Side-Hustle Tax Calculator
If you have a PAYE day job and a self-employed side income, IR3 time often brings an unwelcome surprise. This calculator estimates exactly how much you'll owe IRD on the side income — and what to set aside each month so the bill doesn't bite.
PAYE-taxed at source via your M tax code.
Freelance, contracting, Airbnb, online sales — gross.
Mileage, supplies, software, % of home office — see IRD's home office expense guidance.
Adds the year-end repayment on your side profit to the IR3 bill. Repayments deducted from your pay are final and are not netted against it.
Estimated extra tax at IR3 time
$5,086.87
Your side income takes you from $70,000.00 to $85,000.00 combined, taxed at a marginal rate of 33.0%.
Why your day-job PAYE doesn't cover this: PAYE is calculated only on the day-job pay run, treating it as your only income. Side income at IR3 time pushes you up the brackets, but your employer never withheld at that higher rate.
If side income exceeds $60k: you generally also need to register for GST. If your residual income tax (RIT) tops $5,000, you'll need to pay provisional tax next year — see our provisional tax calculator.
ACC separately bills self-employed people: for self-employed side income, ACC also charges the Working Safer Levy and a self-employed Work Levy (industry-rated). The Work and Working Safer levies on your side profit are included in the figures above; ACC invoices them separately from your PAYE.
How side-hustle tax works in NZ
When you have a PAYE day job, your employer withholds income tax + ACC earner levy every payday based on that pay alone. Your tax code (usually M for primary income) tells the employer to apply the standard brackets to that income.
When you also have self-employed side income — freelance, contracting, Airbnb hosting, online sales, gig work — the side income is not PAYE-taxed at source. It's reconciled once a year on your IR3 return. By that point, the side income has pushed your total annual income into higher brackets, but the day-job PAYE was withheld as if the side income didn't exist.
The IR3 wash-up is the gap: extra tax owed = tax on (PAYE + side) − tax already withheld on PAYE. Plus an ACC earner-levy top-up if the combined income is below the ACC cap and your side portion fits below it too.
If you claim the independent earner tax credit (tick the box in the calculator), the credit is tested on your net income for the year, which includes the side profit (ITA 2007 s LC 13). Side profit that lifts net income over the credit's abatement threshold reduces the credit, so the extra tax owed also includes that lost credit. Without the tick, the calculator leaves the credit out.
Marginal-rate trap — three worked examples
$10,000 of side income hits very different bills depending on where your PAYE income lands. Figures use the 2025-26 ACC earner levy (1.67%, capped at $152,790) — the year this side income is filed at IR3 time.
PAYE $45,000 + $10k side
- Combined income: $55,000
- Side income at marginal rate: 30% (above $53,500)
- $8,500 of side at 17.5% bracket-finish
- $1,500 of side at 30%
- Income tax on side: ~$1,938
- ACC earner levy on side (1.67%): $167
- IR3 bill: ~$2,105
- Monthly set-aside: ~$175
PAYE $75,000 + $10k side
- Combined income: $85,000
- $3,100 of side at 30% (to $78,100)
- $6,900 of side at 33%
- Income tax on side: ~$3,207
- ACC earner levy on side (1.67%): $167
- IR3 bill: ~$3,374
- Monthly set-aside: ~$281
PAYE $185k + $10k side
- Combined income: $195,000
- $10,000 of side at 39% (above $180k)
- Income tax on side: $3,900
- ACC earner levy: $0 (above $152,790 cap)
- IR3 bill: $3,900
- Monthly set-aside: $325
- Same gross side income → ~$1,795 more tax than the $45k earner
Set-aside rule of thumb: if you're in the top half of the 30% bracket or above, budget at least 30% of gross side income for tax. If your combined income is above $180k, budget 40%. The calculator above gives the exact figure based on your inputs.
GST $60,000 threshold — when registration matters
GST registration is generally mandatory once your turnover (gross side income, before expenses) has exceeded $60,000 over a rolling 12-month window, unless Inland Revenue is satisfied the next 12 months will stay at or under it. The window is forward-looking too — if you reasonably expect to cross $60k in the next 12 months, register before you do.
