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Contractor tax calculator: is your withholding rate enough?
Contractors choose their own withholding rate, from 10 % upwards. Too low, and a bill arrives after 31 March; too high, and your cash waits for a refund.
Reviewed by Radif Partners
Tax still to pay after withholding
$1,415
$18,000 withheld at 20 % · rate that would cover it: about 22 %
| Contract income | $90,000 |
| Business expenses | − $5,000 |
| Taxable profit | $85,000 |
| Income tax on the profit | $17,928 |
| ACC earners’ levy (invoiced by ACC; work levy extra) | $1,488 |
| Tax withheld at 20 % | − $18,000 |
| Still to pay | $1,415 |
Inland Revenue rates for 2026-27: 10.5 % to 39 %, ACC 1.75 % up to $156,641, KiwiSaver default 3.5 %. PAYE is annualised; Inland Revenue’s tables can differ by a few cents per pay. Estimates only, see the methodology.
A contractor paid schedular payments has tax withheld by the client at a rate the contractor chooses on the IR330C form, at least 10 %, or 15 % for someone on a temporary visa. That withholding is only a prepayment. The real tax is worked out after the year on the profit: fees minus business expenses, taxed at the same 10.5 % to 39 % scale as salaries. On $90,000 of fees and $8,000 of expenses, the profit is $82,000, income tax $16,938 and the ACC earners’ levy about $1,435. A 20 % withholding rate takes $18,000 during the year, so $373 remains to pay. A rate of about 21 % would have covered it. The calculator compares the two for your fees, expenses and chosen rate. It treats the contract as your only income; if you also have a salary, the contract profit sits on top of it and is taxed at your marginal rate.
Withholding at 20 % against the real bill, expenses at 10 % of fees
| Fees | Profit | Tax and ACC due | Withheld at 20 % | Balance to pay | Rate that covers it |
|---|---|---|---|---|---|
| $40,000 | $36,000 | $5,838 | $8,000 | -$2,162 | 15 % |
| $60,000 | $54,000 | $9,366 | $12,000 | -$2,635 | 16 % |
| $90,000 | $81,000 | $18,025 | $18,000 | $25 | 21 % |
| $120,000 | $108,000 | $27,408 | $24,000 | $3,408 | 23 % |
| $160,000 | $144,000 | $39,918 | $32,000 | $7,918 | 25 % |
A positive balance is tax to pay after 31 March; a negative one is a refund. Above about $60,000 of fees, 20 % is rarely enough, and residual income tax above $5,000 also makes you liable for provisional tax the following year.
GST, provisional tax and records
GST registration becomes compulsory once your turnover exceeds $60,000 in 12 months; GST is then added to your invoices and returned to Inland Revenue, and is not part of your income. Provisional tax spreads next year’s expected bill over instalments. Keep invoices and receipts for seven years. The self-employed tax guide explains provisional tax methods and ACC levies in detail.
Questions people ask
What tax rate should a contractor choose in NZ?
One that covers your income tax and ACC on the profit, divided by your fees. On $90,000 of fees with $8,000 of expenses, tax and ACC come to about $18,373, which is 20.4 % of fees: a 20 % rate would leave $373 to pay at year end. The minimum you can choose is 10 %, or 15 % on a temporary visa.
What happens if I do not give my payer a tax rate?
If you do not complete the IR330C form, your payer must deduct tax at the no-notification rate of 45 %, which is far more than most contractors owe. The excess is refunded after the year ends, but the cash is tied up for months. Complete the form with a rate of your choice, or the standard rate for your type of work.
Do contractors pay ACC in New Zealand?
Yes, but not through the withholding tax. ACC invoices self-employed people directly after the year, for the earners’ levy on liable earnings and a work levy that depends on the industry. This calculator includes the earners’ levy of 1.75 % in the amount to cover; budget for the work levy on top.
Related calculators and guides
Sources
Written by Radif Partners
Publisher of payroll calculators and practical guides · New Zealand PAYE, KiwiSaver and ACC
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Rates for 2026, last checked on