Starting a business – have you thought about…?

We know you have hundreds of thoughts and ideas when setting up your business and you’re bound to overlook some aspects or haven’t considered certain areas. This is absolutely normal, and when you realise this, get in touch with a suitable advisor.

We can’t give you a list of everything to consider, but we’ve covered some topics here that you may need to address.

Business insurance
Student loan repayments
Business bank accounts
Xero setup and record keeping

Business Insurance

There are numerous types of insurance you can purchase to protect yourself and your business. They include Business Asset Insurance, Public Liability, Employers Liability, Statutory Liability, and Income Protection.

We suggest you contact insurance providers for quotes. Another option is to speak to your bank manager; they usually provide sound advice around what is best for you. Remember, at the end of the day, it is up to you what sort of insurance you buy. Don’t be pressured into purchasing every insurance policy under the sun, but security definitely comes first.

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If you are contracting, you’re responsible for paying you own ACC levies. Your first ACC payment is normally calculated after your first tax return as a contractor is filed.  Your payment will be based on your net income and the specific industry you work in – each industry has a different rate.

ACC often comes as a surprise to a new business person because ACC has always been paid via your PAYE-paid wages and you don’t see it.

However, in the event you have an accident, you do get paid out a weekly amount 80% of your normal income – so this is effectively another form of insurance.

You can contact ACC directly if you would like more information. Unfortunately, due to privacy reasons, we are unable to do this for you.

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Student loan repayments

If you have a student loan and are no longer receiving any PAYE-paid wages or salaries, Inland Revenue will calculate your student loan payment when you file your personal tax return at the end of the financial year. The student loan threshold changes each year, but is generally around $20,000. This means you’ll pay 12% on any net income you earn above this threshold.

For example, if you earn a net income of $32,500 for the financial year, you will pay:

  • 12% on ($32,500-$20,000 = $12,500)
  • 12% x $12,500 = $1,500 payment

Your student loan payment is due on the same dates as your income tax and provisional tax (if applicable). You can contact the Inland Revenue Department, Student Loan section if you wish to make voluntary payments throughout the year.

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If you have a KiwiSaver account and wish to continue making contributions, please contact your KiwiSaver provider about setting up a direct debit into your account.

We have a separate blog on Kiwisaver for the self-employed, which is a useful read.

These days, Kiwisaver is probably the only investment where you’ll receive a 50% return, up to $520. It’s free money!

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Business bank accounts

If you are setting up a company, you will need to open a business bank account under your business name. You will need to provide a copy of your company registration (we will provide this) to your bank manager when doing so.

We suggest opening a normal debit account and also a Tax/GST savings account.  This way you can allocate 20-30%% of your earnings into you tax savings account and won’t be caught out when it’s tax time!

Separate business credit cards can also be setup – please discuss with your bank manager for your best options and be sure to ask about fees!

If you are operating as a sole trader, we’d also suggest setting up a separate bank account for business purposes. Keeping business and personal expenses separate makes it so much easier when preparing financial statements.

Remember to put ALL business expenses through your business account so they can easily be recorded and not forgotten! And if, on the odd occasion, you pay business expenses personally, we need to include these in your financial statements.

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Xero setup and record keeping

We can set you up with a Xero accounting subscription. This will be linked directly to your bank account and records all income and expenses going through your bank.

You are not required to use Xero and there are many other options out there. However, we find Xero the most efficient accounting package available, plus we can access it (if you provide authorisation) and advise you on your progress at any stage.

You will still be required to keep all invoices/receipts for up to 7 years and could be requested to provide copies to the Inland Revenue Department at any time. So, keeping these in some sort of order is definitely advisable. We love it when clients attach invoices to Xero transactions!

As your accountant, we may request copies of invoices for assets, insurance or legal costs, etc at year end only. These can be uploaded to your Beany account at any stage for safe keeping. Even better – attach them to the relevant Xero transaction and they’ll always be there – even if you stop your subscription.

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Remember, we are here to help you!  If you would like to discuss any of the above information, please get in touch.

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