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  • stacey2383

Self Employed for the First Time - What do I Need to Do?

Updated: Mar 11

Congratulations on getting your first contract or share milking job! Being self-employed is rewarding and motivating, and a great way to build wealth.

1. Get yourself an accountant

  • Hopefully you have got yourself a great accountant before you even reach the interview stage, to help with budgeting to determine if the job is worthwhile!

  • They can help with cashflow budgets to determine how much savings you need or whether you need to apply for an overdraft

2. Apply for an IRD number (partnerships) or register a company

3. Sign the contract

4. Register for tax (GST and PAYE)

  • If your income will be over $60,000 you need to register for GST. You should register for GST before you start buying equipment so that you can claim the GST

  • If you are going to be employing staff, you need to register for PAYE

  • When you go through step 2 you will be able to register for these tax types. Sole traders need to register for GST and PAYE on the IRD website

5. Set up a business bank account

  • You will need to take the IRD number and company incorporation certificate and extract (if a company) to the bank to set up the bank accounts

  • If you require bank lending you will need to start this process quickly as the banks can take up to 6 weeks to process new lending. You will need budgets, cashflows and stress tested scenarios which your accountant can help you with

6. Organise insurance

  • You need milk, public liability, plant, machinery and vehicle insurance prior to starting the job. It is worth the time to get several quotes and go over these with a fine-tooth comb as some policies vary considerably. Make sure you understand what is covered and what isn’t

7. Prepare cashflow budgets so you understand the capital requirements

  • Getting through the first winter is hard and you need to know how much savings you need in the bank to get through. Do a worst case scenario so you are adequately prepared

  • Check out the DairyNZ budgets or get in touch if you aren't sure what business expenses you can claim

8. Set up accounting and payroll software

  • Talk to your accountant about which software they use as this will save a lot of time for end of year accounts if you choose something they don’t use. Examples of accounting software providers include Xero, MYOB and Farm Focus

  • If you are employing staff, there are various providers, however you want one that understands the industry as rosters other than the standard 5 on 2 off can be complicated for calculating annual leave. Examples include AgriSmart, Paysauce, and Smartly

9. Software training

  • Decide if you or the accountant will do the GST returns, and if you are, ask your accountant to do software training with you

  • Training is key, if your GST returns are not done correctly you will end up with a very large accounting bill at the end of the year

10. Keep records for all business income and expense

  • Keep tax invoices for business expenses over $50

  • You must provide a tax invoice when selling goods or services over $50

  • If you receive electronic invoices, set up a dropbox (or similar) folder to store them all by month and year to make finding them easier. Keep a shoe box in the ute for those pesky fuel receipts

11. Options for getting through the first winter

  • Structure the herd purchase for 31 May so you get the GST refund in June to act as the cash buffer to get through winter

  • Set up a Farm Source account and get items deferred for a few months, however you need to be careful that you plan to have the cash to pay them when they are due

  • Ask your farm owner for an advance to get through the winter that you repay in summer

There is a lot to organise before you even start the job so make sure you start early and ask for help if you aren’t sure. The facebook farming groups are great for practical advice and your accountant will be able to help lessen the load too.

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

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