Contractors' tax tidy-up

Tax rules on payments to non-resident contractors have been simplified.

Finance Minister Michael Cullen said the changes, which take effect from December 1, were designed to reduce compliance costs for both employers and contractors.

"They prevent employers having to go to disproportionate effort to withhold tax from small payments to short-term contractors who, in many cases, do not have to pay New Zealand income tax anyway."

Contractors who come from a country with which New Zealand has a double tax agreement will have more time - 92 days rather than 62 days - before they have to apply for a certificate of exemption from withholding tax.

Payments for contract work amounting to less than $15,000 in a 12-month period will be exempted from non-resident contractors' withholding tax.