New Contractor Withholding Tax Rules
If you are a contractor, or engage the services of a contractor, are you up to speed with the changes to the withholding tax rules?
From 1 April 2017, contractors can elect their own withholding tax rate. This means they no longer have to have tax deducted from their payments in line with their flat rate under the withholding tax rules (otherwise known as the Schedular Payment rules).
Schedular payments apply to contractors across a broad spectrum of industries; from cleaners, farmworkers and gardeners, to entertainers, sportspeople, labour-only builders and fishing boat workers. The withholding rate can be equally as broad; from 33% for examiners' fees, to 10.5% for personal service rehabilitation payments.
With the new rules however, contractors can choose to elect a lower withholding tax rate, down to a minimum of 10% (15% for non-resident contractors). This is done by the contractor electing a rate on their Tax Rate Notification for Contractors form (IR330C) which they provide to parties they invoice. The idea being that the lower rate will more accurately reflect the contractor's end of year marginal tax rate.
Posted on Mon, 1 May 2017
by Shawn O'Grady