cfs user guide - university of auckland · s:\hr share\hr projects\contracts for service\final...

$: CFS User Guide - University of Auckland · S:\HR Share\HR Projects\Contracts for Service\Final Documentation Intranet Implementation\CFS User Guide.doc Last saved 18 January 2008$
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File Name: CFS User Guide.doc

Version: 0.20

Creation Date: 19 November 2007

Status: Final

Authors: Steve Deeble, Nancy Lata

HR Programme

S:\HR Share\HR Projects\Contracts for Service\Final Documentation Intranet Implementation\CFS User Guide.doc

Last saved 18 January 2008 Contract For Service User Guide Page 2 of 45

Table of Contents 1 Introduction .............................................................................................................3 2 Process Overview and Roles .....................................................................................4

2.1 High volume users............................................................................................. 4 2.2 Regular Users ................................................................................................... 5

3 Delegations...............................................................................................................6 3.1 High volume users of Independent Contractors ...................................................... 6

4 Checklist for High volume users................................................................................7 5 Assessment of Independent Contractor Determination Tests ...................................8 6 Guidelines for Reviewing Determination Tests..........................................................9 7 Contract for Service versus Contract for Supply......................................................11

7.1 Policy definitions ..............................................................................................11 7.2 Implications of an inaccurate determination .........................................................11

8 Withholding Tax......................................................................................................12 8.1 Hiring GST-Registered Contractors and deducting Withholding Tax ..........................12 8.2 Withholding Tax & Academic Services..................................................................13 8.3 Reimbursement of Contractors’ Expenses.............................................................13

9 Appendices .............................................................................................................14 9.1 Engaging an Employee or Independent Contractor ................................................14 9.2 Appointment of an Independent Contractor on a Contract for Service Policy..............16 9.3 Application to Engage an Independent Contractor .................................................27 9.4 Application to re-engage an independent contractor ............................................... 6 9.5 Completing application forms .............................................................................10

9.5.1 Tips for completing the application to (re)engage an independent contractor form...10 9.5.2 FAQs............................................................................................................10

9.6 IR330 Form .....................................................................................................11 9.7 Withholding tax obligations in respect of resident contractors .................................13 9.8 Withholding tax obligations in respect of non-resident contractors ...........................14 9.9 Non-Resident Contractors and Entertainers flow chart notes ...................................15 9.10 Non-Resident declaration form ...........................................................................17

HR Programme



1 Introduction This guide has been developed as a guide for contracting managers, HR personnel and Financial Services personnel involved in the engagement of independent contractors.

Your key contact people for ongoing support are:

Role Name Extension

Training Hope Shaw 83394

Tax & other finance Nancy Lata 87867

Independent Contractor Determination Assessment Kate Hays 85789

HR Programme



2 Process Overview and Roles 2.1 High volume users High volume users are those staff who have specific written HR delegations currently for:

B&E: Short Courses, Grad School of Enterprise Education: Kohia, Education Centres Student Admin: Recreation Centre.CCE: Short courses

Role Process Re-engagements

Contracting Manager 1. Completes Application to Engage an Independent Contractor form Where the contractor does not complete PART 2 of the form themselves, confirms

the content of Part 2 with the prospective contractor.

2. Assesses the independent contractor determination test 3. Raises any concerns with Faculty / Service Division HR. 4. Approves Application. 5. Drafts Contract for Service. 6. For NZ Residents conducts Withholding Tax (WHT) obtains

IR330.(www.ird.govt.nz) 7. For Non-Resident selects appropriate forms for completion. 8. Sends to/or meets with prospective contractor to complete/process.

Application to Re-engage an Independent Contractor form completed (excludes independent contractor determination test). NZ Residents are not required to complete the IR330 again. All other steps remain the same.

Prospective Contractor Completes where appropriate and then signs all of the following: 1. Application Form PART 2 declaration. 2. Contract for Service. 3. Applicable tax forms:

NZ residents: IR 330 Non-residents: 92 day declaration OR Non-resident Entertainer Fact Sheet

(covered in the same form). 4. Returns forms to contracting manager

Contracting Manager 1. Confirms all forms completed and signatures received by completing checklist memo.

2. Sends documentation pack to Accountant Tax Compliance (Financial Services )

Accountant Tax Compliance (Financial Services)

1. Conducts WHT compliance check. 2. Applies for IRD approved exemption for non –resident “Entertainers”. 3. Enters Contract for Service details in register. 4. Obtains Financial Director signature on Contract for Service. 5. Sends signed copies to each: the contractor, Faculty / Service Division

Accountant and files the original. 6. Advises Faculty / Service Division Accountant to complete vendor maintenance

application for new vendors.

HR Programme



2.2 Regular Users Regular and low users are all other areas not specified in section 2.1.

Role Process Re-engagements

Contracting Manager 1. Completes Application to Engage an Independent Contractor form Where the contractor does not complete PART 2 of the form themselves, confirms

the content of Part 2 with the prospective contractor.

2. Forwards to Faculty / Service Division HR.

Same process using Application to Re-engage an Independent Contractor form.

Faculty/ Service Division HR* *no longer Central HR

1. Assesses the independent contractor determination test. 2. Approves and sends approved application to Financial Services.

Checks application (excludes independent contractor determination test). Approves and sends application to Financial Services.


1. Conducts WHT compliance check. 2. Drafts Contract for Service. 3. Enters Contract for Service details in register. 4. Sends pack to prospective contractor. 5. Emails contracting manager that contract sent to prospective contractor.

Prospective Contractor Completes where appropriate and then signs all of the following: 1. Application form PART 2 declaration (if not yet signed). 2. Contract for Service. 3. Applicable tax forms:

NZ residents: IR 330 Non-resident: 92 day declaration OR Non-resident Entertainer Fact Sheet (covered

in the same form).

4. Returns pack to Financial Services.

Not required to complete IR330 unless there has been a change in the contractor’s business trading status.


1. Obtains Financial Director signature on Contract for Service. 2. Sends signed copies to each: the contractor, Faculty / Service Division

Accountant and files the original. Emails the contracting manager the same. 3. Applies for IRD approved exemption for Non –resident “Entertainers”. 4. Advises Faculty / Service Division Accountant of WHT % for invoices and to

complete vendor maintenance application for new vendors.

Not required to set up new vendor in the system.

HR Programme



3 Delegations There are two broad categories of contracting managers that engage independent contractors:

High volume users Regular Users.

High volume users have written delegations to perform specified tasks in this process due to the high number of similar type contracts that they are required to process on an on-going basis.

Regular Users are contracting managers who have significantly less volumes to process and who are required to route their applications through their Faculty/Service Division HR.

3.1 High volume users of Independent Contractors The following areas and nominated individuals have delegated authority as “High volume users” limited to the specific Contract for Service types listed below as at 01/12/07.

For the engagement of all other independent contractors, the procedure for regular users is required.

Nominated Individual:

Faculty/Service Division:

Delegations limited to the following specific Contract for Service types:

Darren Levy, Director Short Courses, Graduate School of Enterprise. Alternates: Mike Groves, Director of Operations - Graduate Programmes, Graduate School of Enterprise. Kevin Morris, Director Executive Development, Graduate School of Business

Business and Economics

Contractors engaged for course presentation for short courses in the Graduate School of Enterprise.

Jill Parfitt

Team Manager TEAM Solutions

Camilla Highfield

Director Teacher Support Services

Education Contractors engaged for course presentation for professional training and short courses under Kohia, Education Centre.

Greg Tollan, Manager Recreation Centre. Alternate: Bill Crome, Group Manager Student Support

Student Administration

Contractors engaged for the specific services of training and instruction in sports nominated by the Recreation Manager.

