Becoming a contractor in NZ: tax, WT code, GST and ACC

When you become a contractor, PAYE stops. If your work is on the Schedule 4 list, your payer takes withholding tax under the WT code at a rate you choose on an IR330C: at least 10%, or 15% if you are a non-resident on a temporary visa. Give no IR330C and the rate is 45%. Either way it is a prepayment, not your final tax: you file an IR3 after 31 March, ACC invoices you separately, and nobody pays your holidays or KiwiSaver but you.

How schedular payments work

Inland Revenue describes schedular payments as "payments made to contractors who do certain kinds of work, mainly involving the supply of labour". The activities are listed in Schedule 4 of the Income Tax Act 2007 (IRD: Schedular payments). Your payer withholds tax from each invoice and pays it to IRD, but the money is not salary or wages, so none of the employee machinery applies.

Three practical points:

• The tax code is always WT. It replaces M, ME or a secondary code for this income.
• You fill in a Tax rate notification for contractors (IR330C) and give it to the payer. You need one for each source of contracting income, so two clients means two forms.
• The payer keeps the form for 7 years. It does not go to Inland Revenue.

On WT there is no ACC earners' levy, no student loan deduction and no KiwiSaver taken from your pay (IR340, April 2026). Each of those becomes your job to manage.

Which tax rate your payer uses

The rate on your invoices depends on what you put on the IR330C. These are the 2026/27 rules from the IR330C and IRD's page on declaring your rate (updated 3 September 2026).

A common misunderstanding is that forgetting to pick a rate means 45%. It does not: with a completed IR330C and no rate chosen, the activity's standard rate applies. The 45% no-notification rate is for when there is no form at all.

If even 10% is too much, for example because you have large business expenses or losses carried forward, you can apply for a tailored tax rate in myIR or on the IR23BS (see our guide to tailored tax codes). A certificate of exemption (IR332) can stop deductions altogether, but not for resident contractors paid under a labour hire arrangement, who may get a 0% tailored tax rate instead. IRD's page on tailored tax rates says you reapply every tax year.

Standard rates for common Schedule 4 activities

These are the standard rates used when you hand in an IR330C without choosing your own rate. They come from the IR330C (January 2024 edition, still the current form) and match the IR340 tables for April 2026, so they apply for 2026/27. The no-notification rate for each is 45%.

Not every contractor is on this list. IT consultancy, for example, is not a Schedule 4 activity. On our reading of the list, an IT contractor only has tax withheld if paid by a labour hire business under a labour hire arrangement (20%) or if they and the payer agree in writing to voluntary schedular payments (20%). Otherwise nothing is withheld and all the tax is paid through your return and provisional tax.

Worked example: $80,000 as an employee and as a contractor

Take the same $80,000 for the 2026/27 year, first as a salary on tax code M with KiwiSaver at 3.5%, then as contract income with no business expenses, so the comparison stays simple. Figures for the employee come from this site's PAYE engine, which follows IRD's payroll specification.

The employee also gets at least 4 weeks' paid annual leave inside that $80,000. Four weeks of an $80,000 salary is $6,153.85.

Now the contractor. Income tax on $80,000 for 2026/27 is $16,277.50 at the standard bands (10.5% to $15,600, 17.5% to $53,500, 30% to $78,100, 33% above). What you set aside depends on the WT rate you choose; the difference is settled when you file your IR3.

At 10%, the $8,277.50 left to pay is residual income tax over $5,000, so provisional tax would start the next year (see below). At 20% the withholding almost exactly covers the tax, which is why 20% is a sensible starting point at this income with no expenses.

On top of income tax, ACC invoices you. The earners' levy part alone, at $1.75 per $100, is $1,400.00 on $80,000 of liable earnings, before the work levy and the Working Safer levy. And there is no employer KiwiSaver ($1,960.00 net in the employee case) and no paid leave. To end up level with the employee, the contractor needs to charge more than $80,000 for the same year's work, or work all 52 weeks. You can check the employee side for any salary on the PAYE calculator.

GST: register at $60,000

You must register for GST if your turnover from a taxable activity "was at least $60,000 in the last 12 months, or you expect it will be at least $60,000 in the next 12 months". The second half of that test catches people out: if you sign a contract on day one that will pay $80,000 over the year, you expect to cross $60,000, so you need to register now, not after you have earned it.

