Self-employed in NZ: Estimating Income for Working for Families
A busy month can fill the business account without telling you what your family will earn for the year. For Working for Families, start with expected business profit, include your partner's income and account for the scheme's income adjustments. Sales, personal withdrawals and the balance in the bank answer different questions.
If you receive weekly or fortnightly payments, you do not have to wait for completed annual accounts before updating an estimate. Use the income already earned and a reasonable forecast through to 31 March. The final entitlement is worked out after the tax year ends.
The practical route is to forecast business profit, add the rest of the family's income, then consider any adjustments. A sole trader and a company owner may arrive at different figures, as explained below. This article concentrates on the estimate; our eligibility guide covers who can qualify.
Build the year from actual results and the work still ahead
For the 2026–27 tax year, use 1 April 2026 to 31 March 2027. Last year's return offers a starting point. A new contract, quieter season or higher costs may mean this year's profit will be different.
Suppose Arjun runs a catering business as a sole trader and his partner Elena earns a salary. They are estimating the same full tax year, with no other income or Working for Families adjustments. The figures below are illustrative NZ dollars. Business sales and deductible expenses are GST-exclusive; assume the expenses have been correctly adjusted for tax and private use.
Forecast item | NZ$ |
Sales already earned, 1 April to 31 October 2026 | 70,000 |
Deductible expenses for that period | (42,000) |
Profit to 31 October | 28,000 |
Forecast sales, 1 November 2026 to 31 March 2027 | 50,000 |
Forecast deductible expenses for that period | (30,000) |
Forecast profit for the remaining period | 20,000 |
Arjun's expected full-year business profit | 48,000 |
Elena's expected full-year salary before PAYE | 34,000 |
Estimated family income, with no other income or adjustments | 82,000 |
The business has expected annual sales of NZ$120,000, but its forecast profit is NZ$48,000. The family estimate is NZ$82,000 under these assumptions. None of those figures is the amount of Working for Families the couple will receive. Their credits also depend on their children, care arrangements and other eligibility conditions.
Forecast the remaining months from expected orders and the costs of fulfilling them. If the catering business takes on more work, ingredients, staffing and delivery costs may rise too. Simply multiplying a strong month's sales by the months left can overstate the profit; carrying forward a quiet month can understate it.
Personal spending from a sole trader's business account is not a business deduction. Nor should every equipment purchase be treated as immediately deductible: use the applicable tax treatment in the forecast. If vehicle costs are significant, our vehicle expenses guide explains the records and calculation methods.
Add family income, then consider the adjustments
Elena's salary is included before PAYE deductions, not as the net pay arriving in her account. Bonuses, overtime, rental income and overseas income may also affect the forecast. Each person's forecast needs to cover the same tax year; adding unexplained bank deposits will not establish that total.
Working for Families family income is not always the same as taxable income. Child support and private maintenance received can increase it, while qualifying payments made can reduce it. A dependent child's passive income above NZ$500 a year is included to the extent it exceeds NZ$500. A non-resident partner's worldwide income can also count. IRD's family-income guidance explains these adjustments.
Company owners need a further distinction. If you are a major shareholder in a close company, relevant company profit can be attributed to you for Working for Families. Reporting only the salary or cash you draw from the company may therefore miss income. Trust arrangements and certain investment income can require adjustments too; use IRD's adjustment guidance alongside the accounts.
A business or investment loss also needs separate attention. It generally does not reduce income for Working for Families, although the treatment of associated business activities can differ. If profits and losses from unrelated activities have been combined in one IR3 box, IRD may need the loss details to reverse the offset. Its loss guidance gives examples. The NZ$82,000 calculation above assumes none of these complications.
Revise the forecast when the business changes
The forecast needs to change when the work or household income changes. A confirmed contract may justify higher forecast sales, but its extra costs belong in the same revision. A partner's pay rise affects the family total even if the business is unchanged.
In myIR, open the Working for Families account, select Family and income details, then Update income. Include what has already been earned and what is expected up to 31 March, and update the partner's estimate where relevant. IRD's update instructions describe the process. Keep the forecasted accounts, supporting orders and payslips so the figure can be explained later.
Underestimating can leave a repayment bill after money has already been spent. A higher estimate may reduce instalments during the year, with any remaining entitlement settled after the final calculation. The aim is an estimate supported by current evidence, not the lowest figure that produces a larger instalment. Our overpayment guide explains that later adjustment.
Keep the annual return and next year's notice in step
At year end, IRD reconciles payments against actual family income and circumstances. Self-employed people generally need an IR3 return. The usual filing date is 7 July after the tax year, or 31 March of the following year where a tax agent's extension applies. If your partner also needs to file, both returns are needed before IRD can finish the family calculation. See IRD's end-of-year assessment guidance.
Next year's instalments are a separate issue. In February or March, IRD sends a notice of entitlement or asks for more information. For IR3 filers, it may use either of the previous two years' returns. If the return information is missing, IRD may ask for filed returns, financial accounts, budgeted accounts or an accountant's confirmation of estimated business income.
If requested information is not supplied by 1 April, weekly or fortnightly payments stop and payment moves to an end-of-year lump sum. Providing the information later can allow instalments to resume. IRD's notice guidance explains this process, and our notice article covers how to read it.
A dated copy of the business forecast alongside the family-income estimate leaves a clear starting point for the next revision. When an order, cost or salary changes, you can see which assumption needs updating.
Disclaimer: This article provides general New Zealand tax and accounting information, not personalised advice. Eligibility and tax treatment depend on your circumstances and the rules applying to the relevant period. Obtain professional advice before acting.
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