Gig workers are part of a flexible and on-demand workforce who do multiple short-term jobs (gigs), and can be anyone from part-timers looking to make extra money from a second or side job to full-time freelancers. The gig economy extends across most industries and roles.

Traditionally, the term ’gig economy’ related to using online platforms like Uber and Fiverr to take on small jobs – but now it’s pretty common for people to call their casual short-term jobs ‘gigs’ too. The same rules that apply to gig workers apply to contractors, freelancers, self-employed people and casual workers.

Services provided may include:

• Personal services like cleaning, moving or DIY tasks.
• Skilled manual work, eg plumbing, building or electrical.
• Administrative work like data entry or ‘click work’.
• Creative or IT work, eg writing, graphic design or web development.
• Professional work like consultancy, legal advice or accounting services.
• Delivery or courier services.
• Driving or taxi services.

Gigs are often infrequent, and many casual workers only work once or twice a month. Gig work usually supplements some other form of income and isn’t a significant portion of total income. This kind of work is increasingly chosen by young people, and is a growing type of self-employment.

Pros

• Choice and variety in work
• Flexibility in pay and hours
• Can easily leave a role if you don’t like it

Cons

• You’re not covered by employment agreements, and that means
  • no guarantee of government minimums, eg minimum wage
  • no sick pay or paid leave.
• No job security
• Frequent job-hunting
• Pay is often low

There’s more information on all these points below, but if you’re short on time, here’s a summary:

• You need to pay tax on all your jobs. Make sure you set money aside for tax from every pay check (unless you’re exclusively working through a labour hire company that’s paying your withholding tax, or are otherwise having the correct tax deducted at source).
• When you file your tax return, choose the BIC (Business Industry Classification) code of the activity you spend the most time doing. This code, along with your earnings, is what your ACC levy is based on. Talk to ACC about the jobs you’re doing, and the best way to estimate what your ACC levies might be. That way you can set the money aside as you earn it. Be aware that ACC may charge their levy on the activity that attracts the highest levy rate.
• If you expect to earn more than $60,000 in the next tax year, or you charge GST, you need to register for GST. That also means you can claim a credit for the GST you pay on most of your business expenses.
• You can claim for the business expenses you incur when you’re working, but make sure you keep great records, and keep all your receipts.
• Tax agents or accountants know all the expenses you can claim for – using one might end up saving you money. Accounting software might help you manage your record keeping and keep track of tax.
• Many casual workers are sole traders – people trading on their own. As a sole trader, you can get a free New Zealand Business Number (NZBN), a unique identifier available to every business in New Zealand. It could save you time and money by allowing you to share and update your business information with other businesses, including those you do casual work for.

Many self-employed people taking on casual or gig work are sole traders. You don’t need to do anything formal to set up as a sole trader – there’s no legal process to go through. There are other business structures you can choose – use our Choose Business Structure tool to help you decide.

If you’re new to working as a freelancer, this might be the first time you’ve had to account for your own tax.

For tax purposes, the rules that apply to you are the same as those for contractors or self-employed people.

It’s easy to get into a bad situation if you don’t start out right. Here’s some useful information to help you get it right from the beginning.

What you need to know

If you’re a sole trader, you normally use your personal IRD number for paying income tax and GST.

When you file a tax return or register for GST with Inland Revenue, you choose a Business Industry Classification (BIC) code. This describes the business activity you do, and is the basis for your ACC levy. If you’re self-employed and work in more than one role, choose the BIC code of the activity you spend the most time doing.

Find your BIC code(external link) — Business Description

Income tax – the forms

IR3

• Sole traders must file an IR3 income tax return at the end of each tax year.
• Your net profit — what you earn after paying your work expenses — is taxed through your IRD number according to how much you’ve earned in your financial year.
• You need to include all earnings from all sources in the IR3 return.
• If the earnings have tax deducted at source, as with schedular payments (see below), you need to ensure these are included in the appropriate places in your IR3 return (in the fields prepopulated by Inland Revenue, or on the summary of earnings.)

