Schedular Payments: Contractor Withholding Tax in NZ

When you work as an independent contractor in certain industries, the business paying you may be required to deduct withholding tax before paying you. These payments are called schedular payments, and the withholding ensures contractors pay tax throughout the year rather than facing a large bill at year-end.

What Are Schedular Payments?

Schedular payments are payments made to contractors in specific industries or activities where IRD requires tax to be withheld at source. The payer deducts tax and passes it to IRD — similar to how PAYE works for employees.

Who Is Subject to Schedular Payments?

Withholding applies to contractors performing activities listed in Schedule 4 of the Income Tax Act, including:

• Company directors’ fees
• Labour-only building contractors
• Labour hire arrangements (paid by a labour-hire/recruitment business to work for one of its clients)
• Contractors in the agriculture, horticulture, and viticulture sectors
• Entertainers and performing artists
• Jockeys and apprentice jockeys
• Insurance commission agents
• Sales commission agents
• Freelance journalists and authors

Note: election day workers are not a schedular-payment category — they’re paid under the primary EDW tax code via ordinary PAYE, not schedular withholding.

Contractors providing a mix of labour and materials (where materials are a significant component) are generally not subject to schedular payment withholding.

Standard Withholding Rates

If you don’t give your payer a completed IR330C (or you don’t elect a valid rate), the no-notification rate of 45% applies. With a valid IR330C on file, the standard withholding rates by activity include:

These are minimum rates — you can choose a higher rate if you expect to owe more tax (it can’t be set below the activity’s minimum, generally 10% for temporary-visa/non-resident contractors or 15% otherwise).

Source: IR330C — Tax rate notification for contractors (activity rate table, page 3).

Applying for a Tailored Rate or Exemption

The IR330C itself is the form you fill in and give to your payer (not IRD) to nominate your chosen rate — it isn’t submitted “through myIR” to request a rate. If the standard rate would result in too much or too little tax being withheld, there are two separate mechanisms for getting a different rate, both applied for via myIR:

• Tailored Tax Rate (TTR): apply in myIR, or complete an IR23BS (Tailored tax code application). IRD assesses your expected income and expenses and issues a TTR certificate — you then enter that rate on the IR330C you give your payer. Useful when business expenses mean the standard rate over- or under-collects.
• Certificate of Exemption (COE): if you want 0% withheld, apply via myIR or the IR332 (Request for PAYE exemption on schedular payments) form. Note: if you’re a resident contractor paid by a labour hire business under a labour hire arrangement, you cannot use a COE for those payments — a 0% TTR via IR23BS is the option instead.

Source: IR330C — Tax rate notification for contractors (page 2, tailored rate and COE guidance).

Obligations for Payers

If you’re a business paying contractors for schedular activities, you must:

1. Deduct withholding tax at the correct rate before paying
2. Report schedular payments to IRD through your employment information filing
3. Issue a summary of payments and tax deducted to the contractor (available through myIR)
4. Pay the withheld tax to IRD by the due dates

Obligations for Contractors

As a contractor receiving schedular payments, you should:

• Complete and return a valid IR330C (with your IRD number and signed declaration) to every payer to avoid the 45% no-notification rate
• File an IR3 tax return at the end of each tax year
• Claim business expenses against your gross income in your return
• Pay any additional tax owing as terminal tax, or receive a refund if too much was withheld

Schedular Payments vs PAYE

It’s important to distinguish between employees and contractors. If the working arrangement is really an employment relationship, the payer should be operating PAYE — not schedular payments. IRD considers factors like control, integration, and the ability to subcontract when determining the true nature of a relationship.

Use the Schedular Payments Calculator to compare the standard, elected, and no-notification rates on a payment, exclude GST where applicable, and estimate the annual income-tax square-up.

Record Keeping

Both payers and contractors must keep records of all schedular payments for at least seven years, including:

• Gross amounts paid
• Tax withheld
• IRD numbers
• Dates of payment

Sources

• Schedular payments — IRD
• IR330C tax rate notification — IRD
• IR330C form (activity rate table, no-notification rate, TTR/COE guidance) — IRD PDF