Anne Caves, Programme Manager Professional Development. Joanna Davies, Programme Manager /Coordinator. Alternate: Lynn Lander, Deputy Director CCE

Centre for Continuous Education CCE

Contractors engaged for course presentation for professional training and short courses under Centre for Continuous Education.

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4 Checklist for High volume users High volume users with HR delegations for processing an application for engaging or re-engaging an independent contractor.

Role Document Action

Contracting Manager

Application to Engage an Independent Contractor form. (or Application to Re-engage an independent Contractor)

Completed Part 1 Application to Engage an Independent Contractor form.

(or Application to Re-engage an independent Contractor) Signed Part 3

HoD/Manager Application to Engage an Independent Contractor form. (or Application to Re-engage an independent Contractor)

Signed Part 3

Prospective Contractor

Application to Engage an Independent Contractor form. (or Application to Re-engage an independent Contractor) *Can be completed in consultation with prospective contractor

Completed Part 2* Application to Engage an Independent Contractor form.

(or Application to Re-engage an independent Contractor) Signed

Contract for Service Signed NZ Residents – Sole Traders or Partnerships IR330

(not required for Re-engagements) Completed and Signed

Non-Resident: EITHER “Entertainers” category Non Resident Entertainer fact sheet OR 92 day Declaration

Completed and Signed

HR Programme



5 Assessment of Independent Contractor Determination Tests

This section details how to assess the Detailed Independent Contractor Determination test and to decide whether or not a prospective contractor’s application should be accepted or declined.

1. Check that the Application to Engage an Independent Contractor form is completely filled out by the prospective contractor in direct consultation with him / her if required.

2. Referring to Section F: Initial Independent Contractor Determination Check, identify the following:

o If the contractor has answered NO to ALL of the questions then they have passed the test and are not required to complete section G. Proceed to Section H.

o If the contractor has answered YES to ANY of the questions then they are required to complete the Section G.

3. Referring to Section G: Detailed Independent Contractor Determination.

o The contractor is required to complete the section providing references and permission to make referrals.

4. Referring to Section G: Tests.

This section details tests covering Control, Integration, Independence, Intention and Economic Reality.

o If ALL answers marked are in column A then based on the information given, the prospective contractor is on balance considered to be a genuine contractor. If you have the HR delegated authority to approve the application then approve it and forwards it to Financial Services for further processing.

o If there are ANY answers in column B then there is doubt about the veracity of the status of the prospect as an independent contractor. Review each question using the guidelines attached. When the review is completed discuss the application with your HR Manager / Advisor BEFORE proceeding any further. The prospects application may be approved depending of which questions are under review, alternately an employment agreement may be more appropriate.

HR Programme



6 Guidelines for Reviewing Determination Tests These guidelines are to assist in determining the next appropriate steps required where the prospective contractor answered NO to a question.

Test Question Guideline / Comment

CONTROL TEST

1. Do you have control over how, where and when the work is done? (within practicality. This is apart from being required to deliver to agreed outcomes or to a pre determined lecturing schedule/programme)

Once the Contracting Manager specifies the scope and outcomes of the service required, it is up to the contractor to organise, manage and control his/her resources to meet the contract outcomes. If the prospect is required to be monitored on a detailed and on-going basis, this is an employee / employer arrangement with high control by the employer.

2. Are you responsible for the quality and standard of the service?

All contractors are responsible for the quality and standard of their service. A NO counts strongly against Independent Contractor status.

3. Do you supervise your work/service? All contractors are responsible for supervising their work/service. Clarify that a catch up meeting to discuss progress is not supervision. A NO strongly against Independent Contractor status.

4. Do you negotiate the price of the work? A NO counts strongly against Independent Contractor status.

INTEGRATION TEST

5. Are the services you provide specialised and/or different from that normally provided by other university employees?

Where the only reason a contract is required is because of a genuine supply and demand problem a NO does not carry much weight.

6. Apart from the venue do you pay for expenditure incurred in doing the work? (e.g. provision of own materials, equipment, supplies, consumables)

A NO counts strongly against Independent Contractor status.

7. Are you prevented from access to the University facilities and services normally provided to employees only?

The emphasis here is for employees ONLY e.g. specific benefit or service to employees only. A NO counts strongly against Independent Contractor status.

8. Will you invoice the University for services provided?


Will you be paid only as services are performed as opposed to a regular salary payment?


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Test Question Guideline / Comment

INDEPENDENCE TEST

9. Do you provide the necessary tools, vehicle, office, phone?

Clarify that items that may be agreed to be provided by the UoA e.g. lecture room or data show or handouts are excluded from this. The prospect must provide all items necessary to provide the service e.g. materials intellectual property and resources.

10. Do you have your own client base and are you free to work for other clients?


11. Do you advertise or actively canvas for work with other clients?


12. Do you provide or pay for your own training?

A NO answer for this question counts strongly against Independent Contractor status unless the contractor is required to undertake training by the UoA as a part of their agreement.

INTENTION TEST

13. Could the University sue you contractor for loss resulting from the provision of the services?

Technically an Independent Contractor could be sued for loss unlike an employee. A NO counts strongly against Independent Contractor status.

14. If the work is not done to specification, can payment be withheld?

If the answer is NO decline.

15. Are you liable for GST and ACC levies? GST registration is not compulsory under a certain threshold of annual earnings so they could still be a legitimate contractor. Contact Financial Services before proceeding.

ECONOMIC REALITY TEST

16. Are you exposed to normal business risks in the provision of services to the university?

Business risk is a normal part of Independent Contracting ranging from continuity of supply of work to running at a loss on a given contract. If the answer is NO decline.

17. Are you liable for correcting sub-standard work at your cost?




7 Contract for Service versus Contract for Supply This section details how to determine whether a contract should be a Contract for Service or a Contract for Supply.

7.1 Policy definitions The following definitions are extracts from the policy document.

An Independent contractor is a named individual or organisation that supplies services of a named individual, typically of a specialised nature through a Contract for Service. They are not employees of the University. The nature of the working relationship reflects this, and they may be employees of another organisation or are self employed. They routinely provide the same or similar specialist service to other organisation(s) and have satisfied the University’s determination test applied in the application process which is based on IRD published guidelines.

Contract for Supply or Contract for the Provision of Services – (Non-Named Individual). There is a further category of Contractor which is an individual or organisation that is contracted for the provision of described services only and where the services of a named individual with specified skills or knowledge are not specified or required. Here the contractor will merely provide services using any of its qualified personnel. This is a purely commercial arrangement for which a Contract for Supply available from Financial Services is more appropriate. E.g. cleaning contract or an emergency service provider providing instructors for first aid training. This contract would not be suitable for engaging independent contractors for teaching and research specialisations e.g. lecturing in law or business

7.2 Implications of an inaccurate determination There are financial and legislative risks when a named individual is engaged as an independent contractor when they should be regarded and treated as an employee, both under the law and in terms of the University’s employment and tax obligations. Penalties for non-compliance can result in significant cost financially and to the image of the university. Individuals currently engaged on an employment agreement with the University cannot be issued with a Contract for Service.



8 Withholding Tax 8.1 Hiring GST-Registered Contractors and deducting Withholding

Tax Withholding tax is deducted from payments made to people who are not employees but who are employed on a contract-for-service basis. If you hire contractors you may need to deduct withholding tax from the payments you make to them.

The main contract activities and the withholding tax rates are listed on the back of the Tax Code Declaration (IR330). This will need to be completed by the contractor. If they don’t complete an IR330, you will need to deduct withholding tax using the no-declaration rate.

