Budget policy changes came into force on 1 April 2017 that will affect you if you are a contractor, or if you employ contractors. The following are now in place and you may need to make some changes to the way you are doing things.
- Pay or receive schedular payments? (Schedular payments are payments made to contractors who perform certain activities. These payments are required to have tax deducted but they’re different to salary or wage payments).
- From 1 April 2017 contactors subject to the schedular payment rules can choose their own tax rate. If you have contractors receiving schedular payments or if a new contractor starts working for you, you will need to give them an IR330C form instead of the IR330 (Tax Code Declaration) form. This means that contractors can choose their own tax rate by using the IR330C, subject to minimums.
- If you are a contractor and want to change your rate, or start a new contract, the same applies – by using the IR330C, you can change/choose your tax rate.
- This change relates to those in the labour hire or recruitment and on-hire companies who pay contractors to work for clients under a labour hire arrangement as well. You need the IR330C for all contractors.
- If you are using payroll software the variable tax rate should be accepted, or you can check with your software provider. Below is the handy flowchart from the IR330C form which will help you decide on the correct rate for you or your employees.
- If this change is going to be costly because of the complex nature of your business, the IRD may grant an extension of time for implementation if you apply to them.
(See http://www.ird.govt.nz/news-updates/contractor-changes.html, for more details).