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Understanding 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.
What's on this page
It's not only individuals who receive schedular payments. Those that can receive them include:
- self-employed contractors
- sole traders
- companies operating in the agricultural, horticultural and viticultural industries, and
- companies paid under labour hire arrangement in the industry.
The person or entity making the schedular payments is often referred to as the "payer".
Non-resident contractors and entertainers can also receive schedular payments.
Am I receiving schedular payments?
You’ll be receiving schedular payments if you’re doing work described on page 3 of the Tax rate notification for contractors IR330C.
You can find a more detailed description of the types of schedular payments outlined in Schedule 4 of the Income Tax Act 2007.
You must provide a completed IR330C to your payer. This will tell them the rate of tax to deduct from your payments.
The only time you don't have to provide an IR330C is if you have a certificate of exemption.
You may be able to claim the tax deducted from schedular payments made to your company in your own tax return as a shareholder-employee.
If your circumstances change you can choose a new tax rate by completing the IR330C and giving it to your payer.
You can only choose a new tax rate twice within a 12 month period with the same payer. If you need to change your rate more than twice in a 12 month period you will need the agreement of your payer.
Example of changing tax rates
On 3 March 2018, Caroline starts work as a building contractor for Small Builders Ltd. Payments from Small Builders to Caroline are subject to the schedular payment rules so Caroline initially provides an IR330C to Small Builders advising a tax rate of 15% is to apply.
On 4 April 2018, Caroline wishes to change her rate and provides Small Builders with a new IR330C advising a rate of 20% is to apply. Caroline does not require the consent of Small Builders to do this change as she has only chosen a rate once within the last 12 months. However, if Caroline wishes to make any further changes to her rate used for payments received by Small Builders until 3 March 2019, she will require the agreement of Small Builders.
On 5 August 2018, Caroline starts work for Large Builders Ltd. Caroline can choose a new tax rate to apply to these payments without the consent of Large Builders as she has not previously chosen a rate with Large Builders.
You can request to have tax deducted from the payments made to you if you're a contractor (including a company) and the payments you're receiving aren't already:
- salary or wages, or
- schedular payments.
To do this, the person paying you must agree to treat your payments as voluntary schedular payments and you must both agree to this in writing.
If an agreement is entered into, your payments will be treated as schedular payments and your payer will be required to deduct tax from payments made to you.
It's recommended the written agreement include:
- your name and the name of your payer
- an agreement that all payments made to you will be treated as voluntary schedular payments
- the period this applies to, and
- the signature of both you and your payer.
The agreement can be in the form of a memo, letter, formal contract or emails.
Generally, you must file an income tax return at the end of the tax year if you receive schedular payments.
You may be able to claim expenses against your income when you file your return. You'll need to attach a Financial statement summary (IR10) or a copy of your financial records that shows your total income and expenses.
Your payer isn't responsible for making these deductions from your schedular payments.
If your total income is over the annual repayment threshold, you'll need to make repayments towards your student loan. If you want to make payments towards your KiwiSaver, you'll need to arrange this with your scheme provider.
You'll receive an invoice for your ACC levies directly from ACC.
If you choose to use payday filing you don't need to provide contractors' details such as date of birth, start and end dates and contact details if you don't have them.
You can include your schedular payments information when you file your employment information on a payday basis, ie when you pay contractors, or on a twice-monthly basis. Schedular payments made:
- between the 1st and 15th of the month must be reported to us within two working days after the 15th of the month.
- from the 16th to the end of the month must be reported to us within two working days after the end of the month.
Any payments made within any half month must be included for that pay period.