Freelancing in NZ

Financial Tips for the Self-Employed

Posted on 10 January 2024

Freelancing offers a world of opportunity, but it also comes with its unique set of financial challenges. Unlike traditional employment, freelancers face the complexities of managing inconsistent income, planning for retirement, and ensuring they are adequately insured.

This article delves into the crucial aspects of financial management for the self-employed in New Zealand. From understanding tax obligations to leveraging technology for financial organisation, we provide comprehensive guidance and practical tips to help freelancers navigate the financial landscape, ensuring stability and growth in their entrepreneurial journey.


Understanding Tax Obligations:

Understanding tax obligations is a critical aspect for freelancers in New Zealand. Unlike traditional employees whose taxes are often handled by their employer, freelancers must navigate and comply with tax regulations independently.

This responsibility includes:

  • registering for Goods and Services Tax (GST) if a freelancer's income exceeds the threshold set by the Inland Revenue Department (currently $60,000/year revenue), and filing regular GST returns (there are options for monthly, bimonthly or half-yearly filing).
  • filing income tax returns (generally an IR3 for individuals, or IR4 if freelancing via registered company), which involves declaring all earnings from your freelancing endeavours and any other income.
  • paying provisional tax throughout the year (traditionally 3 payments are made at set intervals throughout the year).

Effective record-keeping is paramount for freelancers. Maintaining accurate financial records not only simplifies the process of tax filing but also ensures compliance with local tax laws. It involves tracking all income sources, expenses that can be claimed as deductions, and any GST collected.

Utilising digital accounting tools can greatly aid in this process, offering streamlined methods for recording transactions and preparing for tax obligations. This meticulous approach to financial record-keeping is essential for freelancers to manage their tax liabilities effectively and avoid potential penalties for non-compliance.

It's highly recommended for freelancers to use the services of a competent accountant to avoid running into tax issues with IRD. Freelancers may also find the services of Hnry and Xero to be useful.


Managing Inconsistent Income:

Managing inconsistent income is a significant challenge for freelancers no matter where they are based. The nature of freelance work often results in fluctuating income streams, making traditional budgeting methods less effective.

To navigate this, freelancers should adopt a budgeting approach that accommodates variability. This could involve calculating average monthly income based on past earnings and planning expenses accordingly. Prioritising essential expenses and using surplus income in high-earning months to cover leaner periods is a practical strategy.

Creating an emergency fund is crucial for financial stability. Given the unpredictability of freelance income, having a safety net to cover at least three to six months' worth of living expenses can provide significant peace of mind.

Starting small, setting aside a percentage of each payment into this fund, and gradually increasing the contribution as earnings stabilize are effective ways to build this fund. This approach not only safeguards against financial stress during lean periods but also ensures continuous business operation.

Retirement Planning:

Unlike for traditional employees, freelancers need to take a more pro-active approach to retirement planning. It's an essential aspect of financial security, yet it is often overlooked due to the immediate financial demands of self-employment.

Whereas employees often have structured retirement plans or Kiwisaver through their employers, freelancers need to setup their own contributions to Kiwisaver and/or invest into alternative schemes like ETFs, other non-kiwisaver managed funds or direct purchase of shares.

There are both advantages and disadvantages to managing your own retirement investments;

  • by investing into funds outside of Kiwisaver you are not bound by Kiwisaver rules, meaning that you don't need to wait until the age of 65 to access those savings. Of course that also carries the risk of withdrawing too much too soon, leaving inadequate funds to retirement.
  • by choosing when and how much to invest, you can better align your savings with the variable nature of your income and expenses.
  • you may decide to direct funds into paying off your mortgage sooner or buying an investment property - options which aren't available through Kiwisaver.
  • On the downside you'll miss out on any employer contributions to Kiwisaver so you need to ensure you charge a high enough hourly rate to counter that.

Although it can be tempting to postpone retirement savings for the future, freelancers need to make a conscious effort to save regularly. This disciplined approach to retirement planning ensures that freelancers can build a substantial nest egg over time, providing financial security in their later years.

Insurance Needs:

Insurance is a critical consideration for freelancers, providing a safety net against various risks associated with self-employment. Important types of insurance include health insurance, to cover medical expenses, and income protection insurance, safeguarding against loss of income due to illness or injury.

Professional liability insurance is also crucial, especially for those in consultancy or advisory roles, as it protects against claims of negligence or harm caused by professional services. In fact it's a mandatory requirement of many contracts for the contractor to hold sufficient professional liability insurance incase things go wrong.

Choosing the right insurance plan involves assessing individual risk factors, the nature of freelance work, and financial capacity. It's advisable to compare policies from different providers to find coverage that suits specific needs and budget. Regularly reviewing and adjusting insurance coverage is also important to keep pace with changing professional circumstances and personal life stages.

