Quick answer
In a first year of business in New Zealand, the key money milestones are choosing a structure and registering, opening a separate business account, registering for GST once turnover reaches or is expected to reach $60,000, registering as an employer before the first hire, setting aside tax from the first sale, and preparing for year two, when first-year tax and second-year provisional tax can fall due together.
Key points
- Separate business banking and a tax account from day one, before the first invoice.
- GST registration is required once turnover reaches, or is expected to reach, $60,000 in 12 months.
- There's usually no provisional tax in year one, but tax is still building up.
- Year two often brings first-year tax plus second-year provisional tax in the same few months.
- Voluntary tax payments in year one can spread the load and may earn an early payment discount.
The first year in business is mostly about customers: finding them, keeping them, getting paid by them. Money admin can feel like a distraction. But the decisions made in the first few months, often without much thought, decide whether year two feels like progress or like paying for year one twice. This feature walks through the milestones in roughly the order they arrive.
Milestone 1: structure, registration and banking
Before the first sale, three things need deciding.
Structure. Sole trader, partnership or company. Each has different implications for tax, personal liability and how you pay yourself. business.govt.nz has a guide to choosing a structure, and an hour with an accountant at this stage is usually money well spent.
Registration. Companies are registered with the Companies Office and automatically receive an NZBN (New Zealand Business Number). Sole traders and partnerships can apply for one. You’ll use it with suppliers, customers and government agencies.
Banking. Open a separate business account, and a second account for tax, before the first invoice goes out. Mixing personal and business money is the single most common reason first-year owners don’t know how they’re doing. It also makes your accountant’s job (and bill) bigger.
Milestone 2: GST registration
GST registration becomes compulsory when your turnover from a taxable activity reaches $60,000 in the last 12 months, or you expect it to reach $60,000 in the next 12 months. You can register voluntarily below that, and many businesses do, so they can claim GST on set-up costs and avoid a price jump later.
When you register, you choose two settings that shape your cash flow:
- Filing frequency: monthly, two-monthly, or six-monthly if sales are under $500,000. See GST filing frequency.
- Accounting basis: payments basis (if sales are $2 million or less), invoice or hybrid. See GST accounting basis.
From the first GST-registered sale, set aside the GST in each week’s takings. The rule of thumb: 3/23 of GST-inclusive takings. How much GST to set aside explains the maths.
Milestone 3: pricing that covers everything
First-year owners often price to win work, then discover the price doesn’t cover the costs they hadn’t counted: ACC, insurance, software, vehicle running costs, non-billable time and tax. Build your prices from real costs from the start, including a market wage for yourself. How to set a charge-out rate shows the method, and margin vs markup helps avoid the most common mistake.
Milestone 4: the first employee
Before the first hire, register as an employer with Inland Revenue and set up payroll. From then on:
- File employment information within 2 working days of each payday (electronically).
- Pay PAYE and other deductions by the 20th of the following month.
- Contribute at least 3.5% of gross pay to KiwiSaver for enrolled employees (from 1 April 2026).
- Provide written employment agreements and keep wage and time records.
- Budget for annual holidays, public holidays and sick leave.
The true cost of an employee sets out the full cost, which is noticeably more than the wage.
Milestone 5: tax building up in the background
Here’s the quiet trap. In your first year, under the standard, estimation or ratio options, there’s no provisional tax to pay. Profit builds up, nobody asks for tax, and it’s easy to assume the money is yours to spend.
It isn’t. Your first year’s income tax becomes payable after the year ends, usually by 7 February the following year (later with a tax agent’s extension). And if that tax was over $5,000, provisional tax for year two starts straight away.
Illustrative example. A Napier interior design business starts as a company on 1 April 2025 and makes $95,000 of taxable profit in its first year. At 28%, its first-year tax is $26,600. In year two, on the standard option, it also owes provisional tax of $27,930 ($26,600 plus 5%) in three instalments.
| Date | Payment |
|---|---|
| 28 August 2026 | Year two provisional tax, instalment 1: $9,310 |
| 15 January 2027 | Year two provisional tax, instalment 2: $9,310 |
| 7 February 2027 | Year one income tax: $26,600 |
| 7 May 2027 | Year two provisional tax, instalment 3: $9,310 |
That’s $54,530 of income tax in about nine months, plus GST on its normal schedule. If the owner set aside 28% of profit from the first month, it’s covered. If not, it’s a crisis. The second-year tax bill covers the options in more depth.
