IT Professionals: Here’s How Freelance Tax Actually Works.
- 93 Accounting
- Apr 8
- 5 min read
Thinking about picking up freelance work while holding a full-time IT job? You're not alone — and you're definitely not the first to wonder how taxes work when juggling multiple income streams.
This guide is made specifically for IT professionals in New Zealand who want to understand their tax responsibilities, claim the right deductions, and avoid IRD surprises. Whether you're building websites on the weekend or consulting between contracts, this article helps you understand what you owe — and what you can claim back. From business registration to GST thresholds and tax return tips — we've got you covered.
Do I Need to Register a Business? If you’re freelancing or contracting
yes, you’re considered self-employed in New Zealand. That means: You need to register as a sole trader with the IRD (easy to do). You’ll be responsible for declaring your income, keeping records, and possibly paying GST (more on that below).
Tip: You don’t need a company to start freelancing — a sole trader setup is perfectly fine (and recommended, as a sole trader will be cheaper and easier to manage for 95% of freelancers. Only for very specific reasons would you may need to register a company).
How Do Taxes Work With Two Income Sources?
If you’re earning both a salary and freelance income, your tax situation is a bit different — but totally manageable.
You’ll need to pay income tax on your total income, which includes:
The salary from your full-time IT job (where tax is already deducted through PAYE), and
Any additional income you earn from freelance or side work (where no PAYE is deducted).
To handle this properly, you’ll need to file an Individual Tax Return (IR3) at the end of the tax year to declare all income and calculate what you owe.
Good to Know: The tax already paid through your day job will be credited toward your total tax bill. So you won’t be taxed again on that income.
Myth Busted: There’s no such thing as a “secondary tax” for freelancers. That term only applies to PAYE jobs with two employers. As a contractor or freelancer, you’re simply taxed based on your total income.
Because no tax is deducted from your freelance income during the year, you might still have tax to pay when you file.
Example - Let’s break this down:
Employment income: $75,000 (PAYE deducted)
Freelance income: $20,000
Business expenses: $5,000
Step-by-step calculation:
Self-employed income $20,000
Minus expenses $5,000
Net self-employed income $15,000
Total income $75,000 + $15,000 = $90,000
Estimated total tax on $90,000 = 19,577.50
Minus PAYE already paid $75,000 = 14,720.50
Tax still to pay $4,857
That $4,857 is the tax owed on your side income — but you only owe that because the IRD didn’t collect tax on your freelance earnings during the year.
Had you not claimed $5,000 in business expenses, you would’ve paid tax on $20,000 instead of $15,000 — costing you up to $1,650 more.
You may have noticed business expenses reduce your net income — and that means a lower tax bill. This is why expenses are the most important part of your tax return. Every dollar of legitimate business cost helps reduce the income you’re taxed on.
What Expenses Can I Claim?
You can claim business-related expenses to reduce your taxable freelance income, including:
Home office portion of rent, power, internet, and phone (including a percentage of your mortgage interest if you own your home)
Laptop, monitor, office furniture, and other tech equipment
Software subscriptions, digital tools, and productivity apps
Marketing, advertising, web hosting, and domain registration
Travel expenses for business-related meetings or networking events
Bank fees on your business account
Phone bills and mobile plans (if used for business)
Accounting or tax prep fees
Professional development (like tech courses or upskilling)
General Rule: If you spend money on something to help you earn taxable income, there's a good chance it's deductible. Keep records and talk to your accountant to make sure it qualifies.
Bonus Tip: Our Smart Expense Tracker scans your bank statements and surfaces expenses you may have missed — and a real accountant reviews it.
Do I Need to Register for GST?
You only need to register for GST if your self-employed income goes over $60,000 per year.
This threshold applies only to your freelance or contractor income — income from your salary or employment is not counted toward this limit. You won’t need to pay GST or register for it based on your employment income.
If you’re just picking up side projects, you likely won’t need to register — but we still recommend tracking your income just in case.
Can I Register for GST Even if I’m Under the $60K Threshold?
Yes — you can voluntarily register for GST even if you haven’t reached the $60,000 threshold.
This can be beneficial in some cases — especially if your work requires you to purchase expensive equipment or assets. Registering allows you to claim back 15% GST on business-related purchases. However, there are pitfalls. Once registered, you’ll be required to file regular GST returns and charge GST on your invoices. It’s best to speak with an accountant first.
If you're unsure whether it's right for you, give us a quick call to discuss your situation.
What If I’m Earning From an Overseas Client?
If you live in New Zealand and do freelance work for clients overseas — you still need to pay tax on that income here.
New Zealand tax law is based on residency, not where the income comes from. So even if your client is in the U.S., Australia, or the UK — that freelance income is taxable in NZ.
You’ll still include this income in your IR3 tax return
You may need to convert the earnings to NZD when reporting
If tax has already been deducted overseas (rare for freelancers), you might be eligible for a foreign tax credit to avoid double taxation
This is a common scenario for IT contractors and developers — and it’s perfectly fine, as long as you report the income correctly.
Should I Hire an Accountant or Do It Myself?
It Pays to Get Help to Reduce Your Tax
If you want to avoid overpaying tax, underclaiming expenses, or IRD penalties, an accountant can absolutely be worth it — especially if:
You’re earning more than $5,000–$10,000 in freelance income
You want to claim a home office or equipment
You’re not confident with tax forms or GST
At 93 Accounting, we work with IT professionals across New Zealand — whether you want a one-off return or a subscription plan with unlimited support.
Please explore our comprehensive service offerings through the link provided below:
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