Tax is one of the biggest financial obligations for self-employed tradies in New Zealand — and one of the most commonly mismanaged. Whether you're a sole trader, a partnership, or running a small trade company, understanding your tax obligations can save you thousands each year and keep you on the right side of Inland Revenue.
This guide covers the complete picture: income tax, GST, deductions, provisional tax, and what you need to do before the end of the financial year (31 March).
Quick Summary: Key Deadlines for NZ Tradies
| Obligation | Key Date |
|---|---|
| Financial year end | 31 March |
| IR3 filing deadline (self-employed) | 7 July (or agent's extension) |
| GST return (2-monthly, March/April period) | 28 May |
| Provisional tax instalment 1 | 28 August |
| Provisional tax instalment 2 | 15 January |
| Provisional tax instalment 3 | 7 May |
| PAYE (if you have employees) | 20th of following month |
Use our free GST calculator and tax calculators to run your own numbers.
Income Tax for Self-Employed Tradies
As a self-employed tradie, you pay income tax on your net profit — that's your total income minus your allowable business expenses.
Tax Rates (2025/26 and 2026/27)
| Taxable Income | Tax Rate |
|---|---|
| $0 – $14,000 | 10.5% |
| $14,001 – $48,000 | 17.5% |
| $48,001 – $70,000 | 30% |
| $70,001 – $180,000 | 33% |
| Over $180,000 | 39% |
These are marginal rates — you only pay the higher rate on the portion of income that exceeds each threshold.
Example: A plumber with $95,000 net profit pays: - 10.5% on the first $14,000 = $1,470 - 17.5% on $14,001–$48,000 = $5,950 - 30% on $48,001–$70,000 = $6,600 - 33% on $70,001–$95,000 = $8,250 - Total income tax: ~$22,270
This doesn't include ACC levies. Use our ACC levy calculator to factor those in.
Sole Trader vs Company Tax
| Structure | Tax Treatment |
|---|---|
| Sole trader / partnership | Personal income tax rates (10.5%–39%) |
| Company | Flat 28% company tax rate |
A company structure can reduce tax if your profit is above ~$70,000. However, you'll need to pay yourself a salary (PAYE applies) and the administration overhead increases. Get advice from an accountant before switching.
GST for Tradies
Do You Need to Register?
You must register for GST if your turnover exceeds $60,000 in any 12-month period. You can voluntarily register below that threshold — which is often worth doing to claim GST back on tools, materials, and vehicles.
GST Rates
- Standard rate: 15% on most goods and services
- Zero-rated: Exports, some rental income
Charging GST on Jobs
Once registered, you must charge 15% GST on top of your prices and remit it to IRD. Customers who are GST-registered businesses can claim it back.
Most tradies quote prices inclusive of GST or add it on top. Always make it clear on your invoices. Download our free GST invoice templates to make sure yours are IRD-compliant.
GST Filing Frequency
| Option | When to File |
|---|---|
| Monthly | 28th of following month |
| 2-monthly | 28th after end of period |
| 6-monthly | Available if turnover under $500K |
Most tradies use 2-monthly filing. Your first period starts from when you registered.
Use our GST calculator to work out the GST component on any amount.
What Can Tradies Claim as Tax Deductions?
This is where significant money can be saved — or lost if you miss legitimate deductions.
Vehicle Expenses
For most tradies, the work ute or van is the biggest deductible expense.
Options for claiming: 1. Logbook method — keep a 90-day logbook to establish business-use percentage, then apply that percentage to all vehicle costs (fuel, insurance, WOF, registration, depreciation). Most accurate. 2. IRD mileage rate — currently $0.76 per km for the first 3,500km, then $0.26/km. Simple but often underclaims at high mileage. 3. Full cost if exclusively work use — if your vehicle is genuinely 100% work use (e.g. a second vehicle kept at home but only used for work), you may claim all costs. Rare in practice.
Tools and Equipment
- Tools under $1,000: Fully deductible in the year of purchase
- Tools over $1,000: Must be depreciated over their estimated useful life
IRD publishes depreciation rates for different asset classes. Power tools typically depreciate at 30% diminishing value.
Tip: Buy tools before 31 March to get the deduction in this financial year.
