You need to follow the following steps when paying contractors:
- Check your accounting software includes the option to choose variable tax rates.
- Brief your payroll team as the contractor will need to be included on the employer monthly schedule (EMS).
- Download the new tax rate notification form (IR330C) and give it to your contractors to complete.
- Add the contractor to your EMS and complete as you would for any other person receiving schedular payments — ignore additional deductions, eg ACC, child support, KiwiSaver or student loan.
- If you employ contractors directly, you must record the agreement in a document.