Withholding tax must be deducted from payments made to contractors unless any of the following criteria are met:

The type of work you’ve hired the contractor to do is not listed on the back of an IR330.

The contractor shows you their current certificate of exemption.

The work or services are completed by a company (but not a company that is a non-resident contractor or a non-resident entertainer or involved in agriculture, horticulture or viticulture).

The payment is for a non-resident contractor who is eligible for total relief from tax through a double tax agreement, and is present in New Zealand for a total of 92 days or less in any 12-monh period.

The work or services are completed by a public, local or Maori authority.

If the contractor is registered for GST they will charge GST on goods and services supplied. This means the gross earnings will increase by the amount of GST charged. If you receive a tax invoice, deduct withholding from the GST-exclusive amount.

Example

Fees for Lecturing services $1,000

Plus GST $ 125

GST-inclusive amount $1,125

Less withholding tax (20% of $1,000) $ 200

Net payment $ 925



8.2 Withholding Tax & Academic Services Withholding tax must generally be deducted from payments made to independent contractors (other than New Zealand registered companies) where the service being provided falls within those services set out on the back page of the IR330 or as prescribed in the 1979 Withholding Tax Regulations in the Income Tax Act.

Provision of academic services by both residents and non-residents involving teaching, lecturing, guest lecturing, public speaking, talks, speeches, presenting seminars, workshops and short courses fall under the category of 'Entertainers' and therefore payments for such services are subject to 20% withholding tax or 35% where no tax code is declared to the University.

For non-resident contractors and entertainers including overseas companies, if the services provided fall within the categories set out on the back page of the IR 330, withholding tax must be deducted at the rate stipulated for the relevant category unless a certificate of exemption has been provided to the University by the non-resident or approved by the IRD.

No withholding tax is required to be deducted where an IRD Certificate of Exemption from Withholding Tax has been provided.

8.3 Reimbursement of Contractors’ Expenses All known costs and expenses which are to be incurred by a contractor in providing the required services should be included in the overall fee.

Where expenses cannot be quantified in advance, the contract may provide for the University to reimburse the contractor. The contract should note the nature of expenses that can be reimbursed and that advance agreement of expenditure is required.

Where contractors are New Zealand residents and subject to withholding tax, the reimbursement of any expenses will also be subject to withholding tax.

Where contractors are New Zealand incorporated companies, they should request reimbursement of expenses by providing a GST invoice with supporting receipts. The University then pays the full amount. Withholding tax is not applicable to companies.

Non-resident contractors may receive reimbursement of expenses without deduction of withholding tax. The expenses must be valid and supported by receipts, and are invoiced accordingly.

For non-resident entertainers, all reimbursements of expenses including per diems are considered to be payments made directly to them and therefore are subject to withholding tax at 20% unless an exemption has been granted by the IRD.

"Tax free allowances" may not be provided to independent contractors.



9 Appendices 9.1 Engaging an Employee or Independent Contractor

This table identifies which employment type to select based on key criteria. For the

employment type you select each criterion must apply. If you have any further queries,

please contact your HR Manager/Advisor

Criteria Permanent Fixed Term Casual Casual Employee

paid on

completion of

one off

assignment

Independent

Contractor

(Contract for

Service)

Definition An employee

engaged on a full

or part time

basis with no

fixed end date

and an intention

of ongoing

employment

An employee

engaged on a full

or part time basis

for a specific term

or period that has

an end date. There

is a genuine reason

for the role being

fixed term.

An employee

engaged to do

occasional work on

an as and when

required basis with

no fixed hours and

no specified end

date.

They are free to

turn down work

when it is offered.

The University has

no obligation to

offer a set number

of hours of work.

A casual, as per

previous column,

with ALL the

following additional

criteria:

-Not currently

employed at the

university; and

-Employment will

be for a period of

LESS than 14

days; and

-There is no

likelihood of further

work; and

-Payment will be

made on

completion of the

assignment.

A named individual

or organisation

supplying services

of a named

individual, typically

of a specialized

nature. They

routinely provide

the same or similar

specialist service to

other

organisation(s).

Contractors are

cannot be

employees of the

University.

Typical

Examples To replace

someone who

has

resigned/retired.

To fill a newly

created

permanent

position.

A research funded

position for a short

duration.

To replace

someone who is on

leave.

For a specific

project e.g. review

of HR policy

To ensure that legal

supervision

requirements are

met e.g. Early

childhood

educators.

To manage

seasonal

fluctuations e.g.

Student advisors in

call centre.

To complete one off

tasks e.g. Envelope

stuffing, events.

An industry

professional with

specialised

knowledge required

for a short term

assignment.



Criteria Permanent Fixed Term Casual Casual Employee

paid on

completion of

one off

assignment

Independent

Contractor

(Contract for

Service)

Continuity

of work Open ended

employment

contract

Employment will

end:

-At the close of a

specific date; or

-On the occurrence

of a specified

event.

Not to exceed 3

years.

No continuity of

employment

guaranteed or

implied.

An intended short

period that may not

be specified, but

does not exceed 14

days.

Pre-determined in

the terms on

contract, but no

longer than 12

months in the first

instance.

Working

days/

hours

Predetermined in

the terms of the

employment

agreement.

Can be either full

time or part

time.

Predetermined in

the terms of the

employment

agreement. Can be

either full time or

part time.

Variable, as and

when required. Variable, as and

when required. Due

to short term

nature of work

hours are normally

agreed at the time

work is requested.

Predetermined in

the terms of the

contract.

Obligation

to work Predetermined in

the terms of the

employment

agreement.

Predetermined in

the terms of the

employment

agreement.

Employee can turn

down work.

University has no

commitment to

offer set hours or

further work.

Determined at start

of employment

agreement.

University has no

commitment to

offer further work.

Predetermined in

the terms of the

contract.

Notice

Period As per

employment

agreement

As per fixed term

employment

agreement

N/A N/A As per contract

Policy and

Processes Please contact

HR

Please contact HR

Please contact HR

Please contact HR

See full policy and

forms



9.2 Appointment of an Independent Contractor on a Contract for Service Policy

POLICY

APPOINTMENT OF AN INDEPENDENT CONTRACTOR

ON A CONTRACT FOR SERVICE.

DEFINITIONS

An Employee is any person employed on an employment agreement to work for some form of salary or wage payment (Casual, Fixed Term or Permanent employment agreements).

An Independent contractor is a particular named individual or an organisation that supplies services of a particular named individual(s), who is engaged on a Contract for Service to provide services that are usually of a specialist nature. An independent contractor is not an employee of the University and the terms of their engagement reflect this relationship. They may be employees of another organisation or self employed. They routinely provide the same or University’s determination test applied in the application process which is based on IRD published guidelines.

Contract for Supply versus Contract for Service – Where the University wishes to engage the services of a particular named individual, or organisation that supplies the services of a particular named individual (or individuals), it does so through a Contract for Service.

There is a further example of an independent Contractor which is an individual or organisation that is contracted for the provision of described services only and where the services of a named individual with specified skills or knowledge are not specified or required. Here where the contractor can provide the services using any of its qualified personnel, a Contract for Supply or other purchasing mechanism is used. This is a purely commercial arrangement e.g. a cleaning contract or an emergency service provider providing instructors for first aid training. A Contract for Supply would not be suitable for engaging independent contractors for teaching and research specialisations e.g. lecturing in law or business

PURPOSE

This policy exists to direct decision making to ensure that only bona fide (genuine) independent contractors are engaged on a Contract for Service.

