Total business profit before tax
Salary you'd pay yourself as company director
Company structure saves you more
Tax saving: $4,452.93 per year
Sole Trader
Company
Key considerations beyond tax
While tax savings are important, other factors include: limited liability protection with a company, compliance costs (annual returns, financial statements), ACC levies differ between structures, and companies have ongoing filing obligations with the Companies Office.
Note: This is a simplified comparison. Actual results depend on your specific circumstances including ACC levies, KiwiSaver, and other deductions. Consult a chartered accountant for personalised advice.
The key differences between running your business as a sole trader or a company
What is the main tax difference between a sole trader and a company?
A sole trader pays personal income tax on all business profits at rates from 10.5% to 39%. A company pays a flat 28% company tax rate on its profits. If your business earns over NZ$70,000 in profit, the company rate of 28% is lower than the personal rates of 33% or 39%. However, you still pay personal tax when you take money out of the company as salary or dividends.
How does limited liability protect me?
As a sole trader, you are personally responsible for all business debts and legal claims — your house, car, and savings are at risk. A company is a separate legal entity, so company debts belong to the company, not you. If the business fails, creditors can only claim the company's assets. However, directors can still be personally liable for reckless trading or tax debts.
How much does it cost to set up a company vs a sole trader?
Setting up as a sole trader is free — you just need an IRD number. Registering a company costs about NZ$150 online through the Companies Office. Ongoing costs for a company include annual company returns (NZ$50), more complex accounting (expect NZ$2,000 to NZ$5,000 per year in accountant fees), and maintaining company records. A sole trader's compliance costs are much lower.
When does it make sense to switch from sole trader to company?
Consider switching when your profit regularly exceeds NZ$70,000 (to benefit from the 28% tax rate), when you want to protect personal assets, when you plan to bring in business partners or investors, or when your clients prefer to deal with a company. Many accountants suggest making the switch once your profit is consistently above NZ$80,000 to NZ$100,000.
How do I pay myself from my own company?
You can pay yourself a salary (which the company deducts as an expense), draw dividends from after-tax profits, or a mix of both. A salary attracts PAYE and KiwiSaver contributions. Dividends come with imputation credits (the 28% tax the company already paid). The best mix depends on your total income — an accountant can help you find the most tax-efficient split.
Do both structures need to register for GST?
Yes, both sole traders and companies must register for GST if turnover exceeds NZ$60,000 per year. The GST rules are the same regardless of your business structure — you charge 15% on sales and claim back GST on business expenses. The threshold applies to the business entity, not the individual.
What about KiwiSaver for each structure?
As a sole trader, KiwiSaver is voluntary with no employer contributions. If you set up a company and pay yourself a salary, the company must make employer KiwiSaver contributions of 3% on top of your salary. This is an extra benefit — on a NZ$80,000 salary, the company would contribute NZ$2,400 per year to your KiwiSaver.
Can I change from a sole trader to a company later?
Yes, and many businesses do this as they grow. You can transfer your business assets and contracts to a new company. Be aware of potential GST and income tax implications on the transfer. You will need a new IRD number for the company, new bank accounts, and updated contracts with your clients. It is best to get professional help with the transition.
IRD-Aligned: Based on 2025 IRD rates and thresholds. For personal advice, speak to a qualified tax agent.
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Disclaimer: This calculator provides estimates based on current HMRC rates and thresholds for the 2025/26 tax year. It does not constitute professional tax, financial, or legal advice. Your actual liability may differ depending on your individual circumstances. Always consult a qualified accountant or tax adviser before making financial decisions. Read our terms