New tax rules are coming in to include agencies and labour hire firms in the withholding tax regime, meaning withholding tax is deducted by the payer and sent to the Inland Revenue rather than the contractor sorting it out.
While this will capture some contractors working for agencies, we don't think it's a bad thing to be consistently putting money away for tax purposes. The major downside is that you're denied use of the money - say for mortgage offset accounts until the tax is actually due.
Make sure that if you are sent an IR330c that you fill this in (ask us if any queries). Failure to fill this in will mean tax is deducted at 45% instead of 10% (the lowest rate).
What is Withholding Tax?
Withholding tax is deducted at source and paid to the Inland Revenue. It's common for employees, interest and some schedular payments (payments to contractors in certain industries).
Does this mean I'll be taxed more?
No, you'll just have a larger credit at year end to offset your tax liability. If your average tax rate works out lower than the rate that withholding tax has been deducted, you will get a tax refund.
For more information on Schedular Payments for Contractors please download the IRD's useful factsheet or contact us
Other Tax Topics:
Staying on Top of GST - http://www.accountech.co.nz/blog/how-to-stay-on-top-of-gst
Getting Money into Kiwisaver before 30 June - http://www.accountech.co.nz/blog/get-free-money