiently deal with tax management by compiling data about your income based on your invoices and payments received.

Set up as a contractor in New Zealand today

Having the freedom and flexibility to work on your own terms is liberating. But your administrative responsibilities can distract from what you really want to be doing: helping your clients, delivering great work, and collecting invoices.

By using a stable, trusted platform like Remote, you can manage these obligations quickly and efficiently, allowing you to focus on your business goals. Specifically, we can help you:

• Avoid intermediary fees and delays with international client payments

• Draft compliant contracts for New Zealand-based and foreign clients

• Enhance your invoice management and avoid manual processes

• Comply with local labor laws regarding work practices

Our platform makes it quick, simple, and seamless to get started as an independent contractor. Learn more about how our expertise can save you time and resources today.