Side hustle tax in New Zealand: when to declare it, your first IR3, and the second-year tax bill

Hobby or business: where the line is

Inland Revenue says a hobby is something you do in your spare time for enjoyment, with no intention of putting in a lot of time, effort and money, and no intention to make a profit. Money from a hobby is not income, so it is not taxed and you do not keep records for it. Selling things you make now and then to family and friends, or at a market, is usually a hobby. The trade-off is that you cannot claim expenses or a loss for a hobby.

A side hustle can be a business even if you do not think of it as one. Inland Revenue looks at whether you:

• intend to make a profit;
• put a lot of time, money and effort into it;
• sell to customers on a regular basis;
• keep records such as budgets and statements of income and expenses;
• run it the way most businesses in the same trade are run;
• intend to keep it going long term, or rely on it to pay your living costs.

Doing paid work for other people through an app or website is clearer still. Inland Revenue says fees for personal services through an online marketplace are taxable income and must be declared, even if it is a one-off payment, whether or not you are in business.

There is also no general tax-free amount in New Zealand. The first dollar of income is taxed at 10.5%. The $200 figure people mention is a filing rule, not an allowance: Inland Revenue says you need to file an IR3 if you received more than $200, before tax, of income it has not been told about. Once you are over $200, all of it goes in the return, not just the part above $200, and the rule does not help if you have another reason to file, such as being registered for GST. The one carve-out is for school students: those who earn less than $2,340 in a tax year from self-employment do not pay tax on it.

How side income stacks on your salary

New Zealand's tax rates rise in bands across your total income for the tax year. For 2026/27 they are 10.5% to $15,600, 17.5% to $53,500, 30% to $78,100, 33% to $180,000 and 39% above that. Your salary fills the bands first, so your side profit starts wherever your salary stops. It is not taxed from 10.5% upwards.

This made-up example assumes 2026/27 rates, a salary taxed correctly through PAYE, and no other income, tax credits or student loan. Aroha earns a salary of $80,000 and makes $10,000 profit from weekend photography. Her salary has already reached the 33% band, which starts at $78,101, so all $10,000 is taxed at 33%: $3,300. ACC's earners' levy, 1.75% for 2026/27, adds $175, because the self-employed usually pay their own ACC. That is $3,475, or 34.75% of her profit. Had she set aside 10.5%, she would have put away $1,050.

That is the number to set aside as the money comes in, not at the end. ACC also charges a work levy that depends on the kind of work, and our guide to contractor tax covers both ACC levies, schedular payments if your clients deduct tax, and student loan repayments.

Filing your IR3: dates, extensions and expenses

The tax year runs from 1 April to 31 March. Your IR3 is due by 7 July, unless you have a tax agent or an extension of time. A tax agent's clients can be given an extension to 31 March the following year. As a self-employed person you use your own IRD number, and in myIR your salary details are filled in for you; you add the business income with a Financial statements summary (IR10).

You are taxed on profit, so a business can claim expenses that help it earn its income. Common ones for a side hustle:

• Supplies and costs of the work itself, such as materials, software or equipment, with depreciation on larger items.
• Your vehicle, for business trips only, using a logbook, 25% of running costs if you have no logbook, or actual costs. Travel from home to your workplace is a personal trip. Inland Revenue publishes its kilometre rates after each tax year ends.
• Part of your home, for the area used for the business. If a room is set aside mainly for it, you can use the square metre rate, $57.30 for 2025-2026, plus a share of rent, rates or mortgage interest.
• Internet, on a fair and reasonable business share, and business calls.

Keep the receipts, invoices and records for at least seven tax years. Our guide to keeping your own timesheet covers the hours side of the record.

The second-year bill, and how to soften it

In your first year of business there is usually no provisional tax, but the first year is not tax-free: the tax is due the following February. Once the tax left to pay on your return, called residual income tax, is more than $5,000, you also pay provisional tax for the year you are now in. Inland Revenue warns that this can mean paying the first year's tax at the same time as provisional tax for the second.

Take Aroha again, with $20,000 of profit in 2026/27. Her residual income tax is $6,600, which is over $5,000.

• 7 July 2027: her 2026/27 IR3 is due.
• 28 August 2027: first 2027/28 provisional instalment. On the standard option it is last year's $6,600 plus 5%, $6,930 for the year, in three instalments of $2,310.
• 15 January 2028: second instalment, $2,310.
• 7 February 2028: the $6,600 for 2026/27 is due (7 April with a tax agent).
• 7 May 2028: third instalment, $2,310.

Between August 2027 and May 2028 she pays $13,530, two years of tax on the side work in about nine months.

Ways to soften it, from Inland Revenue's own pages:

• Pay as you go in year one. Voluntary payments during the first year spread the cost. The early payment discount on them is for people who get most of their income from the business, so a side hustle beside a salary will usually not get it.
• Know the interest rule. On the standard option, with residual income tax under $60,000, interest is charged only from the day after the end-of-year due date.
• Tax pooling, which Inland Revenue says can help manage provisional tax and reduce interest.

Whatever you choose, setting aside your top rate plus the ACC levy from each payment as it arrives means the money is there in February. Your Timesheets at jobtracker.co.nz can hold the side work as its own place, marked as your own business or as contractor work, and logging its hours is free. With the Career and Timesheets plan it adds your rates, invoices, expenses and mileage at Inland Revenue's rate a kilometre, and the money to set aside for tax. That estimate counts only the side work, so for a side hustle on top of a salary, open "How your tax is paid", choose to pay it yourself and type your top rate, such as 33, so it does not start from 10.5%. It is a guide, not advice.

Platforms, marketplaces and GST

You must register for GST once your sales from taxable activities reach $60,000 in the last 12 months, or you expect them to in the next 12. That is turnover, not profit, and it counts every taxable activity you run. Once registered you charge GST, file GST returns and claim the GST on your business costs.

Three kinds of work have their own rules: ride-sharing, food and beverage delivery, and short-stay accommodation, when sold through an online marketplace. Since 1 April 2024 the marketplace collects GST at 15% on these listed services. If you are not registered, it pays 6.5% to Inland Revenue and passes 8.5% to you as a flat-rate credit, which you can choose to include as income or not. If you are registered, you treat those sales as zero-rated in your GST return.

Marketplaces also report on their sellers. Since 1 January 2024, online marketplaces resident in New Zealand must collect and report information about sellers who provide relevant services. So expect Inland Revenue to hear about income from a platform that reports, and make sure your return includes it.

The side work and its tax, kept together