Below $60k — registration optional
- No GST charged to customers (simpler invoicing)
- Cannot claim GST back on business expenses
- Voluntary registration possible if your expenses include significant GST you'd like to recover
- Common for digital services and consulting — most expenses are low-GST
Above $60k — registration generally required
- Charge 15% GST on all sales (B2C and B2B)
- File GST returns 6-monthly, 2-monthly, or monthly
- Claim back 15% GST on legitimate business expenses
- Net effect: GST is generally cashflow-neutral if you collect more than you spend on GST-bearing expenses
- Late registration penalty applies if you cross $60k and don't register in time
Voluntary registration ROI: only valuable if your major expenses bear GST and exceed the admin cost of GST returns. A consultant with mostly time-billed services and no GST-bearing expenses gains little. A photographer who buys $30k of camera gear annually claims back $3,913 of GST — worth the admin overhead. Once registered, you must charge GST even on small invoices.
Allowable deductions — what you can offset against side income
Side-hustle income is reported on IR3 as business income (Schedule of Other Income). You deduct the work-related portion of qualifying expenses BEFORE the tax brackets apply. Common deductions:
- Home office — % of mortgage interest (post-2026 deductibility restoration on existing properties), rent, rates, insurance, power. IRD looks at the space and the time that part of your home is used for income-earning, so a shared room is claimed in part; if an area is set aside and mainly used for business, IRD's square metre rate option is available instead. Internet on a plan you also use privately is claimed at a business proportion that gives a fair and reasonable result. See home office expense calculator.
- Vehicle — kilometre rate (Tier 1: $1.20/km up to 14,000 km, Tier 2: $0.37/km thereafter for petrol, 2025-26 rates from IRD) OR actual expense method with a logbook. Pick one per income year per vehicle.
- Asset depreciation — laptops, cameras, tools, equipment > $1,000 are depreciated over IRD's effective life schedules. Items ≤ $1,000 immediate deduction (raised from $500 in 2020).
- Professional fees — accountancy, legal advice for the business, membership of professional bodies relevant to your work.
- Tools and materials — consumables directly used in the business (software subscriptions, raw materials, postage, packaging).
- Bank fees and merchant fees — for the business account or processor (Stripe, PayPal, Square fees).
- Marketing and advertising — website hosting, Google Ads, Meta ads, business cards.
- Education and training — directly related to current side-hustle work (e.g. Photoshop course for a freelance designer). Not deductible for new skills outside your current activity.
Document everything: keep receipts for 7 years (IRD retention period). Use a separate bank account for the side-hustle so deductible expenses are easy to identify. Mixed personal/business expenses (e.g. mobile phone) must be apportioned by usage % — IRD accepts a 4-week representative diary as evidence.
$5,000 RIT trigger — when provisional tax kicks in
If your IR3 wash-up produces residual income tax (RIT) over $5,000, IRD enrols you in the provisional tax regime for the following year. RIT = total tax due minus tax already withheld (PAYE, RWT). For a side-hustler with a PAYE day job, only the side-income tax counts toward RIT (the PAYE portion is already withheld).
Implications of crossing $5,000 RIT:
- Three instalments next year: 28 August (P1), 15 January (P2), 7 May (P3); two, on 28 October and 7 May, if you pay GST 6-monthly
- Each instalment = 1/3 of (last year's RIT × 1.05) under the standard method
- Or use the estimation method to base instalments on a forecast — under-estimate triggers UOMI
- Year-1 safe harbour: first $60k of RIT is UOMI-free if you pay terminal tax on time (7 Feb / 7 Apr on agent's list)
Practical recovery if your side hustle quietly grew past $5k RIT: open a high-interest savings account, set aside 30-40% of gross side income each month, and use the first-year provisional tax calculator to verify whether you stay inside safe harbour. The cashflow shock of three instalments in year 2 catches many side-hustlers off-guard.
Frequently asked questions
Why is the tax on side income so much higher than I expected?
