Sole traders come in all shapes and sizes. The name ‘sole trader’ is actually a blanket term used to describe most self-employed people in any industry.
That being said, specific sole traders might like to identify themselves by their job type.
For example: tradies.
What is a tradie?
What is a tradie, you might ask? Well simply put, they work in the trades (mind blowing we know). The term ‘tradie’ is originally from Australia, and it’s essentially just a shortened way of saying tradesman or tradeswoman.
Tradies are typically hands-on workers with an area of expertise. A lot of the time their work is centred around building things, fixing things, and generally doing that good hard yakka.
As of March 2023 tradies made up a whopping 10.7% of New Zealand’s total workforce (approx 308,500 tradies), and contributed around $17.6 billion in annual revenue (around 6.3% of the country’s total GDP). Needless to say, they’re an important industry that keeps the country ticking along.
Not all tradies are sole traders running their own business, however. Some tradies are full-time salaried employees, who work for a specific company in a specific role. These guys don’t have to worry about doing their taxes, but are somewhat limited in terms of how much they can earn and what hours they work.
What do tradies usually do?
As we mentioned earlier, tradies are all about the hands-on work. This includes, but is certainly not limited to:
- Electricians
- Carpenters/builders and joiners
- Plumbers
- Bricklayers
- Scaffolders
- Mechanic
- Landscaper
- Plasterers
- Tilers
- Roofers
- Stonemasons
There are also so many trades and subsections within each category. If we listed them all, we’d be here all day!
Tradie tax stuff
Like all business owners, sole trader tradies have their own share of paperwork to sort – and this includes their taxes! Here are a few things tradies should be aware of when it comes to their tax obligations:
Income tax
If you’re a self-employed tradie, you’re responsible for calculating, deducting, and paying your own taxes to the IRD. It’s not a straightforward calculation either – in New Zealand, income tax is a progressive tax. This means the more you earn, the more you pay in tax relative to your income.
Confused? Don’t worry, we have a full rundown on what progressive tax is here. Getting your calculations right can also be a real pain, so we’ve got a nifty tax calculator here.
ACC for tradies
If you’re self-employed, you’ll need to take your ACC levies account when calculating your taxes. Just like income tax, it’s not just a straight-forward amount. There are three different ACC levies you’ll need to calculate; two are charged at a flat-rate, and the last depends on your work and industry.
Each industry has a different code assigned to it and making sure you’re on the right code means that you’ll receive the right type of support or treatment in case anything happens to you on the job.
Tradies usually pay slightly more in levies since their jobs are technically riskier – but this is a good thing! If something were to happen (and were hoping nothing will), then you’ll know you’re covered.
GST for tradies
You’ll also need to check whether you have to register for and charge GST. The rule of thumb is:
- If you are registered for GST you must charge and collect GST.
- If you make or think you’re going to make over $60,000 in self-employed income in a 12-month period, you have to register for GST.
If you’ve made under 60k within the last 12 months, you don’t have to register for GST. You still can, if you want to, but you’ll need to assess whether it’s the right choice for you and your business.
Business expenses for tradies
Finally, there are business expenses. If you’re running your own business, chances are you’re making purchases that directly correlate to the running of that business. You can claim these purchases as a tax deduction.
Valid expenses differ from person to person. What’s valid for you may not be valid for someone else who works in a different industry but it’s good to know what others in your field are claiming so you’re not missing out on potential tax deductions.
Expenses tradies often claim include things like COGS (cost of goods sold), vehicle expenses, and the depreciation of assets.
Let Hnry do it for you
Hnry is an award-winning tax service and app that helps automate your tax obligations.
For just 1% + GST of your self-employed income, capped at $1,500 a year, Hnry will calculate and pay all your taxes, levies and whatnot for you, including:
We can also handle things like:
- Managing expenses
- Quotes
- Invoices
- Invoice chasing (politely of course. Get paid 8 days faster than the industry average!)
- Scheduling invoices
And we automatically complete and file your tax returns for you. Basically, we become your accountant. And you’ll never have to think about tax again!
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