Please note: Since making this video, we no longer use the terms ‘secure mail’, ‘email’, ‘secure message’, ‘secure email’ and ‘web message’ to refer to messages that we send to, and receive from customers through myIR. Because all these terms referred to the same service, we now simply use the terms ‘message’ and ‘send us a message in myIR' to avoid confusion.
The video title Business Basics Sole Trader Structure slides in from the left of the screen.
The title slides to the right of the screen and is replaced by a person sitting at a desk with a laptop. File folders, a desk lamp and a mug also appear on the table. A clock ticks on the wall. 3 lights hang from the roof and there is a potted plant on both sides of the desk.
A circle appears above the desk on the right with a person standing inside it as “being your own boss” is said.
A circle appears above the desk in the middle with a love heart inside it as “working on the projects you want to” is said.
A circle appears above the desk on the left with a tax form inside it as “being responsible for your own tax matters” is said.
The scene is replaced by 3 circles with a different structure type in them. On the left is SOLE TRADER, in the middle is COMPANY, and on the right is PARTNERSHIP. Each circle expands and contracts as the structure type is said.
The sole trader circle expands again as this is what we’re looking at today. An image of a person replaces the word SOLE TRADER.
Cheerful and bubbly music plays during the whole video.
Starting your own business can be pretty exciting, being your own boss, working on the projects you want to and being responsible for your own tax matters.
One of the first things to do is choose a business structure that's right for you.
The 3 most common business structures are sole trader, company and partnership.
In this video, we'll look at sole traders and how they do their taxes.
Lisa is shown in an office environment with 4 other people, waving them all goodbye. The scene changes to Lisa’s home, where a cat is sleeping on a desk next to a computer, there is a bookshelf and a potted plant.
A circle appears on the left of the screen with a dollar symbol. The background of the circle fills from the bottom to the top showing she gets 100% of the businesses profits or losses. An arrow points up next to the dollar symbol for profits and points down for losses.
The dollar symbol is replaced by an exclamation mark as Lisa is responsible for all taxes and debts.
The circle turns in to a pie chart, 1 third of it is highlighted and expands, showing how Lisa pays tax on her net profit.
The camera zooms in to Lisa’s computer screen showing our myIR logo, which is then replaced by an envelope icon showing you can send us secure messages in myIR.
Meet Lisa. She's just quit her job and decided to go into business as a sole trader.
As a sole trader, Lisa runs her business by herself.
She gets 100% of the business profits or losses, and she's personally responsible for all taxes and debts.
As a sole trader, Lisa pays income tax on her net profit for the year.
Like all sole traders, Lisa needs to tell us that she’s started working for herself.
She has a myIR account, so she just sends us a secure email via myIR. Job done.
The camera zooms back out to Lisa’s home office.
An IRD number icon appears above Lisa’s head showing she uses the same one as before. An Individual tax return – IR3 appears in a circle on the left side of the screen as that is the income tax return Lisa needs to file.
Half of the screen shows Lisa as an employer with her taxes being done for her, the other half shows Lisa as a sole trader needing to do her own taxes.
We move to a new room with Lisa sitting in a chair. A calendar appears on the left with 31 March highlighted as that is the end of Lisa’s tax year.
The calendar is replaced by income statements and a pie chart showing how Lisa pays tax on her net profit.
The pie chart turns in to a circle again and an Individual tax return – IR3 is shown. This is replaced by a ticking clock.
As a sole trader, not much changes for Lisa.
She still uses the IRD number she had as an employee.
She still only has an IR3 individual tax return, but she has to file her IR3 manually this tax year unlike last tax year when she was just an employee and it was filed automatically for her.
After the end of the tax year, that’s March thirty-first, Lisa or her accountant prepares her financial statements and calculates income tax on her business’ net profit.
She completes her IR3 return and files it online by the seventh of July.
If Lisa ever needs an extension of time, she can come to an arrangement with us.
Some of the tools and resources available to you appear in 4 circles.
From left to right, the circles contain:
- useful tools and resources from business.govt.nz
- GST returns as you must register if your turnover is more than $60,000
- our ird.govt.nz web address
- our myIR logo.
A few final things to remember before we wrap up.
For useful tools and resources for businesses, including a tool to help you choose your business structure, visit business.govt.nz.
All businesses with sales of more than 60,000 dollars must register for GST and file GST returns.
Our website ird.govt.nz has lots of useful information for people in business to help you get it right from the start.
And if you don’t already have a myIR account, set one up via ird.govt.nz so you can file your returns online and send us secure emails.
The video ends showing our web address ird.govt.nz and then our logo.