Because of the potential for ambiguity in this area, the specific process for determining the status of bona fide (genuine) independent contractors needs to clearly specified.

POLICY

All individuals or organisations engaged by the University must sign a written contract setting out the terms and conditions of the appointment prior to commencement.

There are financial and legal implications when an individual (or organisation) is engaged as an independent contractor, when they should in fact be regarded and treated as an employee under the law and with regard to the University’s employment and tax obligations. If you are uncertain as to which contract to use i.e. Contract for Service or an employment agreement



Individuals currently employed on an employment agreement with the University can not be issued with a Contract for Service.

The Independent Contractor status of individuals making application for a Contract for Service must be determined PRIOR to being engaged on a Contract for Service. This means that the various independent contractor tests in the Application to Engage an Independent Contractor form must be satisfied by the University, the application and approval procedure complied with and a Contract for Service signed by both the Contractor and then the Finance Director or designate.

In principle an employment agreement should be used in preference to a Contract for Service. This is particularly the case for securing core teaching and research activities.

A Contract for Service is suitable for the provision of short term consultancy or specific specialised work, where no employees for such work are available. Under these circumstances bona fide (genuine) Independent Contractors are an important and necessary part of the University’s success.

A Contract for Service may only be entered into for a maximum of 12 months per contract. Contractors can be re-engaged under new contracts using an expedited application process. See Application to Re-engage an Independent Contractor form.

Where a contractor has an existing Contract for Service with one area of the University and is approached for a different Contract for Service in a different area then the Application to Re-engage an Independent Contractor form should be used. The specific terms of each contract need to be specified and will be recorded in the Contract for Service register.

No Contract for Service can be entered into without the inclusion of a fee amount and GST must be specified (for those registered for GST).

For all other appointments other than a Contract for Service, including rejected Applications for a Contract for Service which do not satisfy the tests, an appropriate employment agreement should be offered. Contact your HR Manager/Advisor for any queries you may have.

Refer APPENDIX 2 for further details regarding the following:

The “Tests” (Independent Contractor Determination Test) Companies and Taxation, Sole Traders, Partnerships, Trusts and Taxation Withholding Tax, Features of an Independent Contract vs. an Employee Reimbursement of Contractors’ Expenses

AUDIENCE

All managers with delegated authority for engaging staff or Independent Contractors.

RELEVANT LEGISLATION UNIVERSITY STATUTE OR REGULATION

Income Tax Act

Employment Relations Act



LEGAL COMPLIANCE

There is a legal requirement to appoint Independent Contractors on the basis that they are bona fide (genuine) contractors, as opposed to employees. The University is liable for any unpaid income tax, penalties and/or claims under employment legislation (e.g. for unpaid sick and annual leave) where employees are incorrectly engaged as independent contractors.

RELATED PROCEDURES/DOCUMENTS

This is the procedure for processing Contracts for Service for regular user faculties/service divisions. There are detailed delegations for high user faculties/service divisions which follow.

Roles and Responsibilities

The Human Resources Division is the custodian of this policy.

The relevant manager (contracting manager) through their Dean/Director is responsible for:

• completing the Application to Engage an Independent Contractor form and obtaining the required authorisations, and assisting to obtain the prospective contractor’s signed declaration (which will always be required),

• ensuring and checking that an approved Contract for Service is entered into by both parties PRIOR to such contract work commencing,

• managing the Contract for Service including forwarding invoices to the Faculty/Service Division Finance Accountant who processes the invoice payment under the terms of the contract and withholding tax provisions (where applicable).

The Human Resources Division is responsible for compliance monitoring and managing the processes of:

• determining the bona fide (genuine) independent contractor status of prospective contractors and then

• approving or declining the same.

Financial Services processes approved applications and is responsible for:

• raising any Contractor status determination queries with HR,

• advising the Faculty/Service Division Accountant tax and vendor maintenance details,

• recording contract details in the register,

• drafting Contracts for Service and obtaining the prospective contractor’s signature (Regular users) and checking for the same (High users),

• approving the Contract for Service (Finance Director),

• handling any queries on the processing status of a given application,

• monitoring tax compliance in terms of this policy.



Detailed Procedure for Managers –

Regular Users of Independent Contractors

The Contracting Manager

1.Determines business need for non-permanent resource and sources the

resource.

2 Manages the completion of the Application to Engage an Independent Contractor form/ Application to Re-engage an Independent Contractor form. For PART 2 of the forms either ensures that the prospective contractor completes in full and signs PART 3 or completes the form on behalf of the prospective contractor by confirming the relevant detailed content with them. 3. Obtains a signed declaration from the prospective contractor in PART 3 of the Application to Engage an Independent Contractor form. Where PART 2 of the form content has been confirmed with and completed on the prospective contractor's behalf, forwards such form to Financial Services, who will obtain the prospective contractor's signature in PART 3 of the form at the time of signing the actual Contract for Service. 4. Obtains the authorisation of the Manager/HoD with authorised delegated a authority for the engagement. (Level 3 UOS i.e. Heads of Departments/Schools; Managers who report directly to Directors; Faculty Manager/Registrar; Faculty Director of Administration; HR Managers.)

5. Forwards such application to their Faculty/Service Division HR Manager/Advisor.

(HR checks the Independent Contractor Determination tests respectively, declines /approves application, forwards approved application to the Accountant Tax Compliance – Financial Services:Conducts WHT compliance check, advises Faculty/Service Division Accountant the applicable WHT amount to deduct for invoices (as applicable) and to complete vendor maintenance application (new vendors), applies for IRD approved exemption for Non –resident “Entertainers”, enters Contract for Service details in register, drafts the Contract for Service and releases to the prospective contractor for signing together with relevant tax documentation and PART 2 and PART 3 of Application to obtain contractor's signed declaration (if not already provided), emails the Contracting Manager that this has been released to the prospective contractor. Obtains signed Contract for Service back from contractor, Financial Director’s authorisation, sends signed copies to contractor, Contracting Manager, Faculty/Service Division Accountant and files original signed Contract for Service in Financial Services).

6. Ensures and checks that no work has commenced PRIOR to the Contract for Service being signed by both the contractor and the Finance Director. 7. Files signed copy (forwarded by Financial Services).

8. Approves payment per invoice submitted, per the Contract for Service. 9. Forwards to Faculty/Service Division Accountant for the correct tax compliance and payment.

ANY queries in connection with determining the status of an independent contractor in terms of University policy should be directed to the HR Director via the HR Manager/Advisor Central HR.



ANY queries in connection with the contractor’s tax status, the contract itself or vendor invoices should be directed to Financial Services – Accountant Tax Compliance.

Processing Guideline and Service Levels – Regular Users

On receipt of an accurately completed Application to Engage an Independent Contractor form, an unsigned Contract for Service and engagement pack will be forwarded to the prospective contractor within 2 working days (48hrs) of being received by Financial Services from HR.

Detailed Procedure for Managers –

High Users of Independent Contractors

The following areas currently have Nominated Individuals who have been given written delegated authority as High Users in terms of this policy. Their inclusion in this policy is illustrative and may change. The delegation is limited to the specific Contract for Service types listed in each delegation.

For the engagement of all other Independent Contractors not listed in the delegation, the procedure for regular users is required. Please contact your HR Manager/Advisor for the latest updated list of delegations

The Contracting Manager:


Delegations limited to the following specific Contract for Service types:

Business and Economics

Contractors engaged for course presentation for Short Courses in the Graduate School of Enterprise.

Education Contractors engaged for course presentation for professional training and short courses under Kohia, Education Centre.

