Payroll: Tax on schedular payments
Tax on schedular payments (formerly withholding payments)
What schedular payments are
Schedular payments are made to contractors who perform activities outlined in Schedule 4 of the Income Tax Act 2007. These payments are subject to tax at a flat rate even if the contractor is registered for GST. Find a list of the Schedule 4 activities on the back of the IR330. Go to "Forms and guides".
Who is affected by tax on schedular payments
Those affected by tax on schedular payments are:
- self-employed contractors, and
- companies operating in the horticultural and viticultural industries.
These contractors must use a "WT" tax code. However, they may be eligible for a certificate of exemption or a special tax rate. Find out how to apply for a certificate of exemption. You can apply for a special tax code online - go to "Forms and guides".
Horticulture and viticulture industries
From 1 April 2010 schedular payments must be deducted from any payment made to any type of contractor (individual, trust, partnership or company) providing work or services for the supply of labour, or mainly for labour on land in connection with:
- fruit crops
- orchards
- vegetables, or;
- vineyards.
This does not include work or services by a:
- post-harvest facility
- management entity under a formal management agreement under which the entity is responsible for payment for the work or services provided.
| Example | |
|---|---|
| Company A provides services under a contract which involves a high capital outlay (ie large use of machinery). As this contract is deemed to have a high capital outlay and low labour input, payments made to Company A in this circumstance will not have tax on schedular payments deducted. However, if the use of the machinery was incidental, with the supply of labour making up most of the contract, then payments made to Company A for this contract would have tax on schedular payments deducted. | |
Employer responsibilities
You must deduct tax at the rates specified on the back of the IR330 from payments to the above workers, unless they provide you with a valid certificate of exemption (IR331) or a certificate that authorises tax to be deducted at a lower rate.
You must show a "WT" tax code when you are completing the employer monthly schedule (IR348) for a schedular payment recipient.
Schedular payments made to contractors in the horticultural and viticultural industries will need to be recorded on the payer's employer monthly schedule, whether they deduct tax or not. The requirement to notify us of the details of the payments only relates to payments made for the specific work mentioned above.
Deductions that are the contractor's responsibility
These deductions are the contractor's responsibility:
- ACC earners' levy
- student loan repayments.
An employer is not responsible for making these deductions from schedular payments.
Date published: 30 Mar 2010
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