IR330C vs IR330: understanding contractor tax forms in NZ

If you're contracting in New Zealand, you've almost certainly been handed an IR330C or IR330 and asked to fill it in before you can invoice. Confusing the two (or skipping them) creates real tax problems down the line.

The short version: IR330 is for employees, IR330C is for contractors. But the details matter.

The fundamental difference

IR330 is the Tax Code Declaration form used by employees. Your employer uses it to determine which tax code to apply to your PAYE: M, ME, SB, S, SH, ST, or SL. If you're starting a new job, your employer gives you an IR330.

IR330C is the Tax Rate Notification for Contractors. It's used when a business engages you as an independent contractor and is required to withhold schedular payments (withholding tax) from what they pay you.

The key distinction: employees get an IR330; independent contractors receiving schedular payments get an IR330C.

What are schedular payments?

Schedular payments are payments made to contractors for specific types of work listed in Schedule 4 of the Income Tax Act 2007. If your work is on that list, the person paying you is legally required to withhold tax and pay it to IRD on your behalf.

Types of work that attract schedular payments include: - Labour-only building work - Agricultural, horticultural, and related services - Road transport - Entertainment work (film, TV, music, events) - Professional services (accounting, IT, consulting, engineering, legal, medical) - Security services - Cleaning services

If you're a freelance developer, consultant, designer, or similar, you're almost certainly covered.

IR330C: what rates do you select?

The IR330C asks you to select a withholding tax rate. Your options are:

Standard rate (20%): the default for most contractors. IRD withholds 20% of your gross contract payment.

Reduced rate (e.g. 10%, 15%): you can apply to IRD for a lower rate if the standard 20% will create a significant overpayment based on your expected annual income. Apply through myIR before the contract starts, not partway through.

Zero rate (0%): available for non-resident contractors or specific exemption categories.

No withholding tax: only if you hold a valid certificate of exemption from IRD, which requires a separate application.

How the withholding tax flows

Here's the process end-to-end:

1. You complete the IR330C and give it to the business engaging you 2. They pay you, withholding the rate you specified 3. They pay the withheld amount directly to IRD on your behalf 4. At the end of the tax year, you file your IR3 (individual return). The withheld amounts are credited against your total tax liability 5. If more was withheld than you owe, you get a refund. If less was withheld, you pay the shortfall

Withholding tax isn't a final tax. It's a prepayment toward your annual liability. The actual tax is settled at IR3 time.

What goes on your invoice

When you're subject to schedular payments, your invoice should show:

- Your gross fee (the full amount for the work) - The withholding tax deducted (as a negative line) - The net amount payable by the client

Example:

Consulting services: $1,000.00 Withholding Tax 20%: -$200.00 Net payable: $800.00

The client pays you $800 and pays $200 to IRD separately.

PayWren handles this automatically: set the withholding tax rate on the client record and every invoice shows the gross amount, WT deduction, and net payable correctly.

What if no IR330C is provided?

If you start work without providing an IR330C, the payer must withhold tax at the non-notification rate, currently 45% for resident contractors. This is deliberately punitive: IRD's way of enforcing compliance with the form requirement.

Always provide your IR330C before your first invoice. If you've already invoiced without one, provide it immediately and ask the payer to apply the correct rate going forward. The overpaid tax will be refunded at year-end through your IR3, but it's a significant cash flow hit in the meantime.

IR330C checklist

Before starting any contract engagement:

• Confirm your work falls under Schedule 4 (professional services almost always do)
• Determine the right withholding tax rate: apply for a reduced rate through myIR if the standard 20% will cause significant overpayment
• Complete and sign the IR330C
• Provide it to the payer before your first invoice
• Show WT separately on your invoices: gross amount, WT deduction as a negative line, net payable
• At year end, file your IR3 and claim credit for all withheld amounts