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Tax Reforms – effective 1 April 2017

1. NEW RULES AFFECTING CONTRACTORS AND BUSINESSES PAYING CONTRACTORS

If you pay self employed contractors
From 1 April 2017

• All new contractors must fill in an IR330C form instead of the previous IR330 form which is now only for employees who earn salary or wages.
• Current sub contractors can choose their tax rate, subject to a minimum, and to do this they will need to fill in an IR330C form.
• Labour Hire companies will be required to report all sub-contractor payments. If you hold an exemption certificate for a contractor then their income must be reported but the tax rate will be 0%.

If you receive self employed contractor income
From 1 April 2017

• If you are receiving schedular payments and you want to change your tax rate or if you start working for someone new, you’ll have to complete a Tax rate notification for contractors (IR330C) form instead of the Tax code declaration (IR330) form.
• If the tax rate for your activity doesn’t best fit your circumstances you will be able to choose your own tax rate, subject to minimums by completing an IR330C form and giving this to the person paying you.2

 

2. AMENDMENT TO HOW PENALTIES WILL BE CHARGED

The reforms will axe some late-payment penalties

Inland Revenue will scrap the 1 per cent ongoing monthly penalty for:

• income tax for the 2017-18 and later tax years
• gst debt from the period ending 31 March 2017
• Working for families overpayments for the 2017-18 year and later.

An initial 1 per cent penalty that applies to late payments and the 4 per cent penalty on debts that are more than a week old will remain. So will interest charges on overdue tax.