G’day, team!
So you’re a builder, a sparky, a plumber, or a painter—a proper Kiwi tradesperson. You’re a pro at your craft, but let’s be honest, the last thing you want to do after a long day on the tools is sort out your finances. We get it.
But here’s the thing: messing up your books can cost you a heap in penalties and missed opportunities. This no-nonsense guide is for all you tradies and contractors out there. We’ll break down the boring-but-essential stuff about accounting and tax so you can focus on what you do best.
Why Bother with the Books?
Think of it like this: your tools are for building, and your accounting is for building your business. Getting it sorted helps you:
- Know where your money’s going (and coming from).
- Work out what you’re actually earning.
- Claim all the gear you bought for work.
- Keep the taxman (IRD) happy.
- Make smart calls for the future, like buying that new ute or hiring an apprentice.
Even if you’re a one-man band, getting this right from the start will save you a world of pain.
Your Business, Your Rules
How you set up your business affects everything. Here’s the lowdown on the most common options:
- Sole Trader: Dead simple to start. You are the business. All your profits are part of your personal income, and you’re on the hook for any debts. Most tradies start here.
- Partnership: Two or more of you running the show together. You share the income and the responsibilities.
- Company: This is the big league. Your business is a separate legal thing from you. It protects your personal stuff if the business goes south. The tax rate is a flat 28%, and it can be a bit more complicated, but it’s great for growth.
The Absolute Must-Dos
Get these right, and you’re golden.
1. Keep Everything!
Seriously, hang onto every receipt and invoice for seven years. Photos on your phone work, but using an app like Xero or MYOB is a total game-changer. They make it easy to snap a pic of a receipt and chuck it straight into your accounts.
2. Track Your Cash
Every cent you earn, even cash jobs, needs to be recorded. Hiding cash from the IRD is a big no-no and can land you in serious trouble. Also, keep track of every expense. It’s the key to paying less tax.
3. Check Your Bank Accounts
Once a month, make sure what’s in your accounts matches what’s in your books. It’s called reconciliation, and it stops tiny mistakes from becoming massive headaches.
4. GST – The 15% Question
If you’re bringing in more than $60,000 a year, you have to register for GST. That means you add 15% to your prices, and you can claim back the GST on your business purchases. You’ll need to file a GST return every one, two, or six months.
5. Annual Tax Returns
You’ll file a yearly return with the IRD. It’s the big one that tells them what you earned and what you spent.
What Can You Claim Back?
This is the fun part. A lot of the stuff you buy for work can reduce your tax bill.
- Your Wheels: Fuel, repairs, WOFs, rego—if you use your car or ute for work, you can claim for it. Keep a logbook to prove how much of your driving is for business.
- Tools & Gear: Your gear is your livelihood. Most tools under $1,000 can be claimed in one go. Anything more expensive, like a big digger, is a “capital asset” and gets claimed a bit at a time over several years. Don’t forget your safety gear either!
- Supplies: All the timber, wire, nails, paint, and whatever else you buy for jobs is 100% claimable.
- Home Office: If you do your paperwork at the kitchen table or have a spare room for an office, you can claim a chunk of your rent/mortgage, power, internet, and phone bills.
- Admin Stuff: The money you pay your accountant, lawyer, or for an accounting app is all tax-deductible.
- Advertising: Got a website, a sign on your ute, or some business cards? Claim it!
- Insurance: Public liability, tool, and vehicle insurance are all business expenses.
- Courses: Any training or memberships for your trade can be claimed too.
What You Can’t Claim
Don’t get cheeky with the IRD. You can’t claim:
- Personal stuff (like your family holiday or your kid’s school fees).
- Your daily lunch or coffee.
- Fines or penalties.
- Regular clothes (unless it’s branded work uniform or safety gear).
The Tax Man’s Rules
- Declare everything: Every cash job, every small gig—don’t hide it.
- Provisional Tax: If your tax bill is over $5,000, the IRD will ask you to pay your tax in chunks throughout the year. It’s a way to avoid one massive bill at the end.
- Hiring Staff?: If you get a couple of apprentices on the books, you’re an employer. You’ll need to register with the IRD and sort out PAYE and KiwiSaver.
- ACC: As a self-employed person, you get an ACC bill every year based on what you earn. It covers you if you get injured on the job.
Why Bother with an Accountant?
Sure, you could do all this yourself. But a good accountant is worth their weight in gold. They’ll:
- Find all the deductions you didn’t know about.
- Keep you out of trouble with the IRD.
- Structure your business so you pay less tax.
- Deal with all the painful paperwork.
Many offer fixed monthly fees, so you know exactly what you’re paying.
Tools to Make it Easier
- Xero, MYOB, or Reckon: The top dogs in accounting software. They sync with your bank and make life a breeze.
- Smartly or PaySauce: If you’re hiring, these apps make payday a doddle.
- IRD myIR Portal: Your personal dashboard for all things tax.
Final Word
Don’t let the paperwork stress you out. Getting your accounting sorted is a massive part of being a successful tradie in New Zealand. It’s about working smarter, not harder.
So, put down the nail gun for a minute and get your books in order. Your future self (and your bank account) will thank you for it.