LABOUR

Tax

Tax: Contractors and What I Need to Do

As most TTR’s and COE’s will have expired on 31 March, after 1 April anyone engaging a contractor (including another contractor) to undertake cultivation contract work needs to review their contractor file and likely get an updated IR330C or COE. You can find the IR330C form here.

The options available are:

• An updated COE (with an expiry date after 31 March) means that no schedular tax is required to be deducted or reported.
• An IR330C with an updated TTR (with an expiry date after 31 March) allows a rate of schedular tax to be deducted at the specified rate (0-9%).
• An IR330C with a contractor electing either the standard rate or elected rate (must be at least 10%). No annual re-election is required if the contractor has elected their rate.
• Where none of the three options above apply (i.e. no IR330C supplied) then schedular tax must be deducted at 45%.

IMPORTANT

The requirements for schedular tax, COE’s and TTR’s are the same even if the parties are related/associated entities.

When engaging a new contractor, or renewing their status, it’s essential that you confirm the person you’re dealing with is authorised to act, i.e. director of the entity or authorised by the owner.

More information on schedular tax reminders here.

An example of schedular tax deduction here.

Do You Pay Contractors? Make Sure You Have it Right

If you pay a contractor for work, you must deduct tax from their pay and pass that on to IRD unless they have a Certificate of Exemption. IRD have advised that they are focussing on the kiwifruit industry and that means they will be checking contractors and growers to make sure everyone is doing it right.

Growers must sight an original of the Certificate of Exemption and must ensure it is valid.  Certificates generally will be renewed annually. If a valid Certificate of Exemption is not sighted, then the grower must deduct withholding tax and pay that to the IRD via an Employer Monthly Schedule. NZKGI will be providing more information in coming newsletters and on our website and you can find out more at www.ird.govt.nz/contractors.

Are you Claiming the Right GST?

IRD have noticed that tax invoices from contractors are being incorrectly written up and growers are missing out.  Some invoices received from contractors are deducting withholding tax before GST is applied which is incorrect and if not picked up by the orchardist results in a short-claiming of the GST input.  Correct invoices should show the scheduler tax deduction being made after the GST is added.  An example of the correct way to do this can be found here.  more at www.ird.govt.nz/contractors.  Please note that if your Contractor holds a Certificate of Exemption you are not required to deduct withholding tax (see here for further information).

Payday filing is here

Payday filing became mandatory on 1 April, which means all employers must now be payday filing.

This means that you:

• Need to file employment information within:
  • Two working days if filing electronically, or
  • Ten working days/twice-monthly if filing on paper
• Can file in advance; don’t need to file nil returns
• No longer need to file an Employer Deductions form (IR345)
• Need to file additional details about new and departing employees.

Remember, payment due dates stay the same.

IRD’s latest webinar aims to answer all of your key questions about payday filing. You can watch this on demand here.

For more information on payday filing, visit IRD’s website.