The Taxation (Business Tax, Exchange of Information, and Remedial Matters) Bill proposes changes to the schedular payment rules. The proposals are still before Parliament, but if enacted this may change some employers' obligations for contractors who will be paid on or after 1 April 2017.
We are providing this information early in order to give employers' as much time as possible to prepare for the upcoming changes. It is expected the Bill will pass in March 2017.
Tax rate notification form
Contractors will need to complete a new tax rate notification form instead of the Tax code declaration (IR330) form from 1 April 2017. They'll only need to complete the new form if they want to change their tax rate, or they start being paid by someone new.
Once the changes are enacted, the new form will be available on our website.
Variable tax rates
The new rules would allow contractors, subject to the schedular payment rules, to choose their own tax rate that best fits their actual tax liability, subject to certain minimums and limitations.
If your client uses payroll software, their software should already be able to accept variable tax rates. If they're unsure, they should check with their software provider.
Note: Variable tax rates will not apply to non-resident entertainers and sports people visiting New Zealand.
Labour hire payments
Contractors hired by labour hire businesses to work for their clients under a labour hire arrangement will be included in the schedular payment rules. Labour hire businesses include recruitment and on-hire companies.
If your client is a labour hire business, they will need to deduct tax when they pay these contractors, and include details of the payment on their employer monthly schedule.
Find out more about the proposed changes