One of the downsides to operating as a contractor versus an employee is you must manage your own tax obligations. Only certain occupations (e.g. sales agents, cleaners) are subject to withholding; all other contractors must ensure they have put enough aside to cover their entire tax bill, which has a knack of arriving at the same time as GST!
From 1 April 2017, contractors, including individuals and companies, can elect a withholding rate of their choosing, with a minimum of 10%.
This will be welcomed by contractors as well as their accountants, who can often be the ‘bearer of bad news’. If the contractor has not set aside money for instance in a separate bank account, this notification can come as a very nasty surprise.
Contractors currently subject to withholding will be able to elect their own rate from 1 April 2017 (minimum 10%) if they have previously met their tax obligations. This will allow for a more appropriate rate to be selected, avoiding under and over deductions.