How to Pay Tax as a Contractor in New Zealand: A Step-by-Step Guide

Starting out as an independent healthcare contractor can feel overwhelming — especially when it comes to tax. This step-by-step guide walks you through exactly what you need to do, from getting your IRD number to filing your first tax return.

Step 1: Get Your IRD Number

If you do not already have an IRD number, you need one before you can work as a contractor. You can apply online through myIR or at an AA centre with proof of identity.

If you already have an IRD number from previous employment, you use the same one. Important: From 2026, IRD will require contractors to use their individual IRD number — not a company or trust IRD number.

Step 2: Fill Out Your IR330C Form

Before you start working through TalentGrid, you need to complete an IR330C — Tax rate notification for contractors. This tells us what rate of tax to withhold from your payments.

How to Choose Your Rate

The right rate depends on your total expected income for the year:

If you have other income (PAYE job, investments, etc.), you should increase your rate to account for the combined income pushing you into a higher bracket.

If unsure, start with 20%. You can adjust it later, and any overpayment will be refunded after you file your tax return.

What Happens If You Don't Submit an IR330C?

We are legally required to deduct tax at 45% — the no-notification rate. This is significantly more than most contractors need to pay, so always submit your IR330C.

Step 3: Understand What Gets Deducted

When TalentGrid pays you for completed shifts, we deduct:

1. Income tax at your declared IR330C rate
2. TalentGrid platform fee (5%)

That is it. We do not deduct:

• ACC levies (your responsibility — see Step 5)
• Student loan repayments (managed through your tax return)
• KiwiSaver (not applicable to contractors)

Step 4: Set Up a Tax Savings Account

This is the most important practical step many new contractors skip. Open a separate bank account and transfer a portion of each payment into it for:

• Additional tax (if your withholding rate does not cover your full liability)
• ACC levies (invoiced annually, usually in July)
• GST (if registered)

A good rule of thumb: set aside an extra 5-10% on top of your withholding tax to cover ACC and any shortfall.

Step 5: Register with ACC

As a self-employed contractor, ACC cover is automatic — you do not need to opt in. However, you do need to be aware of how it works:

• ACC will invoice you after your first tax return is filed
• The earners' levy is currently $1.67 per $100 of liable income (2025/2026)
• Your work levy varies based on your occupation classification
• Invoices are typically sent in July each year

Example: ACC Levy Calculation

If your annual contractor earnings are $60,000:

• Earners' levy: $60,000 ÷ 100 × $1.67 = $1,002
• Work levy: Varies by role (healthcare roles are typically moderate risk)
• Working Safer levy: A small additional amount

Total ACC levy might be approximately $1,200 — $1,800 per year depending on your role.

Step 6: Check if You Need to Register for GST

You must register for GST if your contracting income will exceed $60,000 in any 12-month period.

• Only your self-employed/contracting income counts — not PAYE salary
• If registered, you charge 15% GST and file regular returns
• You can voluntarily register even below the threshold
• Being GST-registered lets you claim GST back on business expenses

For most healthcare contractors earning under $60,000 from contracting alone, GST registration is not required.

Step 7: Keep Records Throughout the Year

Good record-keeping makes tax time simple. Track:

• Income: TalentGrid provides earnings summaries in the app, and your income is reported to IRD automatically
• Expenses: Keep receipts for work-related costs (vehicle, uniforms, registrations, training)
• Mileage: If you drive between facilities, log your kilometres

You can use a simple spreadsheet, a notes app, or accounting software like Hnry, Solo, or Xero.

Step 8: File Your Tax Return (IR3)

After 31 March (end of the tax year), you need to file an IR3 individual tax return. Here is the process:

1. Log into myIR at myir.ird.govt.nz
2. Check pre-populated income — Your schedular payment income and withholding tax should already appear
3. Add any other income — PAYE employment, bank interest, rental income, etc.
4. Claim expenses — Enter your work-related deductions
5. Submit your return — IRD will calculate if you owe tax or are due a refund
6. Pay any tax owing or receive your refund

Deadline

• 7 July if you file yourself
• 31 March the following year if you use a tax agent

Step 9: Pay Any Tax Owing

If your withholding rate was too low, you will owe additional tax. You can:

• Pay online through myIR
• Set up a payment plan with IRD if needed
• If you owe more than $5,000, you may need to pay provisional tax the following year

Common Mistakes to Avoid

1. Not submitting an IR330C — You will be taxed at 45% instead of your actual rate
2. Setting your rate too low — This leads to a large tax bill at year end
3. Forgetting about ACC — The annual invoice can be a surprise if you have not budgeted for it
4. Not claiming expenses — You are legally entitled to deduct work-related costs
5. Mixing personal and business finances — Keep a separate account for tax savings
6. Missing the GST threshold — If your contracting income creeps over $60,000, you must register
7. Not filing a return — Even if all your tax was withheld correctly, you still need to file an IR3

Quick Reference Checklist

• Get your IRD number
• Complete and submit your IR330C form
• Open a separate tax savings account
• Set aside 5-10% extra for ACC and tax shortfalls
• Keep receipts for work-related expenses
• Check if you need to register for GST ($60,000+ threshold)
• File your IR3 tax return by 7 July (or 31 March with a tax agent)
• Budget for your annual ACC invoice (usually July)

This article is for general information only and does not constitute tax advice. Consult a qualified accountant or tax advisor for advice specific to your circumstances.