Taxing schedular payments made to contractors

If you pay a contractor for work under a schedular payment activity, you must deduct tax from their pay. You will find the schedular payment activities on page 3 of the Tax rate notification for contractors (IR330C).

 

Note: Contractors hired under a labour hire arrangement fall under the schedular payment rules.

IR330C and choosing a rate

Contractors can choose their own tax rate between 10% and 100%. 15% is the minimum rate for contractors on a temporary entry class visa. To confirm their tax rate, make sure you get a completed IR330C from each contractor. If you don’t get a completed IR330C, you need to deduct tax at the no-notification rate for their activity (generally 45%).

If the contractor wants to be taxed at less than 10%, they’ll apply for and give you a special tax rate certificate or a certificate of exemption.

The paperwork

You need to include contractor income and tax on your Employer monthly schedule (IR348) and Employer deductions (IR345) form.

Other contractors – option to have tax deducted

Contractors that don’t fall under the schedular payment rules can also choose to have tax deducted by giving you a completed IR330C. However, this is by agreement. This is a valid way for people contracting in industries not covered by the rules who want to pay tax as they go as opposed to having provisional tax obligations.

 

Find out more about hiring, and working as, a contractor at www.ird.govt.nz/contractors

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