Budget 2016 has introduced changes for contractors, and payers of contractors. From 1 April 2017 Withholding Tax must be deducted from all payments made to contractors working under a Labour Hire Arrangement for a Labour Hire business. In this presentation, Margaret Holmes, Director of Engine Room, summarises key changes to taxation for contractors.

1. New Withholding Tax Rules
for Labour Hire Businesses
7TH APRIL 2017

2. CHANGES TO TAXATION FOR CONTRACTORS
- WHAT YOU NEED TO KNOW
• Budget 2016 has introduced changes for contractors, and payers
of contractors.
• From 1 April 2017 Withholding Tax must be deducted from all
payments made to contractors working under a Labour Hire
Arrangement for a Labour Hire business.
• In this presentation, Margaret Holmes, Director of Engine Room,
summarises key changes to taxation for contractors.

3. MARGARET HOLMES
Director
Engine Room
Margaret is a Chartered Accountant with
over 25 years’ of experience in both corporate
accounting and public practice. She holds her
Certificate of Public Practice and is a member
of the Institute of Directors.
With her passion for information technology
(her inner geek), Margaret likes to explore new
technology options and drives the development
of technology for both the Engine Room
and clients.

4. NEW SCHEDULAR PAYMENT RULES
• Effective as of 1st of April
• Standard rate – 20%
• No-notification rate – 45%
• You can choose a rate – not lower than 10%

5. SPECIAL TAX RATES (STR)
• STR Application - IR23BS
• Not a certificate of exemption
• May be 0%
• Must pay provisional tax and GST on due dates

6. SPECIAL TAX RATES (STR)
• If you choose to deduct less than 10 percent, you have to have a special tax
rate.
• You have to apply for a tax rate, and that can be zero, but you’ll only get it
if you can prove that historically you have paid your taxes on time.
• You can apply for this rate via form IR23BS (not the standard certificate
of exemption application form).
• In order to get a zero tax, you have to have a history of your provisional tax
and your GST payments being current, and you have to continue
to do that with your GST.

7. LABOUR HIRE ARRANGEMENTS
• A labour hire arrangement is when a person is paid by a labour hire
business to perform work or services directly for clients of the business,
or another person instead of performing the work directly yourselves
(contractors). The client will pay the labour hire business who will pay
the worker.
• What the rules change means is that labour hire businesses have now come
in under the same category as Withholding Tax for labour only contractors
in the building sector and the horticultural sector.

8. EMPLOYEE OR CONTRACTOR
• There’s always a risk if you haven’t got an intermediary (like RWA
Technology People) - even on a short-term contract - that you’re deemed
to be an employee, which leads to a whole lot of other issues.
• As a contractor directly engaged by a company you won’t get Withholding
Tax deducted, but here’s the difficulty: if you’re a contractor to company XYZ
directly yet you’re there most of your time, the rules basically say if you
work on one site or for one customer using their facilities and their
equipment, you’re an employee.
• If there’s an opportunity for you to contract direct, please think carefully
about whether you’re going to be considered a contractor or an employee.

9. EXAMPLES OF WHAT YOU CAN CLAIM
AGAINST YOUR INCOME
• Use of home expenses (home office)
• Vehicle expenses relating to work travel
including your office and the site of your contract role
• Communication expenses including mobile phone and internet
• Insurance
• Tools, equipment and office equipment under $500

10. MARGARET HOLMES
Director of Engine Room
E-mail: margaret@engineroomca.co.nz
Call: 09 238 5939
www.engineroomca.co.nz
QUESTIONS?
Taxation
RWA TECHNOLOGY PEOPLE
Specialists in Recruitment Excellence
E-mail: info@rwa.co.nz
Call: 09 579 7929
www.rwa.co.nz
IT Contracting