Question: I have just started work and my employer has informed me I am responsible for paying my own tax. Does this require me to put away 20% of my wages? What are my tax responsibilities?
Answer: In this case you’re effectively a self employed contractor – not an employee, so this means you’ll need to put aside some of your gross income to pay your tax later. It’s a good idea to keep this somewhere where it’s unlikely you’ll dip into it, maybe a term deposit account and earn some interest for example.
By putting aside 20% from the start you should have enough saved to pay your tax when it falls due.
If you’re income goes over $48 000 aim for around 30%-35% to be on the safe side. For higher incomes it would be smart to talk with a tax advisor for more accurate advice for your situation.
Being self-employed you’re able to claim direct costs associated with earning this income- like phone, tools, safety clothing, advertising, stationery, vehicle costs etc – so keep all receipts and invoices for these costs.
Then after the end of the financial year (usually 31 March) you’ll be required to have financial accounts prepared detailing your income and expenses and net profit or loss from your self employed business activities. This profit or loss is then included in your personal income tax return along with any other income you’ve earned and the income tax liability worked out.
About Kiwitax – Award winning business improvement, tax and accounting service
Here’s the thing. As a business, rental property owner or start-up, you get a kick out of having your own gig. But chances are dealing with your tax and accounting leaves you cold. Good news! We love it, so hand it over to Kiwitax and we’ll look after it all for you.
Whether you deal with us online, by phone or drop into our Napier office, you’ll find a friendly, professional hardworking team ready to work with you, however you keep track of your financial information and from wherever you do business. And all for a fixed price. It takes just two minutes to get a quote.
Plus if you’re at a loss to know how to improve aspects of your business – from growth planning to cashflow management, even tax debt and so much more – we’re all over that too. Our Business Improvement advisors can help you make a plan and put it into action.
Kiwitax are a preferred training provider for Business Improvement services through the Regional Business Partner Network Capability Voucher Scheme. This is a government funded scheme designed to boost business capability by providing funding of up to 50% of approved training programs with specified training providers up to a maximum value of $5000.
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