Below $60,000 you can register voluntarily. Once registered, you add GST to your invoices and return it to IRD; it is not part of your income. Make sure your contract rate is clear about whether it includes or excludes GST.

Provisional tax and your first year

Provisional tax is not a separate tax. It is your income tax paid in instalments during the year. IRD says: "You'll have to pay provisional tax if you had to pay more than $5,000 tax at the end of the year from your last return" (Provisional tax, updated 19 November 2025).

That $5,000 is your residual income tax: tax on your taxable income less PAYE and tax credits other than Working for Families. Withholding tax on schedular payments counts as a credit, so a contractor whose chosen WT rate roughly covers their tax can stay under $5,000 and never enter provisional tax. That is the real choice behind the rate on your IR330C.

Under the standard option, with a 31 March balance date, the instalments are due on 28 August, 15 January and 7 May. The amount is last year's residual income tax plus 5%, or the year before's plus 10% (IR289, April 2025). Other options are estimation, ratio and AIM.

In your first year there is usually no provisional tax, but IRD warns: "Your first year in business is not tax free." The whole first year's tax can fall due at once, at about the same time as the first provisional tax instalments for year two. Two practical defences:

• Choose a WT rate that covers your tax, so little is left over.
• Where nothing is withheld, put money aside each month and consider voluntary payments, which may earn an early payment discount.

ACC levies arrive as a separate invoice

As an employee, the ACC earners' levy came out of every pay through PAYE. On schedular payments it does not. The IR330C says: "If you receive schedular payments you will receive an invoice for your ACC levies directly from ACC."

The invoice is worked out from the income you file in your IR3 and covers three levies: a work levy (the rate depends on the classification unit for your industry), the earners' levy, and the Working Safer levy. For 2026/27 the earners' levy is $1.75 per $100 of liable earnings, including GST, on earnings up to $156,641, according to IRD's 2026/27 payroll specification.

If you work full time (over 30 hours a week on average) but earn less than $50,501 in 2026/27, ACC charges you as if you earned that minimum. Part time means 30 hours or less on average. Set money aside for the invoice as you earn: withholding tax does not cover it.

What you give up: holiday pay, sick leave and KiwiSaver

A contractor gets none of the minimum employment rights an employee has. That means:

• No paid annual holidays or sick leave. An employee gets at least 4 weeks' annual leave, or 8% holiday pay as a casual.
• No compulsory employer KiwiSaver. Since 1 April 2026 employers must contribute at least 3.5% of gross pay for employees (IR340). Nothing is deducted for you, and nobody adds to it.
• No automatic tax and ACC. You file an IR3 at the end of the year, and the IR330C says you will "generally be required to complete an income tax return".

business.govt.nz tells contractors to "factor in covering KiwiSaver, sick leave, holiday pay themselves". A workable rule of thumb (ours, not IRD's): your rate should cover holiday pay, KiwiSaver, ACC, sick days, unbilled time and any income tax your WT rate does not.

Check you really are a contractor. Employment New Zealand warns that a worker wrongly treated as a contractor "may miss out on minimum entitlements such as annual holidays and sick leave" (Employee or contractor).

This guide is general information, not tax advice. If you have expenses, more than one client or a company structure, an accountant can set your WT rate and provisional tax option properly.

Questions people ask

What tax rate should I choose on my IR330C?

Any rate of at least 10% (15% for non-residents on a temporary visa). Pick a rate that roughly covers your income tax for the 2026/27 year after expenses. On $80,000 with no expenses, 20% leaves only $277.50 to pay at year end; 10% leaves $8,277.50 and pushes you into provisional tax.

What happens if I don't give my payer an IR330C?

Your payer must withhold at the 45% no-notification rate (20% for non-resident contractor companies). If you give the form but don't choose a rate, the standard rate for your activity applies instead, usually 15% to 33%.

Does withholding tax cover my ACC levies?

No. Payers do not deduct the ACC earners' levy from schedular payments. ACC invoices you directly, based on the income in your IR3, for the work levy, earners' levy and Working Safer levy.

When do I have to register for GST?

When your turnover was at least $60,000 in the last 12 months, or you expect it to be at least $60,000 in the next 12 months. You can register voluntarily below that.

Do I have to pay provisional tax in my first year contracting?

Usually not, because it depends on the previous year's residual income tax being over $5,000. But the first year's tax is still due after you file, and provisional tax for year two can start at about the same time.