Student Administration Contractors engaged for the specific services of training and instruction in sports nominated by the Recreation Manager.

Centre for Continuing Education CCE Contractors engaged for course presentation for professional training and short courses under Centre for Continuing Education.



1. Determines business need for non-permanent resource and sources the resource. 2. Completes the Application to Engage an Independent Contractor form/ Application to

Re-engage an Independent Contractor form. For PART 2 of the forms either ensures that the prospective contractor completes in full and signs PART 3 or completes the form on behalf of prospective contractor by confirming the relevant detailed content with them.

3. Conducts independent contractor compliance check. 4. Approves application by signing PART 3 of Application to Engage an Independent

Contractor form. 5. Drafts Contract for Service 6. For NZ Residents conducts WHT (withholding tax) check on form IR330 (not required

for re-engagements if no change to trading entity status of contractor). 7. For Non-Residents selects Form for prospective contractor to process 8. For IRD category “Entertainers” (includes lecturers) obtains Non-resident

Entertainer Fact Sheet. 9. For all other prospective contractors obtains 92 day declaration form. 10. Sends to or meets with prospective Contractor.

The prospective contractor

1. Signs and/or completes and signs Application to Engage an Independent Contractor form PART 3 declaration

Contract for Service NZ residents - IR 330 Form Non-residents - the applicable form: for “Entertainers” (lecturers included) Non-resident Entertainer Fact Sheet; OR 92 day declaration)

2. Returns pack to Contracting Manager.

Contracting Manager checks and forwards pack to Accountant Tax Compliance – Financial Services.

(Accountant Tax Compliance – Financial Services: Conducts WHT compliance check, Advises Faculty/Service Division Accountant: the WHT amount to deduct as applicable for invoices and to complete vendor maintenance application (new vendors), Applies for IRD approved exemption for Non–resident “Entertainers”, Enters Contract for Service details in register, obtains Financial Director authorisation of Contract for Service, sends signed copies to Contractor, Contracting Manager, Faculty/Service Division Accountant and files original signed Contract for Service in Financial Services)

Contracting Manager

• ensures and checks that no work has commenced PRIOR to the Contract for Service being signed by both the contractor and the Finance Director.

• files signed copy (forwarded by Financial Services) • approves payment per invoice submitted, per the Contract for Service, and forwards

to Faculty/Service Division Accountant for the correct tax compliance and payment. • On completion of the Contract for Service, manages the deprovisioning of the

contractor. (Logging off computer system, access card returns etc).

ANY queries in connection with determining the status of an independent contractor in terms of University policy should be directed to the Faculty/Service Division HR.

ANY queries in connection with the contractor’s tax status, the contract itself or vendor invoices should be directed to Financial Services – Accountant Tax Compliance.

Processing Guideline and Service Levels – High Users

Given accurately completed Application to Engage an Independent Contractor forms and



signed Tax documentation, an unsigned Contract for Service and relevant engagement documentation will be forwarded to successful applicants within 2 working days (48hrs) of being received by Financial Services from the High User area.

DOCUMENT MANAGEMENT AND CONTROL

Prepared by: Steve Deeble

Authorised by: Andrew Phipps

Date Issued:

Review Date:



APPENDIX 1

The “Tests” (Contract for Service Independent Contractor Determination Test)

Listed below are 5 tests that have been developed by the Courts to distinguish a person who is an “independent contractor” from that of an “employee” for tax and employment law purposes.

The determination of whether a person is an employee or an independent contractor is not an easy task and it depends on the facts of each case. If you are in any doubt, please contact your HR Manager/Advisor.

A Contract for Services may be used if the answers to the following questions are generally "yes". The Application to Engage an Independent Contractor form is based on these tests.

CONTROL TEST Does the Contractor have control over how, where and when the work is done? (within practicality)

Is the Contractor responsible for the final product or service?

Does the Contractor supervise the job?

Can the Contractor hire other people to do the work (as opposed to being required to perform the work personally)?

INTEGRATION TEST Is the type of work different to that which is normally done by employees of the University?

Is the Contractor only an "accessory" to the University, as opposed to being an integral part ("part and parcel") of the University?

Do they use their own systems rather than the University's systems?

INDEPENDENCE TEST

Does the Contractor supply the necessary tools, vehicle, office, phone, etc.?

Does the Contractor normally work on site?

Is the Contractor supplying consultancy advice?

Is the Contractor free to work for other organisations?

ECONOMIC REALITY TEST

Is the Contractor responsible for loss?

Is the Contractor exposed to normal business risks?

How the Contractor is paid – payment for results (as opposed to a set fee?)

INTENTION TEST Do the payments include GST?

Is there any reference in the contract to the University being responsible for Annual Leave, Sick Leave, Allowances, etc.?

Is the Contractor carrying out work that has been done by Independent Contractors (rather than normally done by employees) in the past?

Did the Contractor approach the University as an Independent Contractor?



Has the Contractor always worked with the University as an Independent Contractor?

Could the University sue the Contractor for loss?

Is there no payment where work is not done to specification?

Companies and Taxation

The University may enter into a Contract for Services with a company.

No withholding tax is required to be deducted from payments made to New Zealand resident companies. Evidence may be obtained to confirm that the company is incorporated before any payment is made. An example of such evidence is a Certificate of Incorporation from the Companies Office.

If an overseas company engaged provides employees to perform certain services in New Zealand, payments made to the overseas company may be subject to withholding tax. See below for more details.

Sole Traders, Partnerships, Trusts

An individual may enter into a contractual relationship with the University as a sole trader (i.e. in his or her own name), via a partnership or via a trust.

A written Contract for Services is required whenever the University contracts services – whether it be with a company, sole trader, partnership or trust. An application form for a Contract for Services is attached.

Withholding Tax

Withholding tax must generally be deducted from payments made to independent contractors (other than New Zealand registered companies) where the service being provided falls within those services set out on the back page of the IR330 or as prescribed in the 1979 Withholding Tax Regulations in the Income Tax Act. Note that provision of most academic services including teaching and lecturing fall within the ambit of 'entertainer' and therefore payments for such services is subject to 20% withholding tax or 35% where no tax code is declared to the University.

For non-resident contractors and entertainers, if the services provided fall within the categories set out on the back page of the IR 330, withholding tax must be deducted at the rate stipulated for the relevant category unless a certificate of exemption has been provided to the University by the non-resident or approved by the IRD.

For all other non-residents (including overseas companies), withholding tax must be deducted at the rate of 20% (entertainers), 20% (companies) and 30% for all other non-resident contractors.

No withholding tax is required to be deducted where an IRD Certificate of Exemption from Withholding Tax has been provided.



Features of an Independent Contract vs an Employee

The following features distinguish an Independent Contract from an Employee Agreement:

INDEPENDENT CONTRACTOR

(Sole Trader or Company)

EMPLOYEE

Tax If a Sole Trader, the University may need to deduct Withholding Tax (see below).

If a Company, no tax deducted by the University. (The Company pays PAYE or provisional tax).

University deducts PAYE

GST Sole Traders must be GST registered and invoices include GST (exceptions will be considered in terms of IRD thresholds)

Companies must invoice inclusive of GST

Not applicable

ACC payments

Contractor's responsibility University's responsibility

Health and Safety

The University and Contractor both have responsibilities.

University primarily responsible

Insurance Contractor should have insurance, unless contract specifies that it is the University's responsibility, or services are provided on the University premises

University's responsibility

Termination According to contract - Civil Courts overview

Justification required - Employment Relations Authority overview

Holiday Pay Not paid by the University, may be payable by the contractor, if it has employees

Payable on taking Annual Leave, or may be paid in employee's hourly rate if short term contract (refer HR)

Sick Leave Not paid by the University, may be payable by the contractor, if it has employees

University's responsibility

Parental Leave

Contractor's responsibility University's responsibility



Reimbursement of Contractors’ Expenses

All known costs and expenses which are to be incurred by a contractor in providing the required services should be included in the overall fee.

