Contractor vs Employee Tax Comparison
Enter the same gross income to compare what you'd take home as an employee versus an independent contractor.
Key Differences
| Factor | Employee | Contractor |
|---|---|---|
| Tax collection | PAYE deducted by employer | Provisional tax in 3 instalments |
| ACC | Earner's levy deducted from pay | Earner's levy + possible work levy invoiced by ACC |
| KiwiSaver | Employee + employer 3% match | Voluntary, no employer match |
| GST | N/A | Must register if turnover > $60k |
| Expenses | Limited deductions | Business expenses deductible |
| Tax return | PTS (auto-calculated) | IR3 return required |
Frequently asked questions
Do contractors pay more tax than employees?
Not necessarily. Contractors can deduct business expenses which reduces taxable income. However, contractors miss out on employer KiwiSaver contributions (3%) and must manage their own provisional tax, ACC, and GST.
Do contractors need to register for GST?
If your annual turnover exceeds $60,000, you must register for GST. Below that threshold, registration is voluntary. When registered, you charge 15% GST to clients and pay it to IRD, but can also claim GST back on business expenses.
How does ACC work for contractors?
Self-employed contractors pay the ACC earner's levy (1.67% for 2025-26) on their net profit, similar to employees. ACC invoices you directly based on your tax return. Work levies may also apply depending on your industry.
Can contractors contribute to KiwiSaver?
Yes, but it's voluntary. You choose how much to contribute and there's no employer match. You can make voluntary contributions directly to your KiwiSaver provider and still receive the government contribution (up to $260.72/year from 1 July 2025; halved from $521.43 under Budget 2025; prior-year income $180,000 or less required).
Related Calculators
This comparison is simplified for illustration. Actual results depend on your specific circumstances. Sources: IRD. Last updated March 2026.
Related Calculators
Sole trader tax
Net income, ACC and tax owing for sole traders
Break-even calculator
Units or revenue needed to cover fixed costs
ESCT calculator
Employer superannuation contribution tax on KiwiSaver
Self-employment tax
End-of-year tax for self-employed individuals
Company tax
Company tax at 28% with imputation credits
All calculators
Browse all NZ business and tax tools