Schedular payments and the IR330C

If you contract through a recruitment agency or labour-hire firm, your tax life is a hybrid: you're self-employed, but tax comes out of your invoices before you're paid, a bit like PAYE. These are schedular payments, the rate is set by a form called the IR330C, and getting that one form right shapes your whole year. This guide covers who's in the system, how to choose the rate, and what changes downstream.

Who's in the schedular system

Schedular payments cover a defined list of activities, and the one that catches most professional contractors is the labour-hire arrangement: if a recruitment or labour-hire business pays you to work for its clients (the classic agency-placed IT contractor), those payments are schedular by law. The list also includes commission salespeople, company directors' fees, and various trades and freelance activities. Contractors invoicing their own clients directly are generally outside it, which is why two contractors doing identical work can have completely different tax plumbing.

The IR330C: choosing your rate

Before your first payment, the payer asks for an IR330C, on which you declare your withholding rate. The rules around the choice:

• You choose, within limits.Residents can't go below 10% without an approved tailored rate; non-residents on temporary work visas have a 15% floor.
• Silence has defaults. Hand over an IR330C without picking a rate in a labour-hire arrangement and the standard 20% applies. Provide no IR330C at all and the payer must deduct the no-notification rate: 45%. That rate exists to make not filling in the form the worst option, and it succeeds.
• Tailored rates exist for poor fits. If your real position justifies it (large deductions, losses, tax already covered elsewhere), you can apply to Inland Revenue for a tailored rate, including 0% for labour-hire contractors, and hand the certificate to your payer.

Picking the number honestly

The right rate is the one that tracks your real effective tax rate. Choose too low and you're quietly building a year-end bill (the exact trap withholding was meant to prevent); choose too high and you've made an interest-free loan until your refund. A contractor expecting $120,000 of profit has an effective rate around 25%, so 20% leaves a gap to cover and 25% is closer to reality. The good news: you can give your payer an updated IR330C when your situation changes.

What withholding doesn't change

• GST is separate.If you're registered, you still charge 15% on top of your invoices, and the withholding applies to the income, not the GST. The $60,000 registration threshold counts your turnover the same as anyone's.
• You still file the IR3, still claim expenses, and still calculate the real tax on your profit. The withheld amounts come off that bill as credits, and the difference becomes a payment or a refund.
• ACC still invoices you as a self-employed earner; withholding covers income tax only.

The provisional tax interaction

Here's the pleasant surprise: provisional tax triggers on residual income tax over $5,000, and residual income tax is what's left aftercredits like schedular withholding. A contractor whose IR330C rate roughly matches their effective rate can earn well into six figures without ever becoming a provisional taxpayer, because the withholding keeps the year-end residual under the line. That's the reward for setting the rate honestly: the double-hit year largely can't happen to you.

How Coffer helps

Coffer's job for a schedular contractor is the remainder: tracking the GST and ACC that withholding doesn't touch, and showing what's genuinely yours once every deduction is accounted for. Invoices, payment records, and the seven-year trail work the same as for any contractor; the tax already withheld simply means more of each payment is actually yours to spend.