Invoice from hours calculator: GST, schedular tax and what you are paid
Multiply your hours by your rate, add GST at 15% only if you are registered, and that is the invoice total. If your client deducts schedular tax, it comes off the amount before GST, never the GST. So 38.5 hours at $85 is $3,272.50, $3,763.38 with GST, and $3,108.88 reaches your bank after 20% schedular tax.
Worked out for the example. Change the boxes to make it yours.
| 38.5 hours at $85.00 an hour | $3,272.50 |
|---|---|
| GST at 15% | $490.88 |
| Invoice total | $3,763.38 |
| Schedular tax at 20% of $3,272.50, the amount before GST | -$654.50 |
| Paid into your bank | $3,108.88 |
| Of that, GST to pass to Inland Revenue | $490.88 |
| Schedular tax already paid toward your income tax | $654.50 |
- GST is 15% of the amount before GST. The GST is not your income: it goes to Inland Revenue with your GST return.
- Schedular tax is worked on the amount before GST, never on the GST. It counts toward your income tax for the year, which is squared up when you file your return.
- Every amount is rounded to the cent.
Free on every plan. Your account adds this client to Your Timesheets as contract work with this hourly rate, after asking, so you can log the hours. The invoice itself is made in Your Timesheets on the Career and Timesheets plan or On the Move.
How the invoice adds up
The amount before GST is your hours times your rate: 38.5 hours at $85 is $3,272.50. If you are registered for GST, you add 15% of that, $490.88, and the invoice total is $3,763.38. If you are not registered, you cannot charge GST at all, and the invoice shows no GST and no GST number. You must register once your turnover reaches $60,000 in 12 months, or when you expect it to. What an invoice must show depends on its size; our guide to invoicing as a contractor sets out each level, with numbering, payment terms and chasing a late payment.
Schedular tax comes off the amount before GST
Many contractors are paid as schedular payments: the client deducts tax before paying you, at the rate you gave them on an IR330C. The Income Tax Act 2007 says the tax is worked on the gross amount of the payment other than GST (s RD 10(3)), so in the example 20% of $3,272.50 is $654.50, and the bank receives $3,763.38 less that, $3,108.88. You can use the standard rate for your kind of work or choose your own of at least 10%; with no IR330C the client must take 45%. Schedular tax is a payment toward your income tax for the year, not the final figure, so it is squared up when you file your return.
What to do with the money that arrives
Not all of what reaches your bank is yours to spend. The GST belongs to Inland Revenue and goes with your next GST return. Schedular tax may not cover all your income tax. ACC invoices its earners' levy to you separately, and a student loan on contracting income is repaid by you, at the end of the year and in interim repayments. Our contractor tax set-aside calculator works out how much of each invoice to move aside, and the contractor hourly rate calculator checks whether your rate covers it all.
Where the invoice itself is made
This page works out the figures; it does not make the invoice. In jobtracker.co.nz the invoice is made in Your Timesheets on the Career and Timesheets plan or On the Move, from the billable hours you logged, numbered in order, with GST only when you are registered, and saved as a PDF or a Word file to send. Saving here adds the client and the rate to Your Timesheets, where logging hours is free on every plan.
Questions
How do I calculate GST on an invoice in NZ?
Multiply the amount before GST by 15% and add it. On $3,272.50 the GST is $490.88 and the total is $3,763.38. Only a GST-registered person can charge GST.
Is withholding tax worked out before or after GST?
Before. Schedular tax is worked on the gross amount of the payment other than GST (Income Tax Act 2007, s RD 10(3)), so the client deducts it from the amount before GST and pays you the GST in full.
Do I charge GST if I'm not registered?
No. You cannot add GST to your prices unless you are registered, and adding it makes registration compulsory. You must register once your turnover reaches $60,000 in 12 months.
What schedular tax rate should I use?
The standard rate for your kind of work on the IR330C, or a rate you choose of at least 10% (15% for a non-resident on a temporary visa). Choose one close to what your income tax for the year will be, so there is little to pay or get back.
Does saving here make the invoice?
No. Saving adds the client and your hourly rate to Your Timesheets, after asking, so you can log the hours. The invoice itself is made in Your Timesheets on the Career and Timesheets plan or On the Move.
Sources
- Goods and Services Tax Act 1985, ss 8 and 51.
- Income Tax Act 2007, ss RD 10 and RD 10B.
- Inland Revenue: deductions from payments to contractors.
- Inland Revenue: registering for GST.
- Inland Revenue: repaying my student loan when I am self-employed or earn other income.
- Inland Revenue: Tax rate notification for contractors (IR330C).
- Inland Revenue: what GST is.
- Inland Revenue: work out and declare my tax rate for schedular payments.
More free tools: see all the calculators.