One of the biggest shocks for new Contract Milkers is tax.
When you move from wages to self-employment, no one is deducting PAYE for you anymore. That means GST and income tax become your responsibility — and if you’re not prepared, it can feel overwhelming.
The good news? With the right system, it’s completely manageable.
First: Remember You’re Now a Business
As a Contract Milker, you’re running a business.
You’ll likely be registered for GST, which means:
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You collect GST on your income
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You claim GST on your expenses
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You pay the difference to Inland Revenue
But GST isn’t your money — it’s held in trust. The safest approach is to treat it that way from day one.
A Simple Rule of Thumb
While every situation is different, a good starting guide for Contract Milkers is:
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100% of GST collected → set aside immediately
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20–30% of your net profit → set aside for income tax
The exact percentage depends on:
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Your total profit
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Whether you have other income
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Your business structure
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Your deductible expenses
If you’re unsure, it’s better to over-save slightly than under-save.
Why Tax Catches People Out
Common reasons Contract Milkers get caught short:
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Spending GST without realising it isn’t theirs
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Not accounting for provisional tax
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Assuming their first year won’t generate much tax
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Underestimating how profitable the season actually was
Tax bills don’t mean something has gone wrong — they usually mean you’ve made money. Planning ahead just removes the stress.
The Smart Way to Manage It
The simplest method is to:
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Have a separate tax savings bank account
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Transfer GST as soon as income is received
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Set up automatic transfers weekly or monthly for income tax
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Review profit regularly (not just at year end)
Using tools like Xero and Figured makes this even clearer, especially when budgeting for the season ahead.
Final Thoughts
Being a Contract Milker is a big step forward. Done well, it builds real momentum toward long-term goals.
Tax shouldn’t hold you back — it just needs to be managed properly.
If you’re unsure how much you should be setting aside or want help putting a simple system in place, feel free to get in touch. A short conversation now can prevent a stressful surprise later.