Investing in Your Business:

For freelancers in New Zealand, the investment in their business is a key factor in achieving sustainable growth and stability.

Balancing personal and business finances is crucial; it involves clear separation of funds to ensure personal expenses do not deplete the business capital. This distinction also aids in clearer financial assessment and tax preparation.

Reinvesting profits back into the business is vital for long-term growth. This can include upgrading equipment, investing in marketing, or pursuing professional development. Such reinvestments, while potentially reducing short-term personal income, can lead to greater profitability and business expansion in the future.

Additionally, strategic planning in investment decisions, considering both current business needs and future goals, is essential to ensure optimal use of available resources.

Networking and Building Client Relationships:

Networking plays a crucial role for freelancers in New Zealand, serving as a key strategy for securing consistent work.

Building a strong professional network can lead to new opportunities, referrals, and collaborative projects. It's important for freelancers to be active in industry events, online forums, and social media platforms related to their field.

Maintaining healthy client relationships is equally essential. This includes clear communication, meeting deadlines, and ensuring high-quality work. Regular check-ins and feedback sessions can help in understanding client needs better and fostering long-term partnerships. Adaptability and a customer-focused approach are vital for nurturing these professional relationships.

Leveraging Technology for Financial Management:

In today's digital age, leveraging technology for financial management is indispensable for freelancers. A plethora of tools and apps are available for budgeting, invoicing, and expense tracking. These digital platforms simplify financial tasks, offering features like automated invoice generation, real-time expense categorization, and financial reporting.

The benefits of using these digital tools extend beyond convenience. They provide freelancers with a clear overview of their financial health, facilitate accurate tax filings, and enable efficient tracking of income and expenditures. Embracing these technologies not only streamlines financial management but also allows freelancers to focus more on their core business activities.

Buying a house as a freelancer:

Is it still possible to buy a house when working as a freelancer or contractor? The short answer is Yes. The longer answer is It Depends.

As well as having a sizeable deposit, banks need to be confident that you have both a sufficiently large income and a good stability of income before they'll lend to you for a major purchase such as a house.

When evaluating the the size and stability of your income banks won't just take your word for it. It's common for them to require two years of business accounts, one or more signed contracting agreements showing forward income, and evidence that you have good skills and/or qualifications within a stable industry.

That makes it tough to get a bank mortgage if you're new to freelancing as you'll lack sufficient documented history of successful freelancing activities. In this case your best bet is probably just to wait a year or two, and continue building savings and a good track record of freelancing contracts.

In some cases banks may choose to be less strict if you have either a higher than normal deposit, exceptionally high income, or a partner who works in a very stable industry. You could also consider using a non-bank lender - with higher interest payments - with a view to remortgaging to a standard bank in the future.


In conclusion, successful freelancing in New Zealand hinges on more than just professional expertise. It requires astute financial management, from understanding and fulfilling tax obligations to effectively managing inconsistent income.

Equally important are considerations like retirement planning, insurance, and the judicious use of technology for financial organization. By embracing these principles, freelancers can secure their financial future, ensuring that their entrepreneurial journey is both rewarding and sustainable.

For readers interested in further exploring the world of freelancing and self-employment, there are several highly-rated books that offer valuable insights and practical advice. These books are well-suited for those looking to enhance their knowledge and skills in the freelancing arena:

"The Multi-Hyphen Method" by Emma Gannon:
This book is ideal for individuals who have various interests and talents and are looking to design a career that combines them all. It offers practical advice and exercises based on research and real-life examples, focusing on creating a flexible career with multiple income streams.

"The Freelancer’s Bible" by Sara Horowitz and Toni Sciarra Poynter:
Aimed at beginner freelancers, this book covers everything from creating contracts and negotiating with clients to building networks. It's a comprehensive guide filled with reliable advice, interactive elements like quizzes and checklists, making it a valuable resource for anyone starting in freelancing.

"Stop Thinking Like a Freelancer" by Liam Veitch:
This book provides an honest insight into the challenges of freelancing and offers practical tips to overcome them. It's suitable for those looking to understand and navigate the darker corners of freelancing while also learning how to thrive.

"My So-Called Freelance Life" by Michelle Goodman:
Targeting women in freelancing, this book is an enjoyable resource for all freelancers. It covers a wide range of topics from tax filing to client acquisition and the daily challenges of juggling work and personal life.

"The $100 Startup" by Chris Guillebeau:
This book is for freelancers interested in creating passive income. It explores 1,500 businesses that began with just $100 and emphasizes on the 50 most intriguing case studies, making it an inspirational read.

These books not only provide a deeper understanding of freelancing but also offer strategies and tips for personal and professional growth in the field.


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