Other Common Deductions
| Expense | Notes |
|---|---|
| Mobile phone | Business-use percentage only (typically 50–80%) |
| Home office | If you have a dedicated workspace — floor area percentage of rent/mortgage interest, power |
| Work clothing | Branded uniforms and PPE (not regular clothing that could be worn outside work) |
| Training and courses | If directly related to your current trade |
| Professional memberships | Trade body fees, licensing renewals |
| Accounting and bookkeeping fees | Fully deductible |
| ACC levies | Deductible as a business expense |
| Bank fees | Business account fees |
| Advertising | Website, local advertising, cards |
| Subcontractor costs | If you hire subbies (withholding tax obligations apply) |
| Materials and supplies | Direct job costs |
What You Cannot Claim
- Personal expenses (meals, clothing not required for work)
- Fines and penalties
- Costs of acquiring capital assets (these are depreciated, not expensed)
- GST on expenses (if you're GST-registered, you claim GST separately)
Provisional Tax
Provisional tax is how self-employed tradies pay income tax throughout the year, rather than in one lump sum at the end.
How It Works
IRD estimates what you'll earn based on your previous year's income and splits your expected tax liability into 3 instalments:
- 1st instalment: 28 August
- 2nd instalment: 15 January
- 3rd instalment: 7 May
If you earn significantly more or less than the previous year, you can opt into the AIM (Accounting Income Method) or Estimation method to pay more accurate amounts.
The Safe Harbour Rule
If your provisional tax liability for the year is $5,000 or less, you're exempt from provisional tax and simply pay a terminal tax bill by 7 February (or your agent's extended date). Most tradies starting out fall into this category initially.
Underpaying Provisional Tax
If you underpay provisional tax significantly, IRD can charge use-of-money interest (UOMI) on the shortfall. UOMI currently runs at around 10.9% p.a. — it adds up if you're caught short.
EOFY Checklist (31 March Deadline)
Complete these tasks before or just after 31 March to ensure accurate filing and maximise deductions:
- [ ] Reconcile all income against invoices — check nothing is missing
- [ ] Reconcile all expenses against bank statements
- [ ] Complete any logbook calculations for vehicle deductions
- [ ] Purchase any tools or equipment you plan to claim this year (must be before 31 March)
- [ ] Ensure all subcontractor payments are recorded and schedular payment obligations met
- [ ] Check GST is up to date — no outstanding returns
- [ ] Organise receipts and invoices (digital is fine — IRD accepts scans)
- [ ] If you owe provisional tax, ensure payment is made on time
Download our free EOFY checklist for NZ tradies for a printable version.
Depreciation: Turning Big Purchases into Ongoing Deductions
When you buy assets over $1,000 (vehicles, machinery, expensive tools), you can't deduct the full cost immediately. Instead, you claim depreciation — a portion of the cost each year over the asset's useful life.
Depreciation Methods
| Method | How It Works | Best For |
|---|---|---|
| Diminishing value (DV) | Fixed % of the remaining book value each year | Most tools and equipment |
| Straight line (SL) | Fixed $ amount each year based on original cost | Predictable write-down |
Example: A $15,000 trailer, depreciated at 20% DV: - Year 1: $3,000 deduction, book value $12,000 - Year 2: $2,400 deduction, book value $9,600 - Year 3: $1,920 deduction, book value $7,680
The asset is never fully written off under the DV method — you continue claiming smaller amounts each year.
Using Accounting Software
Manual spreadsheets work, but accounting software saves time and catches GST errors. The main options for NZ tradies:
| Software | Monthly Cost | Best For |
|---|---|---|
| Xero | $32–$75/mo | Established businesses; full feature set |
| MYOB | $20–$80/mo | Long-term NZ standard; some tradies prefer it |
| Hnry | 1% of income (capped $1,500/yr) | Sole traders who want IRD handled automatically |
| Sorted Business (free) | $0 | Very basic; invoicing and tracking only |
Hnry is worth a look if you're a sole trader who finds tax stressful — it calculates and pays your tax automatically each time you invoice, so there's no end-of-year scramble.
Withholding Tax on Subcontractors
If you hire subcontractors who do work for you, you may need to deduct schedular payments (withholding tax) from what you pay them, unless they have a certificate of exemption.
The standard withholding rate for contractors in the building and construction industries is 20% (or 15% if the subcontractor applies for a lower rate). You pay this to IRD and the subcontractor gets credit for it in their own tax return.
IRD reference: Schedular payments and non-resident withholding tax
Key IRD Resources
- Self-employed income tax guide (IR3)
- Business expenses you can claim
- Depreciation rates
- GST registration
- Provisional tax
Free Tools at TradieTools.nz
- GST Calculator — work out GST on any amount
- ACC Levy Calculator — estimate your ACC bill
- Hourly Rate Calculator — build tax into your charge-out rate
- Markup / Margin Calculator
- Invoice Templates — IRD-compliant, free download
NZ Tradie Tools provides free calculators, templates and guides for New Zealand tradies. This article is general information — for advice specific to your situation, consult a registered tax agent.