myIR, payments and more
Schedular payments are payments made to people who are not employees, but who are employed under a contract for service (self-employed / independent contractors).
The tax code for schedular payments is 'WT' and the payments are taxed at the standard rate for the activity or a rate otherwise chosen by the contractor subject to minimums. If the contractor:
- is GST registered, they will supply you with a tax invoice and you should work out the tax on the GST exclusive amount
- isn't registered for GST work out the tax on the full amount
- does not supply a Tax rate notification for contractors (IR330C), the tax will be deducted at the no-notification rate of 45% unless they are a company that is a non-resident contractor where the rate is 20%.
You may need to treat these payments differently for example where:
- a certificate of exemption is provided - no tax is deducted by the payer
- a special tax rate certificate is provided - tax is deducted at the specified rate on the certificate
- the contractor is a company - no tax is deducted by the payer
unless the company is:
- working in the agricultural, horticultural and viticultural industries, or
- a non-resident entertainer, or
- a non-resident contractor, or
- receiving payments made to it under a labour hire arrangement from a labour hire business.
How you deal with other payments
You may make payments or give allowances to employees. Some are taxable and some aren't.
- Benefit allowances (taxable) examples include - accommodation, farm cottage or board.
- Reimbursing allowances (not taxable) examples include - mileage allowance, tools.
- Travel allowances (taxing depends on situation) examples - includes working outside normal hours of work, or outside normal place of work.
- Wages to school children (depends on the circumstances) - primary and secondary students only.
- Wages to spouse (taxable) - husband, wife, defacto or civil union partner.
- Lump sum payments (taxable) examples include - bonuses, retiring or redundancy payments.
- Holiday pay (taxable) examples include - holiday pay and pay for statutory holiday.
If you're a sole trader you can't pay yourself a wage - you take money from the business for personal use (these are called drawings).