Milestone 6: voluntary payments and the early payment discount
Inland Revenue lets you make voluntary tax payments during your first year to spread the cost, and you may qualify for an early payment discount for doing so. Even if you don’t make voluntary payments, set the money aside in your tax account: the discipline is what matters. Some owners also consider the AIM option, which calculates tax on actual profit through compatible accounting software and spreads payments through the year.
Milestone 7: the first ACC invoice
ACC levies are based on earnings information filed with Inland Revenue. For self-employed people, the first invoice often follows the processing of the first income tax return, so it can arrive well into year two, covering earnings from year one. Employers’ work levies follow payroll. Either way, it’s a bill to expect; see ACC levies.
Milestone 8: paying yourself sustainably
Many first-year owners pay themselves whatever’s left at the end of the month, which makes the business’s results hard to read and personal finances unpredictable. A better approach is a fixed, modest drawing or salary, set after tax money is put aside, reviewed quarterly as the numbers firm up. Our feature on paying yourself explains the options by structure.
Milestone 9: your first annual accounts and tax return
The first balance date (for most businesses, 31 March) is when year one gets its report card. A stocktake, a debtors and creditors list, details of any assets bought and records of your own drawings or shareholder current account all go to your accountant. The income tax return is due by 7 July if you don’t have a tax agent or extension; with an agent, the deadline is generally later. The return confirms your residual income tax for the year, which sets two things: the tax you owe for year one, and whether (and how much) provisional tax applies in year two.
Treat this as a planning moment, not just a compliance one. Ask your accountant which provisional tax option suits year two, whether your GST settings still fit, and whether your structure is still right. Those three questions, answered early, are worth more than any tax trick.
What does a good first-year money routine look like?
- Weekly: move GST and an income tax allowance into the tax account; check the bank balance against your minimum; chase overdue invoices.
- Monthly: pay PAYE by the 20th (if you employ); file GST when due; review profit and compare with your plan.
- Quarterly: review prices, your own pay and the tax set-aside rate with your accountant.
- Annually: stocktake at balance date, file the tax return, review structure, GST settings and provisional tax option.
The GST & provisional tax set-aside planner helps you put numbers to the weekly step.
When year one goes better than planned
Success brings its own cash pressure: more stock, more staff, bigger customers on longer terms, and a tax bill sized to a strong year. Newer businesses often have fewer funding options, especially unsecured ones that need trading history, but owners who can offer property as security usually have more choice. If that’s your situation, you can see what’s possible in about a minute.
Setting up year two for success
The owners who arrive at year two in good shape are the ones who treated tax as a cost from the first sale and kept their numbers separate and current. If year two’s plan includes growth that needs funding, talk to us early. We look at unsecured options for trading businesses and loans secured on residential or commercial property. There’s no credit check when you first enquire, your details aren’t passed on to other lenders, and a real person on our New Zealand team reads your enquiry. Accurate answers on the form mean the first call can be about your real situation. Start your enquiry.
Frequently asked questions
When do I have to register for GST in New Zealand?
When your turnover from a taxable activity was at least $60,000 in the last 12 months, or you expect it to be at least $60,000 in the next 12 months. You can register voluntarily below that.
Do I pay provisional tax in my first year?
Not under the standard, estimation or ratio options. Your first year's income tax is usually due by 7 February the following year, and provisional tax for year two may start at the same time.
How much should I set aside for tax in my first year?
It depends on your structure and profit. Companies pay 28% on taxable profit; individuals pay at their personal rates. Setting aside a fixed share of each month's profit, agreed with your accountant, is the simplest approach.
Should I set up as a sole trader or a company?
It depends on your plans, risk, income level and whether you'll have partners or investors. business.govt.nz has a guide to choosing a structure, and it's worth talking to an accountant before you start.
When does the first ACC invoice arrive?
For self-employed people it usually follows the processing of your first income tax return, so it can arrive well into your second year. Employers' work levies follow payroll information.