Tax Tips Contractors

• You will be required to file an IR3 taxation return;
• You are required to register for GST if you exceed the threshold of $60,000 turnover in any 12-month period;
• You will be required to pay ACC levies – these are triggered automatically (about 2 months after you file your tax return).

As an independent contractor you will most likely incur several expenses that are deductible from your income, these costs include, but are not limited to;

• Vehicle running costs – if the vehicle is used for business and private, you need to keep a log book for 3 months once every 3 years to claim the business percentage of all motor vehicle costs such as petrol/diesel, services, repairs, tyres, RUC, registration, insurance, interest on finance for the vehicle, depreciation and any other associated costs. Alternatively, you can use the mileage rate as per IRD which for the year 1 April 2018 – 31 March 2019 is set at 79 cents for the first 14,000km’s for petrol/diesel vehicles and 30 cents for each km over 14,000kms;
• Equipment and tools – if the cost is $500 or above (net of GST) then it will generally need to be capitalised and depreciated each year. Items under $500 (net of GST) can be tax deductible in the year of purchase (NB: this has been temporarily changed to $5,000 for purchases between 17 March 2020 to 16 March 2021 and then will be $1,000 permanently);
• ACC levies;
• Insurance – Vehicle (see above for percentage), public liability, income protection insurance (but then any payout is subject to tax);
• Telephone – portion of mobile and home phone/internet;
• Licence fees/subscriptions that relate to your industry/profession;
• Protective clothing – hard hats, steel capped boots, hi-viz;
• Home office/workshop – percentage based – rent/interest on mortgage payments, rates, water rates, insurance, power and repairs & maintenance; and
• Any other expenses directly related to your contracting activity.

Note – These tax tips are of a generic nature. If you require clarification or assistance with the application to your business, we are happy to assist.

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