Schedular payments are payments made to contractors who perform certain activities. Tax is deducted from these payments but they’re different to salary or wage payments.
Who gets schedular payments?
Contractors doing certain activities or services, or contractors working in certain industries.
A contractor can be an individual, partnership, trust or company. Contractors can be New Zealand tax residents or tax non-residents. Some examples of contractors getting schedular payments are:
- an IT project manager contracted by a recruitment agency (labour hire business) to one of the agency's clients
- a builder contracted to a labour hire business
- a freelance journalist paid to write a magazine article
- an insurance agent or salesperson paid commission
- a company director paid directors’ fees
- a commercial cleaning partnership paid by a local business to clean their offices
- companies contracted to supply labour to the agricultural, horticultural or viticultural sectors
- non-resident contractors, entertainers and sportspeople.
The Tax rate notification for contractors - IR330C - lists the activities which schedular payments can be paid for.
Choosing to get schedular payments
People can choose to have their income treated as schedular payments in some circumstances. These are called voluntary schedular payments. Voluntary schedular payments cannot be paid for income from salary or wages. A payer needs to agree in writing to make schedular payments. The agreement could include:
- name of the payee and payer
- a statement that the payments will be treated as voluntary schedular payments
- the period it applies to
- signature of the payee payer.
Tax rates for schedular payments
- use the standard schedular payment tax rate for their activity
- apply for a tailored tax rate, or
- choose their own tax rate.
Contractors that are companies and meet certain criteria may also transfer the tax deducted from schedular payments to their shareholder-employee(s).
Certificates of exemption
Contractors who have a certificate of exemption pay all their tax at the end of the tax year rather than having it deducted from each payment.
Schedular payment payee responsibilities
If you receive schedular payments you need to:
- work out your tax rate and declare it to your payer, or
- apply for a tax rate exemption and show your certificate of exemption to the person who pays you.
Schedular payment payer responsibilities
You need to deduct tax from most schedular payments and file employment information.