Workers all around the world are increasingly favouring short-term jobs, or gigs, in place of more traditional permanent roles. Gig workers who take casual short-term jobs fall into the same category as contractors, free-lancers and self-employed people who must account for their own tax on every job they take.
For tax purposes, the same rules for sole traders apply to people who do gig work:
- You usually use your personal IRD number for paying income tax (and GST if applicable).
- You are personally responsible for all of your taxes.
- All of your earned income is taxed.
- Work expenses can be claimed to reduce your income tax, so you should keep accurate records and all of your receipts.
- You must complete an IR3 tax return each year, including all of your income from all sources.
- When filing your tax return with IRD, select the BIC (Business Industry Classification) code of the activity you spend the majority of your time doing. ACC bases its levy on this code and your earnings.
- You will need to register for GST if you expect to earn more than $60,000 in the next tax year, or if you include GST in your rates. Registering for GST means that you can also claim back the GST portions of your business expenses.
When Tax Is Deducted At Source
Recruitment and labour hire companies are required to deduct income tax from your pay (tax deducted at source). In this instance you will need to fill out an IR330C tax rate notification form which will allow the company to deduct tax at your chosen rate. You will still be responsible for paying your ACC levies, KiwiSaver, and any applicable deductions for child support or student loans. You can deduct your business expenses and must file an annual IR3 tax return.
Schedular payments, which are a contractor’s equivalent of wages/salary, are referred to on the IR330C. The tax code for schedular payments is ‘WT’ because this tax used to be known as withholding tax. The IRD’s website explains schedular payments in more detail.
Please contact us if you have questions regarding paying tax on multiple short-term jobs.