Contractor vs Employee Tax Comparison
Enter the same gross income to compare what you'd take home as an employee versus an independent contractor.
Key Differences
| Factor | Employee | Contractor |
|---|---|---|
| Tax collection | PAYE deducted by employer | Provisional tax in 3 instalments |
| ACC | Earner's levy deducted from pay | Earner's levy + possible work levy invoiced by ACC |
| KiwiSaver | Employee + employer 3% match | Voluntary, no employer match |
| GST | N/A | Must register if turnover > $60k |
| Expenses | Limited deductions | Business expenses deductible |
| Tax return | PTS (auto-calculated) | IR3 return required |
Frequently asked questions
Do contractors pay more tax than employees?
Not necessarily. Contractors can deduct business expenses which reduces taxable income. However, contractors miss out on employer KiwiSaver contributions (3%) and must manage their own provisional tax, ACC, and GST.
Do contractors need to register for GST?
If your annual turnover exceeds $60,000, you must register for GST. Below that threshold, registration is voluntary. When registered, you charge 15% GST to clients and pay it to IRD, but can also claim GST back on business expenses.
How does ACC work for contractors?
Self-employed contractors pay the ACC earner's levy (1.67% for 2025-26) on their net profit, similar to employees. ACC invoices you directly based on your tax return. Work levies may also apply depending on your industry.
Can contractors contribute to KiwiSaver?
Yes, but it's voluntary. You choose how much to contribute and there's no employer match. You can make voluntary contributions directly to your KiwiSaver provider and still receive the government contribution (up to $521.43/year).
Related Calculators
This comparison is simplified for illustration. Actual results depend on your specific circumstances. Sources: IRD. Last updated March 2026.