Schedular payments are payments made to contractors who perform certain activities. Tax is deducted from these payments but they’re different to salary or wage payments.
Who gets schedular payments?
Contractors doing certain activities or services, or contractors working in certain industries.
A contractor can be an individual, partnership, trust or company. Contractors can be New Zealand tax residents or tax non-residents. Some examples of contractors getting schedular payments are:
- an IT project manager contracted by a recruitment agency (labour hire business) to one of the agency’s clients
- a builder contracted to a labour hire business
- a freelance journalist paid to write a magazine article
- an insurance agent or salesperson paid commission
- a company director paid directors’ fees
- a commercial cleaning partnership paid by a local business to clean their offices
- companies contracted to supply labour to the agricultural, horticultural or viticulture sectors
- non-resident contractors, entertainers and sportspeople.
The Tax rate notification for contractors – IR330C – lists the activities which schedular payments can be paid for.
Choosing to get schedular payments
People can choose to have their income treated as schedular payments in some circumstances. These are called voluntary schedular payments. Voluntary schedular payments cannot be paid for income from salary or wages. A payer needs to agree in writing to make schedular payments. The agreement could include:
- name of the payee and payer
- a statement that the payments will be treated as voluntary schedular payments
- the period it applies to
- signature of the payee payer.
What are the tax rates for schedular payments?
- use the standard schedular payment tax rate for their activity
- apply for a tailored tax rate, or
- choose their own tax rate.
Certificates of exemption
Contractors who have a certificate of exemption pay all their tax at the end of the tax year rather than having it deducted from each payment.
Some contractors can apply for a certificate of exemption. These contractors pay all their tax at the end of the tax year instead of having the tax deducted from each schedular payment.
Certificates of exemption can only be used for schedular payments. They cannot be used for salary or wages.
Who can apply for a certificate of exemption?
New Zealand tax residents can apply for a certificate of exemption if they:
- are in business
- have a good record of filing tax returns and paying tax
- receive schedular payments from a payer other than a labour hire business under a labour hire arrangement.
New Zealand tax residents receiving schedular payments from a labour hire business under a labour hire arrangement need to apply for a 0% special tax rate instead.
Non-resident contractors receiving schedular payments from a labour hire business under a labour hire arrangement are eligible to apply for a certificate of exemption.
Renewing a certificate of exemption
We issue certificates of exemption for up to five years. We look at a contractor’s tax record when deciding how long to issue a certificate for.
Contractors need to renew their certificate of exemption every tax year. We send a renewal notice in January or February so the contractor has time to renew their certificate before the new tax year starts on 1 April.
Schedular payment payee responsibilities
If you receive schedular payments you need to:
- work out your tax rate and declare it to your payer, or
- apply for a tax rate exemption and show your certificate of exemption to the person who pays you.
Schedular payment payer responsibilities
You need to deduct tax from most schedular payments and file employment information.
You need to deduct tax from most schedular payments.
You deduct tax at the rate shown on the Tax rate notification for contractors – IR330C. If the contractor has not given you an IR330C, deduct tax at the no-notification rate for their activity.
Some contractors will have a tailored tax rate certificate. The contractor needs to complete an IR330C, showing their tailored tax rate. They also need to show you their tailored tax rate certificate.
Some other contractors are exempt from having tax deducted from their payments:
- resident contractors who have a certificate of exemption
- non-resident contractors who are automatically exempt or who have a certificate of exemption
- non-resident entertainers and sportspeople who we have approved an exemption for.
Tax schedular payments and file employment information
Get the contractor’s tax rate
If the contractor:
- has given you an IR330C form, use the tax rate shown
- has not given you an IR330C form, use the no-notification rate for their activity
- has a tailored tax rate certificate, use the tax rate shown.
- Calculate the tax due
- Multiply the contractor’s tax rate by their gross payment to find the tax to withhold.
Remember that you do not need to deduct student loan repayments, KiwiSaver deductions or ACC levies from schedular payments.
File the employment information
You do not need to tell us the contractor’s date of birth or contact details if you do not have them.
Filing on a payday basis
You need to file the employment information within 2 working days of the date of payment if filing electronically, or within 10 working days if filing by paper.
Filing twice a month
Schedular payments made between the:
- 1st and 15th of the month are treated as if they were made on the 15th of the month
- 16th and end of the month are treated as if they were made on the last day of the month.
- The date you file employment information about the schedular payment depends on whether you file your usual payday information electronically or by paper.
File information within 2 working days of:
- the 15th of the month
- the last day of the month
File by paper
File information within 10 working days of:
- the 15th of the month
- the last day of the month
Pay the deduction
Pay us the withholding tax you deducted from contractor payments. This is due when you pay any PAYE you deducted from employees’ wages.