Where expenses cannot be quantified in advance, the contract may provide for the University to reimburse the contractor. The contract should note the nature of expenses that can be reimbursed and that advance agreement of expenditure is required.

Where contractors are New Zealand residents and subject to withholding tax, the reimbursement of any expenses will also be subject to withholding tax.

Where contractors are New Zealand incorporated companies, they should request reimbursement of expenses by providing a GST invoice with supporting receipts. The University then pays the full amount. Withholding tax is not applicable to companies.

Non-resident individual contractors may receive reimbursement of expenses without deduction of withholding tax. The expenses must be valid and supported by receipts, and are invoiced accordingly.



9.3 Application to Engage an Independent Contractor

Procedure 1. PART 1 – to be completed by the Contracting Manager or designate.

2. PART 2 – to be completed and signed by the prospective contractor in person OR completed by the administrator. Where the application is completed by the administrator, the content needs to be confirmed with the prospective contractor by the contractor signing the declaration in this form when he/she signs their contract for service.

3. PART 3 – to be signed by the Manager/HoD with authorised delegated authority, the Contracting Manager (if not the same person) and the Prospective Contractor

4. Form forwarded to Faculty/Service Division HR for compliance check

5. (For designated HIGH USERS-only: completes this application form and required tax documentation, conducts compliance check - refer to procedure in Policy for detail.

6. Completed form then forwarded to Accountant Tax Compliance – Financial Services

7. Finance Director/designate ensures signed copy of the Contract for Service sent to the Contracting Manager the Faculty/Service Division Finance and the Contractor.

8. The Contracting Manager must check that the Contract for Service generated from this application has been signed by BOTH the Contractor and Finance Director/designate PRIOR to work commencing. In addition No payment can be made without this signed contract.

Click here to complete the form

Application to engage an independent contractor form: Part 1 Sections A – D Page 28 of 45

Application to ENGAGE an Independent Contractor Form

PART 1: Sections A – D To be completed by Contracting Manager or designate.

Section A: Contracting Manager Details

Date:

Name:

Position:


Telephone:

Cost Centre:

Contact Person:(where not the contracting manager)

Contact Person Phone:

Section B: Services Required

The contractor will be engaged for the following services/tasks/outcomes:

Section C: Reason for Engagement of Services

Please state reasons why services cannot be delivered under a University Employment Agreement (casual or fixed term) with this service provider i.e. why should they be engaged as an independent contractor rather than an employee.

Section D: Contract Details

Start date:

End date: If end date unknown, specify reason why and estimated length of engagement

Total period: (days/months)

Estimated hours over period:

Total fee to be charged: $

Is total fee: (please select) GST inclusive GST exclusive

$ Rate per hour:

Method of Payment: Invoice on Completion Invoice Monthly



PART 2: Sections E – H To be completed and signed by prospective contractor in person OR completed by the administrator.

Section E: Contractor Details

Contractor Surname:

First Name(s):

Trading Name:

IRD Number:

GST Number:

Date of Birth: (required as a unique identifier for access to University systems)

Telephone:

Email:

Address:

SECTION F. Initial Independent Contractor Determination Check These questions will enable the University to make an accurate determination as to your contractor/employment status.

Please select the appropriate answer that applies to you for each question.

1. Are you currently an employee/have you been an employee of the University in the last 2 years?

Yes No

2. Is the University of Auckland the only organisation that you will routinely provide the same or similar service to in this year, as part of your continuing business?

Yes No

3. In your estimation will your income from this contract be greater than 50% of your or your organisation’s income for this year?

Yes No

If you answered YES to ANY of the questions above, please go to section G.

If you answered NO to ALL of the questions above, please go directly to section H.

SECTION G. Detailed Independent Contractor Determination (to be completed by prospective contractor)

Please provide basic references of wider business trading relationships where you provide, or have provided, the same or similar services outside of the University in the table below. Alternatively, you can attach a brochure of your services, which demonstrates the extent of your trading relationships, or email it to the manager contracting your services.

No referees will be contacted without prior permission of the contractor.

Clients Industry type (e.g. Retail, Education, Finance) OR Client Name

Basic Services Delivered Year Length of engagement

e.g. ABC University Designed and presented a course in XYZ 2007 3 months

1.

2.

3.



Section G continued Tests

Please circle/mark clearly the answer that applies to you in column A or B These questions are taken from IRD published guidelines. Please See detailed definitions of the tests below

Control Test

1. Will you have control over how, where and when the services are provided? (within practicality /this is apart from being required to deliver to agreed outcomes or to a pre determined lecturing schedule/programme)

Yes No

2. Will you be responsible for the quality and standard of the service?

Yes No

3. Will you supervise your work/service?

Yes No

4. Do you negotiate the price of the work?

Yes No

Integration Test

5. Are the services you provide specialised and/or different from that normally provided by other university employees?

Yes No

6. Apart from the venue will you pay for expenditure incurred in doing the work? (e.g. provision of own materials, equipment, supplies, consumables)

Yes No

7. Are you prevented from access to the University facilities and services normally provided to employees only?

Yes No

8. Will you invoice the University for services provided?

Yes No

9. Will you be paid as services are performed, or on completion, as opposed to a regular set payment (i.e. like a salary)?

Yes No

Independence Test

10. Apart from the venue will you provide the necessary tools, vehicle, office, and phone?

Yes No

11. Do you have your own client base and are you free to work for other clients?

Yes No

12. Do you advertise or actively canvass for work with other clients?

Yes No

13. Do you provide or pay for your own training?

Yes No

Intention Test

14. Could the University sue you for loss resulting from the provision of the services?

Yes No

15. If the work is not done to specification, can payment be withheld?

Yes No

16. Will you be liable for GST and ACC levies?

Yes No

Economic Reality Test

17. Will you be exposed to normal business risks in the provision of services to the University?

Yes No

18. Will you be liable for correcting sub-standard work at your cost?

Yes No



Section G continued Appendix 1: Independent Contract Determination definitions

1. The control test has been the most common used to distinguish between independent contractors and employees. The test analyses the nature and degree of detailed control exercised by the principal over the individual doing the work e.g. over hours of work, methods, level of supervision. The greater the degree of control, the more likely it is that the person is an employee. Determining when a programme/lecture should be delivered or agreeing to specify outcomes are normal requirements of a contractor working relationship.

2. The integration test (also known as the organisation test) is based on the notion of an employee being "part and parcel" of the organisation in which he/she is employed. By way of contrast, an independent contractor is not integrated into the business, and is in reality an important but necessary “accessory”.

3. The independence test focuses on the manner in which the individual ordinarily performs his/her business or work, including their economic involvement (for example, an independent contractor has direct responsibility for the profits and risks of the business). A contractor will usually have a high level of independence.

4. The intention test examines the intention of the parties in the relationship. Usually intention is demonstrable from the express terms of the contract between the two parties. However, the contract must be consistent with the actual circumstances and conduct of the parties to the relationship - the description given to the relationship is not a conclusive indication of the type of relationship that exists.

5. The economic reality test (also known as the fundamental test) involves examining the total work relationship to determine its economic reality i.e. is the person engaged to perform the services providing them in as a person on business on his/her own account. This includes having regard to circumstances prior to entering into the contract and the conduct of the parties since then.

