Plenty of good tradespeople go out on their own and find the work is the easy part. It’s the tax, the paperwork, the gaps between payments and the underpriced jobs that cause trouble.
This checklist is written with New Zealand in mind, with a few notes for Australia. Use it to work out what to ask your accountant, not as a replacement for one.
1. Choose a business structure
The two common options for a new trade business are sole trader and company.
| Sole trader | Company | |
|---|---|---|
| Setup | Cheapest and simplest | More steps, rules and costs |
| Debts | You’re personally responsible for all of them | The company is a separate legal entity, which can limit your personal risk |
| Tax | Business profit is taxed as your personal income | The company pays tax, and you take wages or dividends |
| Paperwork | Less | More, including an annual return to the Companies Office |
Many people start as a sole trader and move to a company later. A company doesn’t protect you from everything, as banks and suppliers often ask directors for personal guarantees. Talk to an accountant before you decide.
2. Register with the right agencies
In New Zealand:
- IRD number: as a sole trader you can use your personal IRD number. A company gets its own, applied for when you register it with the Companies Office.
- NZBN: companies get a New Zealand Business Number automatically. Sole traders can register for one for free. It makes dealing with suppliers and government easier.
- GST: you must register once your turnover from your taxable activity has been, or is expected to be, $60,000 or more over 12 months. You can register voluntarily below that. Get advice on whether it suits you.
- Provisional tax: once your end-of-year tax bill is more than $5,000, you’ll generally have to pay provisional tax during the following year. Plan for it so it isn’t a shock.
- ACC levies: if you’re self-employed, Inland Revenue passes your income details to ACC, which invoices your levies, usually after your first year. Tell ACC what work you do so you’re charged the right rate.
- Employer registration: needed with Inland Revenue before you hire staff.
In Australia, the main equivalents are an ABN and GST registration, which is required once your GST turnover reaches $75,000.
Tax thresholds and rules change. Check current figures with Inland Revenue, the ATO or your accountant before relying on them.
3. Check your licences
Some trade work can only be done by licensed people. In New Zealand:
- Licensed Building Practitioners (LBP): restricted building work on homes, meaning consented work on the primary structure or weathertightness, must be carried out or supervised by an LBP with the right licence class.
- Plumbers, Gasfitters and Drainlayers Board (PGDB): sanitary plumbing, gasfitting and drainlaying can only be done by people registered and licensed (or otherwise authorised) for that work.
- Electrical Workers Registration Board (EWRB): prescribed electrical work must be done by registered workers, and anyone doing it for pay needs a current practising licence.
Keep your licence current, and keep up any ongoing training it requires. In Australia, licensing is mostly handled by each state, so check with the regulator where you work.
If you contract directly with homeowners in New Zealand, residential building work of $30,000 or more (including GST) needs a written contract, and you must give the client a disclosure statement and the official consumer checklist before they sign.
4. Get the right insurance
Talk to a broker who works with trades. The common covers are:
- Public liability: if your work damages someone’s property or injures someone
- Contract works: damage to the work itself while it’s being built
- Tools and equipment: theft or damage, including from your vehicle
- Vehicle: check it’s insured for business use
- Professional indemnity: if you give design advice or specifications
- Income protection or sickness cover: if you can’t work, the money stops
Read the exclusions. A cheap policy that doesn’t cover your actual work is no use.
5. Open a separate business bank account
Keep business and personal money apart from day one. It makes bookkeeping and tax far easier. Many tradies also set up a separate tax account and move a share of every payment into it.
6. Work out your charge-out rate
Your rate has to cover everything, not just your wage: vehicle, fuel, tools, insurance, phone, software, accounting, levies, licences, time off and profit. Divide that by the hours you can actually bill, which is far fewer than 40 hours a week once you take out quoting, admin, travel, holidays and sick days.
As an example only, if your yearly costs plus the wage you want come to $120,000 and you can bill 1,400 hours, your rate needs to be around $86 an hour before any profit margin. Your own numbers will be different. Work them out rather than copying what someone else charges.
7. Set up your quoting and invoicing
Pick a system early and use it for every job:
- A quote template with scope, inclusions, exclusions, price, payment terms and validity
- Deposits and stage payments on bigger jobs
- Invoices that go out the day the work is done
- A simple way for clients to pay, and reminders for when they don’t
If you want quotes, invoices and bookings in one app on your phone, have a look at TradeFlow.
8. Keep good records
You need records for tax, and they protect you in disputes:
- Every receipt and invoice, stored digitally
- Mileage or vehicle use
- Job notes, photos and written variations
- Signed quotes and contracts
In New Zealand, business records generally have to be kept for seven years. A bookkeeping app linked to your bank account makes this much easier.
9. Sort out health and safety
Even if it’s just you, you have health and safety duties. In New Zealand, the Health and Safety at Work Act 2015 applies to businesses of every size. Have a simple way to identify and manage the risks of your work, keep your gear in good condition, and know what to do in an emergency. When you start hiring or working alongside other trades, you’ll need to talk with them about how risks are managed on site.
10. Build a cash flow buffer
New businesses often run out of cash while busy. Materials are paid for before the client pays you, and clients don’t always pay on time. Aim to build up a buffer, ideally enough to cover a couple of months of running costs, plus money set aside for tax. Don’t spend GST you’ve collected. It isn’t yours.
11. Basic marketing
You don’t need a big budget:
- A Google Business Profile with photos of your work
- A simple website or a page with your services, area and contact details
- Signage on your vehicle
- Business cards or a QR code that links to your reviews
- Asking every happy client for a review and a referral
Doing good work, turning up on time and answering your phone is still the best marketing there is.
Your first-year checklist
- Business structure chosen, with advice
- IRD number, NZBN and GST sorted (or ABN and GST in Australia)
- Licences current for the work you do
- Insurance in place and exclusions read
- Separate business and tax bank accounts
- Charge-out rate worked out from real costs
- Quote and invoice system set up
- Records kept digitally from day one
- Health and safety basics in place
- Cash buffer and tax savings building
- Google Business Profile and a way to ask for reviews
This guide is general information, not legal, tax or financial advice. Rules and thresholds change, and the right setup depends on your situation. Get advice from an accountant, lawyer or insurance broker before making decisions, and check current rules with Inland Revenue, the Companies Office and your licensing body.