Filing your income tax return (IR3) doesn’t need to be stressful. This practical guide includes everything you need to know to confidently handle your income tax from start to finish. We’ll cover what income tax is, who needs to pay it, and how to calculate and file your income tax return (IR3). Filing income tax can be intimidating to begin with, but once you’ve done it the first time you’ll never look back.
You can jump to section of this page by using the links below:
- What is income tax?
- Do I have to file and pay income tax?
- Do I need to register for income tax?
- How to file an income tax return
- How to pay the amount due to IRD
Note: This guide is intended for sole traders with self-employed or schedular payment income. It does not cover specific tax return details for rental income or farming.
What is income tax?
Income tax is a tax on the money you earn, including profits from your business as a sole trader. In New Zealand, income tax is applied to individual income, including earnings from self-employment, wages, salaries, benefits, and pensions.
As a sole trader, your business income is considered personal income. After deducting/claiming business expenses, you pay tax on the remaining profit (also known as taxable income or net income).
Do I have to file and pay income tax?
Yes, if you are earning income as a sole trader (such as self-employed income, schedular payments or rental income), you are required to pay income tax. At the end of each tax year (31st March), you must file an IR3 income tax return, declaring all your income and expenses to the IRD. When you file your income tax return the IRD will then calculate how much income tax you have to pay. File your income tax return by 7th July and pay any outstanding tax to the IRD by 7th February of the following year.
The amount of tax you pay depends on your profit (your income minus your expenses) for the tax year (1 April – 31 March). If you don’t make any profit, you don’t pay any income tax.
New Zealand has a progressive tax system, this means the amount of tax you pay increases as your profit increases. These increases in the tax rate are know as ‘tax brackets’.
The New Zealand income tax brackets for 2025-26 onward are:
- 10.5% for profit up to $15,600
- 17.5% for profit over $15,601 and up to $53,500
- 30% for profit over $53,501 and up to $78,100
- 33% for profit over $78,101 and up to $180,000
- 39% for profit over $180,001
Note: The income tax brackets above took effect from 31 July 2024.
Do I need to register for income tax?
You don’t need to register for income tax, or even as a sole trader. Simply start earning self-employed income (such as self-employed income, schedular payments or rental income) and, at the end of your first tax year (1 April – 31 March), file an income tax return.
To file an income tax return you will need a personal IRD number, which you will already have if you’ve ever worked in New Zealand, and a myIR account.
If you don’t have an IRD number you can apply for one online. You can also register for myIR online.
How to file an income tax return (IR3)
When your tax return becomes due (after 31 March) you need to login to your myIR account and file your return using the IRD’s online form.
To access your online income tax return:
- Log in to myIR.
- Click Returns and transactions under ‘Income tax’ in your summary.
- Click File return for the due period.
Follow the step-by-step instructions below to complete each section of the online tax return form.
Note: You can change/amend your income tax return after you’ve filed it.
Filing requirement
Select if you were a non-resident for NZ tax purposes and click Next.
- Select No if you have a permanent place where you usually live in New Zealand, or if you’ve been in New Zealand for more than 183 days (including the day you arrive) in any 12-month period. The 183 days do not need to follow each other.
- Select Yes if you do not have a permanent place where you usually live in New Zealand and are away from New Zealand for more than 325 days in any 12-month period.
Build your return
Select the income types that you earned during the financial year and click Next. If you earned taxed income such as salary and wages or schedular payments, these will likely be preselect for you. If you earned self-employed income you will need to select that income type (zero-rated supplies is included in self-employed income).
- New Zealand income with tax deducted: This includes income where tax has been deducted at source before you received it. Common examples are salary, wages and benefits.
- Schedular payments: Payments for specific types of work which have withholding tax deducted by the payer. Common for contractors and freelancers. You can also enter expenses relating to this income.
- Self-employed income: Income you earn from your own business activities, without tax deducted at source, and any expenses relating to earning that income. You must calculate and pay tax on this income yourself.
- New Zealand interest received: Interest earned from bank accounts, debentures, or bonds within New Zealand.
- Working for Families Tax Credit from Work and Income: Payments you receive for supporting your family. It’s a non-taxable income but must be declared.
