There are only three types of income that you need to categorise in Solo; Self-employed Income, Zero-rated Supplies and Rental Income. Other income types, such as Salary & Wages or Schedular Payments, have already had the tax portion paid to IRD on your behalf by your employer.
So that Solo can accurately calculate your taxes, you need to categorise all your Self-employed Income, Zero-rated Supplies or Rental Income since the beginning of the financial year (April 1st).
Understanding which income category to use can sometimes be a bit confusing. So to help you make a confident choice, below is a description of the three income types used within Solo.
Self-employed Income is general untaxed income that has been paid directly to you by a customer or client and has not yet had any tax taken out if it.
- Client invoices
- Sales to NZ customers
- Payments from a contract where the employer does not pay tax on your behalf
Zero-rated Supplies is income you get paid from an overseas client or customer. This type of income is similar to Self-employed Income but the key difference is that it has no GST. Overseas clients are not required to pay GST to the New Zealand government so you do not need to add GST when invoicing them. But you still do need to pay income tax on this income.
When invoicing overseas clients you should not include GST.
Solo will automatically ignore all GST on income that you categorise as Zero-rated Supplies.
- Services performed outside of NZ
- Internet sales to overseas customers
- Services to overseas customer
- Exported goods
Rental Income is income from your rental property or a flatmate in your home. Income from long-term renting (more than 4 consecutive weeks) is exempt from GST. However, short-term rental income (such as AirBnb or Bookabach) needs to include GST.
Solo will automatically calculate the correct amount of GST for the rental type you select in your settings. You also have the option to split your rental income and expenses if you own only a portion of the property.
- Flatmates in your home
- Rental properties
- Payments from short-term rental services such as AirBnb or Bookabach
Other common types of income
Other income types, such as Salary & Wages or Schedular Payments, have already had the tax portion paid to IRD on your behalf by your employer. These income types are currently not supported by Solo but we will soon be able to sync this income data directly from IRD into your Solo account.
Schedular payments (also known as withholding tax payments) is contract based income that has already had some income tax taken out by your employer. Unlike salary or wages and you still have to pay your own GST, ACC and do a tax return when you receive schedular income.
Being paid schedular payments is something that you would have set up with your employer. If you’re unsure if you get paid this type of income check your payslip or with your employer.
- Labour-only contractors
- Film and television contractors
- Taxi drivers
- Commission paid to insurance agents or salespersons
- Agricultural, horticultural and forestry work
- Payments for modelling
Salary and Wages
Salary or Wages is regular income paid from an employer that has already been fully taxed through PAYE before you receive it.
New Zealand Interest
New Zealand Interest is payments that you’ve received from your bank for interest on your savings account or term deposit. Banks automatically tax this income at a flat rate and pass the tax on to IRD.
- Bank savings accounts
- Term deposits
Non business related income
Sometime you receive money into your bank account that hasn’t come from sales or services you provide and is therefore not considered business income. This money does not need to be categorised in Solo or included in your tax returns.
- Transfers between bank accounts
- Personal payments
- Money from selling an asset
- Occasional Trade Me sales