Schedular payments are a specific type of contractor payment where the client (the payer) must deduct withholding tax before paying you — similar to how an employer deducts PAYE from an employee’s wages. Not all contractor income is subject to schedular withholding; it applies only to specific activities listed in Schedule 4 of the Income Tax Act.
If you work in a Schedule 4 activity (building, cleaning, entertainment, advertising and more), your client must deduct withholding tax at 20% (NZ residents) or 15% (non-residents) from your payment. You still file an IR3 and claim the withheld tax as a credit. Use the IR330C to notify your client of the correct rate or to apply for a 0% rate if you have a tax agent or meet the criteria.
Which Activities Are Subject to Schedular Payments?
Schedule 4 of the Income Tax Act lists the activities covered. The main ones include:
| Activity | Withholding rate |
|---|---|
| Labour-only building and construction | 20% |
| Cleaning services | 20% |
| Agricultural, horticultural, and viticultural work | 20% |
| Fishing activities | 20% |
| Modelling (promotional or photographic) | 20% |
| Entertainment — actors, musicians, comedians, DJs | 20% |
| Advertising (media and production services) | 20% |
| Surveying, mapping, and aerial photography | 20% |
| Forestry and logging | 20% |
| Non-resident contractors (most activities) | 15% |
If your activity is not on Schedule 4, you receive the full invoice amount and manage your own provisional tax.
How Schedular Withholding Works
Step 1: You give your client an IR330C form The IR330C (Tax rate notification for contractors) tells your client:
- Your IRD number
- The withholding rate to apply
- Whether you want a special rate
Your client is legally required to hold a current IR330C from you before making schedular payments.
Step 2: Client deducts withholding tax When your client pays your invoice, they deduct withholding tax from the payment and pay you the remainder. For example:
- Invoice: $5,000
- Withholding at 20%: $1,000
- Amount paid to you: $4,000
- Amount paid to IRD by client: $1,000
Step 3: Client files employer monthly schedule Your client reports the payments and withholding to IRD monthly on their employer schedule — just like they report PAYE for employees.
Step 4: You file an IR3 At year end, you file an IR3 and report the gross income ($5,000 in the example). The $1,000 withheld is credited against your tax liability. If your actual tax is less than what was withheld, you receive a refund.
Applying for a Different Withholding Rate
The standard 20% rate is not necessarily your correct tax rate — it is just a safe default. If your marginal rate is lower (or you have significant deductible expenses that reduce your net income), you may be overwitheld.
Applying for a Lower Rate
You can request a lower rate using the IR330C by selecting a special tax rate. IRD may approve rates as low as 0% if you:
- Have a tax agent and expect to meet your tax obligations
- Can demonstrate your effective tax rate is lower (e.g., due to significant expenses)
To apply for a special rate or 0% rate:
- Log in to myIR
- Go to Income tax → Withholding tax → Request special tax rate
- IRD assesses your request and issues a rate authority
- Give the rate authority to your client; they apply the approved rate
Requesting a 0% (Exemption) Rate
A 0% rate means the client pays you in full and you manage all your own tax through provisional tax. This is common for contractors who:
- Have a tax agent
- Have significant business expenses reducing their effective rate
- Prefer to manage their own cash flow
What If Your Client Doesn’t Deduct Withholding?
If you work in a Schedule 4 activity and your client fails to deduct withholding tax, the liability is primarily the client’s — they are the withholding agent and IRD can pursue them for the shortfall plus penalties. However, IRD may also recover tax from you in certain circumstances.
If you are unsure whether withholding applies, it is worth confirming with your client or asking IRD.
Schedular Payments vs Provisional Tax
| Schedular payments | Provisional tax | |
|---|---|---|
| Who withholds | Client (payer) | You (self-manage) |
| When paid to IRD | Monthly (via client’s employer schedule) | Three instalments per year |
| Applies to | Schedule 4 activities | All self-employed income when RIT > $5,000 |
| Form required | IR330C | None — calculated via IRD assessment |
| Over/under-payment | Settled in IR3 | Settled as terminal tax |
Many contractors in Schedule 4 activities apply for a 0% rate and manage their own provisional tax — this gives more control over cash flow.
Frequently Asked Questions
Do I still pay provisional tax if my income is subject to schedular withholding?
If your client withholds at the correct rate, the withholding may cover most of your tax liability. However, if you have other income or your withholding rate was too low, you may still owe provisional tax. IRD’s auto-assessment will show whether there is a shortfall.
What rate do I put on my IR330C?
If you are unsure, 20% is the default. If you have a tax agent and want to self-manage, apply for a 0% special rate via myIR. If your income is low and your effective tax rate is lower than 20%, calculate your expected rate and request that rate.
Can overseas contractors working in NZ use schedular payments?
Yes. Non-resident contractors working in NZ face a 15% withholding rate on schedular payments. Additional withholding rules may apply under double tax agreements between NZ and the contractor’s home country.
Does GST interact with schedular withholding?
Yes. If you are GST-registered, withholding tax is calculated on the GST-exclusive portion of your invoice. Your client pays you the GST component in full (no withholding on GST). Example: $5,000 + $750 GST = $5,750 invoice. Withholding at 20% is on $5,000 only = $1,000 withheld. You receive $4,000 + $750 = $4,750.