How can an Umbrella Company Help with Contracting in New Zealand?
Most freelance workers aren’t superheroes who successfully tackle these issues all on their own. There are companies who specialise in helping workers make the most out of their contracts.
They’re called Umbrella Companies (or, contractor management companies).
Basically, an Umbrella Company acts as your full-time employer, even though you maintain your independence as a contractor. They collect and filter payments from your clients, filtering out the necessary social security and fees. You send them your timesheets, and they send you payments.
Because they act as your “employer,’ they can sponsor you and provide a single work permit for multiple contracts in New Zealand. Even better, most are experts in New Zealand and expat tax law, meaning they’ll also help you optimise your earnings in New Zealand.
Although the Umbrella Company is technically your “employer,” you’re essentially freeing yourself to work even more independently. You still dictate your contracts, your hours, your schedule. The Umbrella Company simply filters out the time-consuming admin and immigration issues, allowing you to focus on your new contract.
Can I Organise My Taxes and Work Permit Myself?
Generally, you need to have an employer sponsor in order to secure the appropriate work permit and work visa for New Zealand.
If you’re working independently, it can be difficult to find clients willing to sponsor you. Moreover, even if your client can do this, you’ll need a new sponsor each time you decide to take on a new contract. Of course, every new sponsor will mean more paperwork.
Also, are you familiar with the intricacies of the tax system in New Zealand, as well as your own country’s laws on overseas earnings? If so, good on you!
However, if you’re like the rest of us, figuring out (much less reducing) your tax liability in New Zealand and your home country can seem like full-time work in itself.
A Contractor’s Guide to Taxes in New Zealand
One of the most consistently challenging aspects of contracting in New Zealand is complying with the country’s tax system. As well as paying tax in New Zealand, you might also still be eligible to pay some tax in your home country, and understanding the legislation behind this can be a challenge.
How do I calculate my taxable income in New Zealand
If you’re working in New Zealand under a permanent contract, many employers will handle your tax under the PAYE (pay-as-you-earn) system. This means that they calculate and process your taxes in New Zealand for you and then send you a net wage. Your income tax, public health insurance, social security and other deductions will all be covered by this payment. This is the easiest way to handle your income tax in New Zealand, but contractors may not be offered this service because of their short stay with each employer.
Anybody who can’t pay their tax in New Zealand through PAYE is left with the prospect doing everything themselves.
Do you know much about New Zealand Tax Law? Does New Zealand have a tax treaty with your home country? You will need to find out or find someone who can help! Income tax in New Zealand can range from 10.5 to 33 percent, and you need to be sure you are placed in the correct tax brackets.
Tax Filing as a Contractor in New Zealand
| When Do You Need to Lodge Your Tax Return? | 7 July |
| Tax Filing Deadline | 7 July |
| Can you file it online? | Yes, https://www.ird.govt.nz/online-services/ir-online-services-register.html |
How to File Taxes in New Zealand as a Contractor
Tax Year-End: 31 March
You are required to file taxes if:
- You are a resident and you have income that does not have tax withheld at source, or you are a non-resident for part of the income year; or
- You are a non-resident and you have New Zealand-sourced income that does not have tax withheld at source.
Step 1: Prepare the Relevant Documents and Information
To file taxes, you will need:
- Your IRD Number (call 000 227 774 if you don’t have one)
- Your summary of earnings (this will be sent to you in May or you can use the Account Information service(link is external) on the IRD website)
- Any other income details e.g. overseas, rental property, farming or business income
- Any interest or dividend statements
- Any taxable Maori authority distribution statements
- Any portfolio investment entity investor statements
Step 2: Register for myIR (if filing online)
If you’re filing online, register for myIR Secure Online Services here(link is external). This is a 3-step process and you will need your IRD Number.
Request a Taxpack (if filing by paper)
Use the Request an IR3 taxpack(link is external) service on the Inland Revenue Department (IRD) website. A “Get Started” button at the bottom of the page directs you to a form via which you can request a taxpack.
Your taxpack will be posted to you and should arrive in approximately 10 working days.
Step 3: File Taxes
To file taxes online, use your myIR Secure Online Services account.
To file by paper, complete the forms sent to you in the taxpack and post them to:
Inland Revenue
PO Box 39090
Wellington Mail Centre
Lower Hutt 5045
You can find comprehensive guides on how to complete your tax forms on the IRD website. Click here(link is external) for the 2016 individual income tax return guide.
Once you file your IR3 return, the IRD will process it and send you an acknowledgment confirmed your assessment within 10 weeks.