- New Zealand dividends: Dividends received from investments in New Zealand companies.
- Income and expenses from residential property/bright-line income: Income from renting out residential property and any expenses related to earning that income. Also includes profits from selling property within certain bright-line periods without declaring it as your primary residence.
- Interest incurred from residential property: Interest expenses on loans taken to purchase or maintain a rental property.
- Other rental income: Income from renting out properties that are not residential, like commercial properties.
- You are claiming net losses brought forward: Deducting losses from previous years from your current year’s income.
- Shareholder employee salary: Salary received as an employee of a company in which you are a shareholder.
- Look-through company (LTC) income: Income distributed by a Look-through Company to its shareholders.
- Partnership income: Your share of income from a partnership.
- Māori Authority distributions: Distributions (profits) received from a Māori Authority.
- Overseas income: Income earned outside of New Zealand including wages, business income, and dividends.
- New Zealand estate or trust income: Income distributed from a deceased estate or trust.
- You are claiming other expenses against your income: Other non-business expenses you are claiming to reduce your taxable income. Examples include, fees paid to your tax preparer, premiums on loss of income insurance, interest paid to Inland Revenue, interest on money borrowed for Investments.
- PIE income / loss: Income or loss from a Portfolio Investment Entity like certain managed funds.
- Other income (such as property sales, cash payments, sale of shares, etc…): Includes income not covered above, such as property sales, gifts, cash payments, sale of shares, etc.
- Government subsidies: Payments received from the government, like wage subsidies during COVID-19.
- Tax credit payroll donations: Credits you can claim for donations deducted from your payroll.
- You have excess imputation credit: Imputation credits received with dividends that exceed the tax payable on those dividends.
BIC code
Your BIC code identifies the main type of work you do and is used to calculate ACC. If you have a BIC code it will be automatically displayed. If it’s not displayed, find your BIC code and enter it. Click Next.
Secondary forms
Select any relevant secondary forms for your situation. If you’re a sole trader, and don’t earn rental income or farming income, you can select This return will include IR 3B Schedule for Business Income and click Next.
The IR3B is used by IRD for statistics purposes and does not effect how much tax you pay. By filing the IR3B as part of your return you will not need to attach full financial accounts. Instructions for completing the IR3B are included later in this guide.
- IR3R Rental Income: This form is used for declaring income and expenses associated with renting out property. It helps in calculating the net profit or loss from rental activities which is then included in your income tax return.
- IR 3F Farming Income: This form is for sole traders and partnerships who derive their income from farming activities. It details income from livestock, crops, and other agricultural activities, and related expenses.
- IR 10 Financial Statement: The IR10 form summarises the financial statements of your business, including income, expenses, and net profit or loss. It provides a concise overview for tax purposes and aids in the preparation of your income tax return. It can be used instead of sending full financial accounts.
- IR 3B Schedule for Business Income: For recording your business income and expenses as a sole trader or partnership. This form helps show the overall profitability of your business. It can be used instead of sending full financial accounts.
- IR 3K Sale/Disposal Financial Arrangement: Used for recording details of financial arrangements, gains or losses on the sale or disposal of property or assets. This form is relevant if you’ve sold property or other assets that involve complex financial transactions.
- IR 307 Schedule of Beneficiary Income: This form is for declaring income distributions to beneficiaries from estates or trusts. It is necessary for determining the tax obligations of the beneficiaries.
- IR 308 Branch Equivalent Tax Return: Used by New Zealand entities with branches in other countries. It helps report income and expenses attributed to those overseas branches, ensuring proper taxation in New Zealand.
Specific situation
Select No specific situations apply (unless one of the situations applies to you) and click Next. You don’t need to include attachments because you will be completing the IR3B as part of your return.
- You’re filing a part year return because:
- you’ve permanently left New Zealand: If you’ve permanently left New Zealand and will no longer be a tax resident, you need to file an IR3 up until the date of your departure.
- you’ve arrived in New Zealand: If you became a tax resident partway through the year, you need to file an IR3 from the date you arrived in New Zealand to the end of the tax year. Include both your New Zealand income and worldwide income post-arrival.