Becoming a sole trader

Choose business structure(external link)

Going contracting

IR330C

• If you find work through a recruitment company or other labour hire business, they are required to deduct income tax from your pay. They will ask you to fill out a tax rate notification form (IR330C), which allows them to deduct tax at a rate you choose.
• You can use Inland Revenue’s tax rate estimator for contractors to help work out your tax rate.
• If you’re a contractor not working through a labour hire business, you can have tax deducted from your pay at a rate you choose, if the payer agrees. If you choose to — or must — have tax deducted from your pay, fill out the IR330C and give it to your payer. You can choose to have tax deducted at any rate - from 10% to 100%.
• Choosing the right tax rate means you’re less likely to have a tax bill at the end of the tax year.
• The IR330C form talks about schedular payments – this is a contractor’s equivalent of wages or salary. Tax on schedular payments used to be known as withholding tax – in fact, your tax code will still be ‘WT’.
• If you’re a contractor doing an activity listed on the IR330C, you’ve submitted your IR330C to the payer with the correct tax rate noted, and the payer has agreed to deduct tax from your pay, you probably won’t need to set money aside to pay tax. But,
  • you are still responsible for paying:
    • ACC levies (see below for more information on this)
    • KiwiSaver
    • Student loans
    • Child support
  • you can deduct business expenses, and
  • you must file an individual tax return (IR3) at the end of the tax year.
• If your activity isn’t specified on the IR330C, or the payer doesn’t deduct tax from your income, you should set aside money from each pay for your tax. You:
  • are responsible for paying all taxes, as well as:
    • ACC levies
    • KiwiSaver
    • Student loans
    • Child support
  • can deduct business expenses, and
  • must file an individual tax return (IR3) at the end of the tax year.
• If the payer is required to withhold your tax but refuses, let Inland Revenue know.

Contractors receiving schedular payments(external link) — Inland Revenue

Tax rate estimator for contractors(external link) — Inland Revenue

Download the IR330C form(external link) — Inland Revenue

Income tax rates(external link) — Inland Revenue

Tax codes for individuals(external link) — Inland Revenue

GST

If you expect to earn more than $60,000 in the next 12 months, or you charge GST on your services, you’ll need to tell Inland Revenue you’ve become a sole trader, and you’ll need to register for GST. You can then claim a credit for the GST you pay on most of your business expenses.

If you are registered for GST, you are required to file regular GST returns.

Register for GST(external link) — Inland Revenue

Video: Registering for GST(external link) — Inland Revenue

GST

Claiming business expenses

Many of your business expenses can be offset against your business income to help reduce your tax bill. There is work involved though – you’ll need to keep good records, and make sure you keep your receipts.

We have information on claiming expenses that will help you understand what you can claim for and how to do it.

Video: Claiming business expenses(external link) — Inland Revenue

Claiming expenses

ACC levies are separate from general tax, and cover the cost of injuries caused by accidents.

The business industry classification (BIC) code you provide to Inland Revenue when you file a tax return or register for GST, along with your earnings, is the basis for your ACC levy.

Inland Revenue passes your BIC code, liable income or payroll, and your contact details along to ACC so they can invoice you for levies based on your business activities.

Some jobs have more risks than others, so some industries pay higher levies than others.

As a self-employed person, you’ll pay three levies: the Earners’ levy (currently $1.21 per $100 (excluding GST) of your liable income), the Working Safer levy (currently 8c per $100 of your liable income), and the Work levy which goes in to the Work Account to fund injuries that happen at work (this differs for every business).

You’ll be invoiced by ACC once a year - most people receive their invoices between mid-July and mid- August.

Find your BIC code(external link) — Business Description

ACC levy guide book [PDF, 1.9MB](external link) — ACC

ACC levies

Get a New Zealand Business Number (NZBN), a unique identifier available to every business in New Zealand. One of the benefits of having an NZBN is that it allows you to share and update your business information with other businesses, including those that you do casual work for.

An NZBN identifies you as a real New Zealand business, and makes it easy for you to check details for new clients. As more businesses get and use their NZBN, it will become easier to invoice and to pay bills. You won’t have to repeat the same basic information multiple times, saving you time and money.

New Zealand Business Number(external link)

Sole traders: Got your NZBN?