Tax Figures in New Zealand
| Currency | New Zealand Dollar (NZD) | ||||||||||
| Tax-free Threshold in New Zealand | None | ||||||||||
| Income Tax Rates |
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|---|---|---|---|---|---|---|---|---|---|---|---|
| Notes | Non-Resident Withholding Tax (NRWT): The rates above apply to employment income for both non-residents and residents. Non-residents are subject to NRWT at 15% of interest income and 30% of dividend income. Tax Exemptions for Non-Residents A non-resident’s personal services income earned in New Zealand is exempt from tax if:
Accident Compensation Corporation (ACC) Earners’ Levy: Employment income of up to NZD122,063 is subject to an ACC Earners’ Levy of 1.39% to fund the accident compensation scheme for the 2017 income year. |
Tax Residency in New Zealand
When do you become a tax resident in New Zealand
You become a tax resident in New Zealand when:
- Have a permanent place of abode i.e. have an available dwelling in New Zealand;
- Are personally present in New Zealand for more than 183 days in any 12-month period.
There are 2 considerations in determining whether the dwelling is a ‘permanent place of abode’:
- Continuity and duration of the individual’s presence in New Zealand; and
- The permanence of the individual’s connection with the property.
The following factors are used in assessing (ii):
- Nature and use of the dwelling
- Intentions
- Family and social ties
- Employment, business and economic ties
- Personal property
- Other relevant factors e.g. receipt of government assistance, whether holidays are spent in New Zealand
Does the 183 day rule apply in New Zealand
Yes
Am I taxed on my global income in New Zealand
Residents are taxed on their worldwide income.
Non-residents are taxed on New Zealand-sourced income only.
Can you set up your own Limited Company in New Zealand?
| How long does it take to set up | 0.5 days |
| How much does it cost | NZD160.22 |
| Is it easy? | Starting a Business Rank: 1/190 (Source: World Bank) |
Tax Calculator in New Zealand
If you are a contractor and want a calculation on your tax and net retention in New Zealand, we can supply it to you free of charge.
Using an Umbrella Company for Income Tax in New Zealand
Contractors in New Zealand are faced with masses of paperwork and numerous wasted hours filing a tax return unless they find an alternative option. A New Zealand umbrella company can act as your employer during your stay in the country whilst still allowing you the freedom of a contractor. The only difference is that you submit your timesheets to them; they’ll calculate and pay your taxes as you earn, and then you receive a net wage (as well as documentation for your records).
The companies are experts in New Zealand taxation, and they’ll ensure that you keep the largest proportion of your earnings whilst complying with local laws. They can deal with any issues with the New Zealand tax office or tax department directly including processing your tax refund if you are eligible.
How We Can Help You with Tax in New Zealand
We work with numerous umbrella companies in New Zealand, many of whom are experts in tax and immigration laws. If you have any questions about tax in New Zealand, we’ll get the answers from them directly so you can rest assured you’ll be getting accurate information. We have comprehensive knowledge of the different services they provide, and can help you find the right company to handle your income tax. We help oil and gas workers, software developers, IT project managers, testers, business analysts and telecommunications contractors get tax efficient payments and sponsorship for their New Zealand work permit.
Our advice is 100 percent free, and comes with no obligations. You will be paying taxes in New Zealand but without the overhead of directly dealing with the New Zealand tax authorities. Get in touch with us today for some reliable advice on tax in New Zealand!
A Contractor’s Guide to Work Permits in New Zealand
Immigration is one of the primary concerns for any contractor hoping to start working in New Zealand. Permanent employees will find it easy to get their New Zealand work permit because they’ll receive “sponsorship” for their entire stay from their prospective employer.
The New Zealand work permit, known more commonly as the Temporary Work Visa, is dependent on this sponsorship because it confirms that you’ll be earning money during your stay in the country. Contracting in New Zealand is more difficult because the work permit is tied to one employer, so you have to change it to suit each new contract. Thankfully, umbrella companies provide a convenient and effective solution to this issue.
How Does an Umbrella Company Work?
Most people want to do their work, earn their money and enjoy their spare time without taking on loads of admin in a new country. That is why an umbrella company can help.
When you’re working through an Umbrella Company, you’ll essentially be outsourcing the admin and tax issues to specialists.
While the umbrella company will charge a fee, you’ll likely end up saving more money in the long run: you’ll be able to focus on your work, expertly reduce your tax liability, and comply with all laws and regulations in New Zealand (which means avoiding fees, fines, or even worse penalties).
How Can We Help You?
There’s a huge variety of Umbrella Companies with different specialities and advantages in New Zealand. How do you find the right one for your circumstances?
We work closely with Umbrella Companies all throughout New Zealand and match contractors with the right company for them. If you’ve already secured a contract in New Zealand, we can help you find your best match (for free). Or, we can simply give you feedback on your situation (for free).