- you were bankrupted: If you have been declared bankrupt during the tax year, you must include the period before and after the bankruptcy in your IR3. Specific income treatment may apply for the pre- and post-bankruptcy periods.
- this is for a deceased person: If you’re filing an IR3 for a deceased person, report the income earned by the individual from the start of the tax year until their date of death.
- your balance date changed during the year: If your balance date for accounting purposes has changed within the tax year, your return will reflect this split period to accurately report income and expenses.
- you’re a student loan borrower and you’ve left New Zealand for 184 days or more: If you have been overseas for 184 days or more, you’re considered an overseas-based borrower, and interest will be applied to your student loan. You must inform the IRD and may qualify for specific exemptions or obligations.
- You’re entitled to an early payment discount: If you’re self-employed or a partner in a partnership and you pay your provisional tax early, you might qualify for an early payment discount. This is designed to encourage prompt tax payments and provides a credit against your income tax liability.
- This return will include attachments: Indicate on your IR3 if you are attaching additional forms or schedules (e.g., IR3R for rental income, IR3F for farming). Attachments may be necessary to provide detailed breakdowns of certain income types and expenses. If you’ve already filled out these forms online during the IR3 process you do not need to include them as an attachment.
Disclosures
Select You have no disclosure to make (unless one of the disclosures applies to you) and click Next.
- This return will include CFC/FIF disclosure:
- CFC: A Controlled Foreign Company arises if a group of five or fewer New Zealand tax residents controls 50% or more of a foreign company. You may need to calculate and disclose CFC income if you hold an income interest in such a company. For CFC disclosures, you must detail the nature and extent of your interest. This applies if your income interest is 10% or more, or if you have attributable income from a CFC.
- FIF: A Foreign Investment Fund is an interest in a foreign company, unit trust, superannuation scheme, or life insurance policy. If the value of your FIF interests exceeds NZD 50,000, you must calculate and disclose FIF income using either the Fair Dividend Rate (FDR) or Comparative Value (CV) methods. Disclosures are required if you hold such interests and they are not exempt under specific conditions (e.g., certain Australian investments).
- This return will include IR833 bright-line property sale information:
- Bright-Line Property Rule: The bright-line test applies to residential property sales/disposals. If you sell or dispose of a residential property within a defined “bright-line” period, any profit is taxable income. The bright-line period is generally five years for properties bought on or after 29 March 2018 (previously it was two years for properties bought between 1 October 2015 and 28 March 2018).
- IR833 Form: This disclosure form is specifically for reporting taxable income from property sales subject to the bright-line test. Information required includes property details, acquisition and disposal dates, and the calculation of taxable gains.
Income
Now it’s time to enter the income you earned during the financial year. The income types displayed are based on the income types that were selected during the ‘Build your return’ step. If you have income with tax already deducted, such as salary and wages, benefits, bank interest or schedular payments these should be automatically displayed in your return.
If you earn schedular payments, the total gross payments and total tax deducted by your employer/s (aka withholding tax) should be automatically displayed. Enter your expenses relating to schedular payments.
If you earn self-employed income, you will need to calculate and enter your self-employed net income. Your net income is your total self-employed income minus your self-employed expenses. If you’re GST registered your self-employed income and expenses should be excluding GST.
E.g. if you’re GST registered and your income was $90,000 (excluding GST) and your expenses were $30,000 (excluding GST) then your self-employed net income will be $60,000.
When you’re not GST registered then your income and expenses will be including GST.
If you earn both schedular payments and self-employed income, it can be difficult to seperate which expenses relate to each income type. You can include your expenses in the schedular payment expenses box or as part of your self-employed net income. Either option has the same effect on the amount of tax you pay. Just be sure not to claim the same expenses twice.
Once you’ve entered your income/expenses click Next.
Tax calculation
You will now see a summary of your total taxable income, any tax that has already been paid (Total tax credits) and how much tax you have left to pay (Residual income tax). The next step will include any provisional tax you have paid during the year. Click Next.
