Payroll tax guide – Contractor exemptions
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  1. Payroll tax guide – Contractor exemptions
  2. Services ancillary to the supply
    of goods
  3. Services not ordinarily required
    by your business
  4. Services required for 180 days or
    less in a financial year
  5. Services provided for 90 days or
    less in a financial year
  6. Services provided by a contractor
    to the public during the financial year
  7. Services performed by 2 or
    more people
  8. Services for the conveyance of goods provided by an owner driver

2. Services ancillary to the supply
of goods

This exemption applies when:

  • the main purpose “of a contract” is to supply goods or equipment, and
  • the services provided by the contractor are only ancillary.

When the amounts relating to goods or equipment are more than 50% of the total contract amount, the provision of labour under the same contract is considered ancillary.

See section 32(2)(a) of the Payroll Tax Act 2007 (PTA).

For more details:

Examples

Exemption applies

A construction business engages a crane operator to assist with the construction of a commercial building.

The crane operator supplies a crane and the services of one of its employees.

The total cost of the contract is $250,000, where $200,000 of this contract is for the crane and $50,000 for the services of the employee.

As the services of the employee are ancillary to the supply of goods (the crane), the exemption applies.

Exemption does not apply

A vehicle repair business enters contracts with mechanics to provide their customers with vehicle repairs and servicing at the customer’s location.

The business provides the contractors with:

  • the vehicle
  • tools
  • replacement parts
  • components, and
  • other consumables.

The purpose of the contract is for the mechanics to maintain, repair and service customers’ vehicles. The supply of any replacement parts (goods) is ancillary.

As such, this exemption does not apply.