GST for Contractors NZ: Schedular Payments & Withholding Tax Explained (2026)

Contractors deal with two separate systems that interact at one specific point: withholding tax (deducted by whoever pays you, under a rate you set via an IR330C form) and GST (which you charge separately once registered). The single most important rule: withholding tax is calculated on your GST-exclusive invoice amount only — never on the GST component.

Calculate your GST separately with our GST Calculator, and see your full take-home picture with our PAYE Calculator.

This guide provides general information only, not tax advice. Confirm your specific withholding rate and GST obligations with Inland Revenue or an accountant.

Withholding Tax and GST Are Two Different Systems

Many new contractors conflate these, but they’re entirely separate:

	Withholding tax (schedular payments)	GST
What it is	Tax deducted from your payment by whoever hires you, at a rate you choose	A 15% tax you add to your invoice once registered
Who decides the rate	You, via an IR330C form	Fixed at 15%
Applies based on	Activity type (Schedule 4 of the Income Tax Act 2007)	Registration status ($60,000 threshold)
Who it’s paid to	Withheld by the payer, remitted to IRD on your behalf	Collected by you, remitted via your own GST return

The critical link between the two: if you’re GST-registered, withholding tax is calculated on your invoice’s GST-exclusive amount only — the payer withholds tax from your fee, then pays the full GST component to you separately, since that GST was never theirs to withhold from in the first place.

How the IR330C Form Works

The IR330C (“Tax rate notification for contractors“) is how you tell whoever pays you which withholding rate to apply. It goes to the payer, not to IRD — each payer you work for needs its own completed form.

Your situation	Withholding rate
You complete an IR330C, NZ resident	Your nominated rate, generally 10%–40% (minimum can vary by activity)
Standard rate for your listed activity (Schedule 4)	Typically 20% (e.g., most trade/construction labour) or 33%, depending on category
Non-resident contractor/company	Minimum 15%, or 20% if a non-resident company with no IR330C
No IR330C provided at all	45% “no-notification” rate — a real financial trap if you forget to file one

Why the 45% default matters so much: if you skip the IR330C entirely, whoever pays you is legally required to withhold at 45% — far above almost anyone’s actual tax liability. You’ll eventually get the excess back as a refund when you file your IR3, but in the meantime you’ve effectively given IRD an interest-free loan of your own cashflow. Filing the IR330C before your first payment, not after, avoids this entirely.

Worked Example — Withholding Tax on a GST-Registered Contractor’s Invoice

This is the single most commonly mishandled calculation in contractor payments — including by experienced accounts payable teams.

Example: Aroha is a GST-registered scaffolding subcontractor. She invoices a construction company $5,000 + $750 GST = $5,750 total. Her declared withholding rate (via IR330C) is 20%.

Step	Calculation	Amount
GST-exclusive base amount	—	$5,000.00
Withholding tax (20% of the GST-exclusive base only)	$5,000 × 20%	$1,000.00
GST (paid to Aroha in full, not withheld from)	$5,000 × 15%	$750.00
Net payment Aroha receives	$5,750 − $1,000	$4,750.00

The mistake that costs money: if the payer incorrectly applies the 20% withholding to the full $5,750 (GST-inclusive) instead of just the $5,000 base, they’d withhold $1,150 instead of $1,000 — over-withholding Aroha by $150 for no legal reason, based on a GST amount that was never subject to withholding in the first place.

Does Schedular Income Count Toward the $60,000 GST Threshold?

Yes. Schedular payment income counts toward your $60,000 GST registration threshold, measured on your income before withholding tax is deducted — the withholding tax is a separate deduction from your gross earnings and doesn’t reduce what counts toward the GST threshold test.

What Withholding Tax Doesn’t Include

Unlike standard PAYE on an employee, schedular payment withholding tax does not include deductions for KiwiSaver, student loan repayments, or the ACC earner’s levy. As a contractor, you’re responsible for arranging these yourself if applicable — KiwiSaver contributions require direct arrangement with a provider and ACC levies for the self-employed work differently from the employee earner’s levy.

The Contractor vs. Employee GST Trap

Being paid via schedular payments (with a WT tax code) doesn’t automatically make someone a genuine contractor for all legal purposes — the actual working relationship (control, integration into the business, ability to subcontract, tools provided) determines true employment status under NZ law, separate from the tax withholding mechanism used. Misclassifying an employee as a contractor can create real liability — including for unpaid holiday pay, KiwiSaver contributions, and PAYE that should have applied all along — regardless of what withholding arrangement was used on invoices in the meantime.

A specific GST-relevant nuance: if a “contractor” is later found to genuinely be an employee, any GST they charged and were paid on their invoices becomes a separate, additional complication to unwind — since employees cannot charge GST on their services at all.

Invoicing as a GST Registered Contractor

Once registered, your invoices must meet IRD’s value tiered taxable supply information requirements. For contractor invoices specifically, showing your gross fee, GST amount, and net total clearly helps the payer correctly apply withholding only to the GST-exclusive base — reducing the chance of the calculation error shown in the worked example above.

Frequently Asked Questions