Provisional tax
Provisional tax is not a seperate tax from income tax. Paying provisional tax is simply making payments of your income tax during the financial year so that you don’t have to pay all of your income tax in one big payment at the end of the financial year. The provisional tax amount will be split into multiple payments during the year (you do not have to pay the full amount immediately). You have to pay provisional tax during the current financial year if your tax bill was more than $5,000 for the previous financial year.
Use the ‘Estimated’ method if you expect your income to be much less for the next financial year. With the estimated method you will pay provisional tax based on how much income you expect to make, rather than how much you made in the previous year.
If your self-employed tax for the previous year was less than $5,000 you will not be shown this step.
Click Next.
Business income (IR3B)
The Business income (IR3B) section of your return is used for gathering statistics by the IRD and does not effect how much tax you pay. By completing this form you do not need to also send full financial accounts with your tax return.
Enter your business sales (usually self-employed income and/or schedular payment income). Also enter details of your stock, if you’re a retailer and hold over $10,000 worth of stock (you don’t need to track your stock if you hold under $10,000 worth). If you earn additional income, such as salary and wages or interest, enter it in the ‘Other income’ box.
- Sales: This field records the total income from your self-employed business activities, including all sales of goods and services. If you made any sales or provided services during the tax year, this amount should be included here.
- Opening stock: This is the value of the inventory (including work in progress) that you had at the beginning of the tax year. If your business involves selling goods and you had stock left over from the previous year, include the value here.
- Purchases: Total costs of goods and materials bought for the purpose of sale or for processing into saleable goods during the year. If you purchased any raw materials or goods to sell in your business, you should include these costs here.
- Closing stock: The value of the inventory (including work in progress) that you have at the end of the tax year. If your business sells goods and you have stock left over at the end of the year, you should record the value of this stock here.
- Other income: This includes income that is not directly from sales, such as interest received, dividends, rental income, or any other miscellaneous income related to your business. If you earned additional income from sources other than your primary business activities, such as salary or wages, include it in this field.
Enter your business expenses for the financial year in the relevant boxes.
- Accident Compensation Levies paid to ACC: These are levies paid to the Accident Compensation Corporation (ACC). You need to pay this if you are if you’re self-employed.
- Advertising: Costs associated with promoting your business, including adverts, brochures, online ads, promotional events, and any other marketing expenses.
- Bad Debts: Write off any debts that are no longer collectible during the tax year.
- Communication: Expenses related to business phone, internet, post, and courier services (that are not included as part of your home office).
- Depreciation: The reduction in value of business assets you have depreciated over time. You can claim this expense based on IRD’s depreciation rates for each type of asset.
- Entertainment: Expenses incurred for business-related entertainment. Note that some entertainment expenses are only 50% deductible due to a significant private element, such as meals, while others are 100% deductible.
- Home Office: If you use part of your home for business, you can claim a portion of household expenses such as rent or mortgage interest, rates, power, internet, and insurance.
- Insurance: Premiums paid for insurance policies related to your business, excluding ACC levies.
- Interest: Interest paid on business loans or overdrafts.
- Legal and Accounting: Fees paid to lawyers and accountants for business-related services.
- Motor Vehicle: Expenses related to the business use of vehicles, including petrol, maintenance, and registration. If the vehicle is used for both business and personal purposes, only the business portion is deductible.
- Power: Electricity costs related to operating your business.
- Rent and Rates: Rent paid for business premises and local council rates.
- Repairs and Maintenance: Costs of repairing and maintaining business assets to keep them in good working order.
- Salary and Wages: Payments made to employees, including PAYE, KiwiSaver contributions, and ACC levies.
- Travel and Accommodation: Expenses incurred for business travel and any related accommodation.
Include any business expenses that have not been entered in the Expenses section above.
If you have disposed of any fixed assets during the financial year, include any gain/loss on the assets. Click Next.
Review
Note: You can change/amend your income tax return after you’ve filed it.
How to pay the amount due to IRD
Use the payment options provided when completing your return to pay the due amount to the IRD. Or visit your online banking and use the ‘pay tax’ function to make payment.
You have until 7th of February of the following year to pay any outstanding amount.
That’s it, you’re all done!
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