Has withholding tax deductions got you confused and don’t know where to start? Then check out this quick guide by New Zealand’s premier accounting professionals Tauranga-based Tutbury & Associates.
“In some industries and professions, the IRD will require employers to deduct and pay to the IRD withholding tax on behalf of their independent contractors,” says Kelly Tutbury, Accountant and Managing Director at Tutbury & Associates Limited
The tax rate is usually around 15% or 20%. However, if the contractor does not supply an IRD number the rate can vary greatly from 25.5% to 48% depending on what industry the contractor is in.
On their part, the contractor must supply the employer an IRD form “IR330” which details their name, IRD number, WT tax code and rate of tax to be deducted.
If you are unsure of the what to put, check out Page 4 of the IR330 as it shows the rate for various industries.
The employer is also required to forward the WHT to the IRD each month as part of their employer return. The tax code that a contractor must use is “WT”.
“Using WT tax code means that the employer does not pay ACC levies on behalf of the contractor, the contractor pays these themself,” adds Kelly.
When a contractor, who has WT deducted, issues an invoice to the employer it will need to clearly show the WT to be deducted.
“It will also need to show the GST if the contractor is GST Registered. Both the GST and WT must be calculated in the gross amount,” advises Kelly.
As experts in all things tax and business accounting, Tutbury & Associates Limited can help you with your accounting needs and liaise directly with the Inland Revenue on your behalf.
About Tutbury & Associates Limited:
Tutbury & Associates Limited has worked hard to build their reputation for excellent customer service by working interactively with their clients and making sure that their clients get value for money. They are ideal for tradespeople, or anyone who wants to grow their business.
Contact Tutbury & Associates Limited:
Phone: 07 576 2194
Email: admin@tutburyassociates.co.nz
Address: 23 Myres Street Tauranga
Website: http://tutburyassociates.co.nz
Facebook: https://www.facebook.com/tutburyassociates/
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