TIPS ON PUTTING CONTRACTOR PAYMENTS INTO PAYROLL

There are generally five things to do when setting up a contractor in your payroll system.

1. Set the tax rate to Withholding Tax.
2. Add a non-taxable allowance for GST calculated at 15% of gross if the contractor is registered for GST.
3. Exempt from KiwiSaver.
4. Disable Holiday Pay.
5. Disable Sick Leave.

Once the above are done, payment to the contractor automatically flows through to the direct credit methods and the IRD returns.

If the contractor is registered for GST, then 15% of gross is added to all payments.