Section H. General Information for Finance 1. Are you a sole trader? (Sole traders may be subject to Withholding Tax – see notes below)

Yes No

2. Do you hold a withholding tax exemption certificate from IRD? (refer IRD Form IR330 on line at www.ird.govt.nz)

Yes No

3. Is your company/the company you work for a registered limited liability company?

Yes No

4. Are you a resident of New Zealand?

Yes No

Note:

1. As a sole trader, withholding tax will be deducted from you as per the service categories specified on the IR330 Form unless you provide an exemption certificate from the IRD with this application.

2. If you are a registered New Zealand company, no tax will be deducted as this is your responsibility/ the responsibility of the contracting company.

3. If you are a non-resident of New Zealand, withholding tax may be deducted. 4. You may be asked to have public liability insurance for the duration of the contract. 5. As a contractor you have no entitlement to terms and conditions applicable to employees of the University. 6. If you are a sole trader you are to complete, sign and attach an IRD Form 330 if applicable to your service category.

PART 3: Sections I – J

To be completed and signed by the Contracting Manager, Dean/Director or designate and



Prospective Contractor. PRINT THE FORM BEFORE COMPLETING THIS PART

Section I: Declaration by Prospective Contractor

Please initial and date ANY changes in this form where the original information provided was incorrect. Note that the University reserves the right to review this application, and any offer of engagement, based on whether subsequent changes materially influence the University’s decision as to you/your organisation's suitability for engagement or the appropriate form of engagement.

The information provided by me in this application whether oral or in writing is to the best of my knowledge accurate and correct.

(sign)

Prospective contractor Name Date

Section J: Authorisation of Application HR Advisor (Regular user only), Contracting Manager & HoD/Manager with authorised delegated authority

(sign)

Contracting Manager responsible for engagement

Name Date

(sign)

HR Advisor/Manager Compliance Check(Regular user)

Name Date

(Sign)

HoD/Manager UOS Level 3* Name Date

*UOS Level 3 = Head of Departments / Schools, Managers who report directly to Directors, Faculty Manager/Registrar, Faculty Director of Administration, HR Managers.



9.4 Application to re-engage an independent contractor

Procedure 9. PART 1 – to be completed by the Contracting Manager or designate.

10. PART 2 – to be completed and signed by the prospective contractor in person OR completed by the administrator. Where the application is completed by the administrator, the content needs to be confirmed with the prospective contractor by the contractor signing the declaration in this form when he/she signs their contract for service.

11. PART 3 – to be signed by the Manager/HoD with authorised delegated authority, the Contracting Manager (if not the same person) and the Prospective Contractor

12. Form forwarded to Faculty/Service Division HR for compliance check

13. (For designated HIGH USERS-only completes this application form and conducts compliance check - refer to procedure in Policy for detail Completed form then forwarded to Accountant Tax Compliance – Financial Services

14. Finance Director/designate ensures signed copy of the Contract for Service sent to the Contracting Manager the Faculty/Service Division Finance and the Contractor.

15. The Contracting Manager must check that the Contract for Service generated from this application has been signed by BOTH the Contractor and Finance Director/designate PRIOR to work commencing. In addition No payment can be made without this signed contract.

Application to re-engage an independent contractor form: Part 2 Sections E – H Page 33 of 45

Application to RE-ENGAGE an Independent Contractor Form

Trading Status

Has the contractor changed their trading status since their last engagement with the university? For example: changed from Sole Trader to Partnership, from School to Sole Trader, from Trust to Limited Liability Company.

No – Proceed with this application.

Yes – Must complete the Application to Engage an Independent Contractor Form.

PART 1: Sections A – D To be completed by Contracting Manager or designate.

Section A: Contracting Manager Details

Date:

Name:

Position:


Telephone:

Cost Centre:

Contact Person: (where not the contracting manager)

Contact Person Phone:

Section B: Services Required

The contractor will be engaged for the following services/tasks/outcomes:

Section C: Reason for Engagement of Services

Please state reasons why services cannot be delivered under a University Employment Agreement (casual or fixed term) with this service provider i.e. why should they be engaged as an independent contractor rather than an employee.

Section D: Contract Details

Application to re-engage an independent contractor form: Part 2 Sections E – H Page 34 of 45

Start date:

End date: If end date unknown, specify reason why and estimated length of engagement

Total period: Estimated hours over period:

Total fee to be charged: $

Is total fee: (please select) GST inclusive GST exclusive

$ Rate per hour:

Method of Payment: Invoice on Completion Invoice Monthly

PART 2: Section E To be completed and signed by prospective contractor in person OR completed by the administrator.

Section E: Contractor Details

Contractor Surname:

First Name(s):

Trading Name:

IRD Number:

GST Number:

Date of Birth: (required as a unique identifier for access to University systems)

Telephone:

Email:

Address:

Previous Contract Details (please provide details of previous contracts with the University) Previous contract length:

Previous contract end date:

Application to engage an independent contractor form: Part 2 Sections E – H Page 35 of 45

PART 3: Sections F – G s

To be completed and signed by the Contracting Manager, Dean/Director or designate and Prospective Contractor.

PRINT THE FORM BEFORE COMPLETING THIS PART

Section F: Declaration by Prospective Contractor HR Advisor (Low user only), Contracting Manager & HoD/Manager with authorised delegated authority

Please initial and date ANY changes in this form where the original information provided was incorrect. Note that the University reserves the right to review this application, and any offer of engagement, based on whether subsequent changes materially influence the University’s decision as to you/your organisation's suitability for engagement or the appropriate form of engagement.

The information provided by me in this application whether oral or in writing is to the best of my knowledge accurate and correct.

(sign)

Prospective contractor Name Date

Section G: Authorisation of Application HR Advisor (Regular user only), Contracting Manager & HoD/Manager with authorised delegated authority

(sign)

Contracting Manager responsible for engagement

Name Date

(sign)

HR Advisor/Manager Compliance Check(Regular user)

Name Date

(Sign)

HoD/Manager UOS Level 3* Name Date

*UOS Level 3 = Head of Departments / Schools, Managers who report directly to Directors, Faculty Manager/Registrar, Faculty Director of Administration, HR Managers.


9.5 Completing application forms 9.5.1 Tips for completing the application to (re)engage an independent contractor form

There must be a named individual with whom the contract is being undertaken. The company name must be written correctly and in full. Must include both a start and finish date. Payment terms must be negotiated and recorded on the application prior to

employment. GST number and IRD number could be the same. Ensure all the contractor tests have been completed Ensure all appropriate declarations and authorisations have been signed.

9.5.2 FAQs

What happens when there is not a specific dollar total known in advance as this may vary depending on the services required (for example a fee schedule for a photographer)

Include relevant information about the payment structure in an appendix to the form.

What happens if the contractor is a non-resident who will not be providing the service in New Zealand at all (for example a researcher engaged to do work in China)?

As long as a declaration can be provided stating that the contractor will not be coming to New Zealand then they will not be required to complete the Non-Resident Declaration form.

Can we provide a contract for service to an organisation with specifying an individual?

No. A named individual, responsible for providing the services, is required for a contract for service.


9.6 IR330 Form


9.7 Withholding tax obligations in respect of resident contractors


9.8 Withholding tax obligations in respect of non-resident contractors

9.9 Non-resident contractors and entertainers - flowchart notes ________________________________________________________________

_______________________________________________________________________________________________ Last updated 25 November 2007 by Louise Major Page 41 of 45

Note 1: Contract activity has a very broad and expansive meaning. In relation to a non-resident contractor, it means:

• The performing or rendering of any work or contract service in New Zealand, being work or contract service in connection with, or in relation to, any contract project.

