Do You Need To File? Hnry Helping Independent Earners Avoid Common Misconceptions
Do you need to file? Hnry helping independent earners avoid common misconceptions as tax deadline approaches
Award-winning FinTech company Hnry is helping independent earners avoid common tax pitfalls as the end of financial year filing deadline approaches on July 7th.
Hnry, a company dedicated to financial administration for New Zealand’s self-employed and contractor workforce, says they are noticing a pattern of people unaware they have to file a tax return at all - a status that only applies to salaried or waged employees who have had PAYE deducted throughout the year.
James Fuller, Hnry CEO, says that since the Covid-19 pandemic, far more people are looking to earn independent income and that the tax system isn’t well set up for individuals.
“Part of the challenge is that IRD have been running glossy adverts across digital and traditional media, informing people that they have automated the tax filing process, and that most people won’t need to file their own tax return. This is true, but only if you’re not earning any self-employed income, or other income outside of a PAYE/salary job,” he says.
“Given that roughly 20 percent of Kiwis earn some or all of their income independently, this has been a really confusing time for people, with a lot of misinformation online, incorrectly stating that IRD have removed the need for anyone to have to file a tax return”.
Fuller says Hnry will likely see a lot of individuals who are unaware they’re expected to file and will receive penalties from IRD. There are also people earning both self-employed and PAYE income who will find IRD has filed their tax return automatically with only the PAYE income included. This will then have to be “undone” and filed properly in order to be correct.
Another common pitfall is the myth that you need to register a company in order to earn independently.
“There are good reasons why you might need to establish a company, however many individuals don’t need to, and have unnecessarily over-complicated themselves and their taxes by setting up company structures, when in fact they would be far better off trading as an individual,” Fuller says.
“It would certainly be much cheaper and less hassle for them”.
He says Hnry also sees a lot of people who don't realise that they must be registered for GST once they start earning over $60,000 in self-employed income - so even if they do know, and remember, to file their tax return at the end of financial year, they may find IRD will require them to register and backdate their GST registration to start at the point of the year they crossed that threshold.
“That could mean you may be required to pay IRD a further 15 percent of tax for any earnings from that time, which comes out of your own pocket as you’re unlikely to be able to retrospectively collect it from your clients”.
People also frequently and mistakenly think that New Zealand has a ‘tax-free’ threshold and that if you earn under that amount, you’re not required to pay tax on it, Fuller says.
“This is completely untrue - the base level of tax, for any earnings up to $14,000 per year, is 10.5 percent”.
He says a lot of the motivation behind creating Hnry was removing the worry for independent earners of making these common tax mistakes - by taking care of all of their financial administration.
“We pay all your taxes for you, make sure you‘re always up-to-date, compliant and that you never overpay. We handle all your business expenses and file all your tax returns for you whenever they’re due. You can also use the Hnry app to send quotes and invoices, set up financial plans and get detailed reports of your income - very important if you’re looking to get a loan or mortgage”.
There is also a range of resources and information available on Hnry’s website.
Visit www.hnry.co.nz for more information.
Hnry aims to make life easier for the self-employed by removing all financial admin, and letting independent earners focus on their paid work. Hnry, winner of the Emerging Gold Service Award at the Wellington Gold Awards 2019, and a finalist in the New Zealand Hi-Tech Awards 2019, is an end-to-end tax agent service that uses cutting-edge automation to calculate, pay and file all tax obligations, charging just 1% of the self-employed income (capped at $2,000 p/a). Hnry’s mission is to give freelancers, contractors and self-employed their freedom back, by being their trusted financial sidekick - enabling them to get back to doing what they love. You can find out more at https://hnry.co.nz/.