Your Inland Revenue Department number (IRD number) keeps track of the tax you pay and helps make sure you pay the right amount or get the right entitlements.

If you are operating as a sole trader, you will need to supply us with your personal IRD number. 

If you are operating through a company, you will need to supply us with your company IRD number. Your company IRD number must also be registered at the Companies Office.

Information on, and applying for, an IRD number can be done online on the Inland Revenue website (search ‘IRD numbers’).

As a contractor, if you expect to earn over $60,000 a year you need to register for GST. You are then required to add GST to the price of your services and file GST returns with Inland Revenue. 

Registering for GST is a simple process which you can do online on the Inland Revenue website (search ‘Registering for GST’). When you register, you will also have to select whether you will file GST returns every 1, 2 or 6 months. This also determines how often you must make payments to Inland Revenue for any GST owing.

If you have registered for GST, you will need to let us know your GST number. We will then add GST to all payments to you, and the GST will also be reflected on the buyer created tax invoice we will provide you. A buyer created tax invoice is simply an invoice raised by us rather than you based on the approved hours you have worked, and your hourly or daily rate and is available via our timesheet and billing system, Invoxy.

You will need to pay the GST charged on your services and paid to you onto Inland Revenue depending on whatever basis you selected when you registered for GST. Many contractors transfer any GST collected into a separate bank account, that way it is set aside away from their day-to-day bank account and they know not to spend it.

You are also able to claim back any GST paid on any business expenses you have incurred. To do so you will need to ensure you keep the tax invoices as a record for 7 years.

Inland Revenue requires all labour-hire firms, such as us, to deduct withholding tax from payments made to contractors.  

Withholding tax must be deducted regardless of whether you are operating as a sole trader, through a company, or any other legal form.

To ensure we deduct the right amount of withholding tax when you start an assignment, we need you to complete an Inland Revenue ‘Tax rate notification for contractors’ form. This form lets us know what your IRD number is, and what amount of withholding tax should be withheld from any payments to you and paid onto Inland Revenue.

If you do not complete and return to us a ‘Tax rate notification for contractors’ form, we are required to deduct withholding tax at the no-notification rate of 45%.

Filling out the ‘Tax rate for contractors’ form

Section 1: Your details

Enter your full name and your IRD number.  Your IRD number should be your personal IRD number if you are operating as a sole trader, or your company IRD number if operating as a limited liability company.

Section 2: Your tax rate

In this section there are two questions you need to answer: your tax rate, and your schedular payment activity number.

1. Your tax rate 

This is the tax rate you select that we will use to work out how much withholding tax to deduct from payments made to you. The standard tax rate for a contractor is 20% and this rate is used by most contractors working through us. However, you may choose another withholding tax rate, but we strongly advise you to discuss this with an accountant first.

The minimum withholding tax rate you can choose is 10% unless you have applied for and obtained a ‘special tax rate’ from Inland Revenue.  If your tax rate is less than 10%, we will need you to provide us with a copy of the special tax rate certificate issued by Inland Revenue in order to apply that rate.

2. Your schedular activity payment number

Inland Revenue calls payments made to people who are contractors ‘schedular payments’. Your schedular payment activity number is 19, which as noted on page 3 of the ‘Tax rate for contractors’ form is a “Payment by a labour hire business to any person (e.g. individual, partnership, trust or company) performing work or services directly for a client of the labour hire business or a client of another person, under a labour hire arrangement.”

As a contractor, it is your responsibility to calculate and pay the right amount of tax to Inland Revenue each year, which is different to an employee where the employer deducts tax (PAYE) from every pay.

We strongly encourage our contractors to utilise the services of an accountant or company that specialises in tax advice for contractors to not only ensure you pay the correct amount of tax, but also take advantage of any tax benefits of being of being a contractor.

As a contractor, you will need to pay ACC levies. ACC levies are charged based on the type of work you do - higher risk jobs like forestry workers’ pay higher ACC levies than lower risk jobs like accountants - so it is important that you use the appropriate Business Industry Code (BIC) code from your tax return or GST registration. 

ACC then use this BIC code to assign you to a classification unit that best describes your type of work as a contractor.

As a contractor, it is extremely important that you protect yourself against being sued by a client for making a professional mistake or damaging their property or reputation. 

Professional indemnity and public liability insurances can provide you with cover in these circumstances.

• Professional indemnity insurance covers you in case a client you are working for makes a claim against you believing that they have suffered a loss from something you have or have not done or breached your professional duty to them. 
• Public liability insurance covers you in case a client you are working for makes a claim against you for damage to their property.

As part of our commitment to our clients, we require all contractors to have professional indemnity insurance and public liability insurance of at least $1 million for each policy in place for the duration of the contract assignment.

You are welcome to arrange your own insurance cover by talking to an insurance broker, or if you wish INSIDE can include you under our group policy at an additional cost. 

Further information on our group insurance policies can be obtained from your recruitment consultant.

As a contractor, you will need to arrange payment for all other deductions or repayments such as Student Loan repayments, KiwiSaver contributions, and any other fees.