Because it's taxed at your marginal rate, not your average rate. If your day-job income already sits at the top of the 30% bracket, every dollar of side income is taxed at 33% or 39% — much higher than the effective rate on your day-job salary. The IR3 wash-up surfaces the gap all at once, instead of spreading the tax burden across your pay cycle like PAYE does.
Do I need to register for GST?
Generally only once your side income (gross, before expenses) has exceeded $60,000 over a rolling 12-month period, or you expect it to in the next 12. Below $60k voluntary registration is optional — useful if your business expenses bear significant GST. The threshold is turnover, not profit, so a high-revenue low-margin operation hits the threshold faster than a service-only business.
Will I have to pay provisional tax next year?
If your residual income tax (RIT) at this year's IR3 exceeds $5,000, you'll need to pay provisional tax in three instalments next year — 28 August, 15 January, 7 May (two, on 28 October and 7 May, if you pay GST 6-monthly). RIT is the tax you owed minus tax already withheld through PAYE. For a side-hustler with a day job, only the side-income tax usually counts toward RIT.
Does the side income affect my KiwiSaver and student loan?
Yes. KiwiSaver employer contributions apply only to your PAYE salary, but you can make voluntary contributions on side income. Student loan is assessed at year end on your side profit (adjusted net income), separately from the repayments deducted from your pay. If your wages are at or above the annual threshold (24,128 for 2025-26), IRD charges 12% of all your adjusted net income from the first dollar, once it reaches $500 (s 78); if your wages are below it, the charge is 12% of your wages plus adjusted net income above the threshold (s 77). Repayments already deducted from your pay are final and are not netted against it. Tick the student loan box in the calculator to add it to your IR3 bill.
Can I claim home-office expenses?
Yes, if you use part of your home for the side hustle. IRD lets you claim a percentage of mortgage interest / rent / utilities / rates / insurance based on the floor area used for the business divided by total home floor area. See the home office expense calculator for the method. Documenting the floor area calculation matters — IRD audits sometimes ask for floor plans or photos.
What records do I need to keep for IR3 side-income filing?
Income records: invoices issued, bank statements showing receipts, platform statements (Uber, Airbnb, Etsy, etc.). Expense records: receipts, supplier invoices, mileage diary, home office calculation. Keep all records for at least 7 years after the end of the income year they relate to (IRD retention requirement). Cloud accounting software (Xero, MYOB) auto-stores; spreadsheet + scanned receipts also work. The bar for substantiation is what a reasonable person would keep, not exhaustive.
What's the difference between IR3 and IR3NR?
IR3 is for NZ tax residents reporting non-PAYE income (self-employed, rental, foreign, investment). IR3NR is for non-residents with NZ-source income. As a side-hustler living in NZ you almost certainly file IR3, not IR3NR. If you become a non-resident mid-year, you may need to split the year and file part-year IR3 + IR3NR — talk to a tax agent.
When is my IR3 due?
7 July following the 31 March balance date if you self-file — so the return for the 2025-26 income year (1 Apr 2025 to 31 Mar 2026) was due 7 July 2026. If you're on a tax agent's client list, the extension takes the deadline to 31 March 2027. Late-filing penalties apply: $50 immediate + $250 if still outstanding after 90 days, plus UOMI on any unpaid balance from the original date.
Can I split side-hustle income with my spouse?
Only if your spouse genuinely contributes labour or capital. Pure income-splitting for tax purposes (assigning income to a lower-bracket spouse who didn't earn it) is treated as tax avoidance under s BG 1 Income Tax Act 2007. If your spouse does run part of the business — bookkeeping, admin, customer service — pay them a market-rate salary and they include it in their IR3. The total tax across both returns should be the same as a single return if the apportionment matches actual contribution.
What if my side hustle makes a loss?
You can offset the loss against other income (including PAYE salary) in the same income year, reducing your overall tax bill. The 'non-commercial loss' rules can deny the offset if IRD determines the activity isn't genuinely commercial — e.g., a hobby that consistently loses money with no realistic profit path. The first 2-3 years of a new business are usually treated as commercial loss-making (start-up phase) and the offset is allowed.
Related calculators
Sources
Tax brackets and marginal rates sourced from IRD — Tax rates and codes. ACC earner levy from ACC — Business levies.