• The performing or rendering of any work or contract service in New Zealand, whether or not that work or contract service is carried on or carried out in connection with, or in relation to, any contract project.

• The granting, providing, or supplying of the use, or the right to use, in New Zealand (whether or not in connection with, or in relation to any contract project), any personal property or services of any person, being a person other than the non-resident contractor (note: this can include, for instance, the right to use software).

Note 2: If there is a mix between services performed in NZ and overseas, an allocation should be made. Note 3: Someone who performs or participates in activity or performance in New Zealand, including performances or appearances on or for radio, television or film:

• In connection with lectures, speeches or talks for any purpose, whether on a regular or casual basis;

• In connection with any sporting event or competition of any nature; • In connection with any performance by actors, entertainers, musicians

singers, dancer, composers or other artists and whether for the purpose of education or culture or religion or entertainment or any other purposes whatsoever.

(Reference: IS guidelines) Note 4: Will be exempt if:

• Entertainers are taking part in a cultural programme sponsored by a government, or promoted by an overseas non-profit cultural organisation or pursuant to a cultural programme

• Athletes/sports persons are officially representing an overseas national sports body.

(Reference: section CW 16) However, IRD letter of approval needs still to be sought even if they fall under these exemptions.

University of Auckland Non-resident contractors and entertainers - flowchart notes ________________________________________________________________

_________________________________________________________________________________________________ Last updated 25 November 2007 by Louise Major Page 42 of 45

Note 5: Applications for exemptions are to be requested via The Financial Accountant - tax (assuming certain criteria apply), however the declaration form is to be completed by the department concerned, in conjunction with the “entertainer” first. Inland Revenue, as a matter of practice, does issue letters of approval (i.e. exemptions), if relief is provided under a DTA. If the non-resident entertainer is from a non-DTA country there are no grounds for an exemption. Under the DTAs, in general, if the non-resident entertainer is a lecturer and is here for less than 183 days and has no fixed base here, they may be eligible for an exemption. However this should be confirmed by checking the relevant DTA. There is a special DTA relief with the US, whereby US tax residents are exempt if the total income is less than US10,000 (including expenses reimbursed or borne on their behalf). The relevant DTA provisions are included in Appendix 10. Applications for exemptions are to be requested via The Financial Accountant - tax. Note 6: Note whether withholding tax should be deducted from cost reimbursements depends on who is contractually bearing the cost. If the contract provides that UOA is responsible for the costs, any cost reimbursement to the entertainer (i.e. the entertainer initially pays the cost and submits the item for reimbursement) is not subject to withholding tax. Alternatively, if the entertainer is responsible for the associated costs, they are able to claim a deduction for the cost in their income tax return. It follows therefore that any reimbursement they may receive from the promoter will be treated as income and be subject to withholding tax. (This view is based on an Australian court decision - FC of T v Robinson 92 ATC 4424) Note 7: The declaration form is included in Appendix 7 and must be attached to the contract for services. Note that the standard exemption query is an either/or provision and refers to all contracted services in any 12 month period performed in NZ, not just for UOA. The 92 day exemption is for DTA countries only (and relates to all time spent in New Zealand, including holidays), whereas the $15,000 exemption applies to all countries. Countries with which we have a DTA are included in Appendix 2.

9.10 Non-Resident – Declaration Form This declaration form only applies to individuals, entities, companies and their employees who are not tax resident in New Zealand. New Zealand resident contractors should not complete this form. The information provided in this form will assist the University of Auckland in meeting its New Zealand withholding tax obligations. Name of Contractor: (as per the Contract for Services)

Address of Contractor: (as per the Contract for Services)

Contractor’s Country of Tax Residence:

Date of Arrival:

Date of Departure:

Number of Days Present in NZ:

Work Permit Granted by NZ Immigration: Yes No Not Required (Please tick box) Select A ,B or C Exemption Declaration below as it applies to your situation.

DECLARATION A: Non-Resident Entertainer (No Standard Exemption) 1. Under NZ tax legislation, services such as lecturing, teaching, speeches, talks, seminars, workshop

presentations for any purpose (among other traditional forms of entertainment) come under the definition of entertainment and different tax rules apply. The most important of these is that the standard exemptions B or C below do not apply and an application needs to be made to the Inland Revenue Dept for tax exemption. A standard withholding rate of 20% applies in the absence of an IRD approved exemption.

2. The contractor must select declaration A if the services provided fall under the definition of entertainment. In

all other cases, select declaration B or C as applicable. 3. Contractor confirms that it is a non-resident entertainer by definition and that neither of the standard

exemptions noted in declaration AB and C apply. DECLARATION B: 92 day exemption (does not apply to entertainers) 1. Contractor confirms that, to the best of its knowledge, it will NOT be present in New Zealand, in total, for a

period exceeding 92 days in ANY 12 month period during which payment is made under the Contract for Services by the University of Auckland. Presence in New Zealand is counted in days from arrival to departure and includes any extended holiday that may have been taken in New Zealand before, after or during any kind of work done in this country, including the work completed for UOA.

2. Contractor agrees to notify the University of Auckland immediately if at any point it considers that it MAY be

present in New Zealand, in total, for more than 92 days in any 12 month period during which payment is made under the Contract for Services by the University of Auckland.

3. Contractor confirms that it is a tax resident of the country noted above, pays tax in that country on income

derived, and is able to avail itself of the Double Taxation Agreement (DTA) that country has with New Zealand (where applicable). New Zealand presently has a DTA in place with the following countries: Australia, Belgium, Canada, China, Chile, Denmark, Finland, Fiji, France, Germany, Indonesia, India, Ireland, Italy, Japan, Korea, Malaysia, Mexico, Netherlands, Norway, Philippines, Poland, Russian

Page 43 of 45

Non-Resident – Declaration Form

Federation, Singapore, South Africa, Spain, Sweden, Switzerland, Taiwan, Thailand, United Arab Emirates, United Kingdom, United States of America

4. Contractor confirms that it does not, or will not have during the period of its engagement with the University of Auckland, any physical presence in New Zealand, other than that required to undertake the services set out in the Contract for Services.

5. Contractor confirms that it does not, or will not have during the period of its engagement with the University of

Auckland, a relationship with any dependent agent in New Zealand, other than that required to undertake the services set out in the Contract for Services.

DECLARATION C: de minimis exemption (does not apply to entertainers) 1. Contractor confirms that the total amount of all contract payments received for the activities performed by the

Contractor in New Zealand or by any person acting on their behalf, is NZ$15,000 or less in any period of 12 months.

Note: Regard must be had to all payments made to or to be made to the Contractor in New Zealand, not just those made by the University of Auckland.

2. Contractor confirms that where the NZ$15,000 exemption is exceeded, the Contractor will notify The

University of Auckland of that fact, as soon as practicable.

Please specify in the box which Declaration applies to you:

Contractor’s name: Signed for and/or on behalf of Contractor: ________________________________________ Date:

Note: (1) Where neither standard exemption B or C is applicable, the University of Auckland will be required to deduct

tax from payments made to the Contractor according to the tax laws of NZ.(unless an exemption is obtained from Inland Revenue).

In that event there is no exemption, if the Contractor is not an entertainer (see declaration A), the Contractor

should consider applying for a NZ IRD Number and complete an IR330 tax code declaration form to enable the University of Auckland to deduct NRCWT at the standard rate(s). Where the form is not completed, a higher non-declared rate of tax will be withheld.

(2) Notwithstanding Contractor’s completion of one of the above declarations B or C, pursuant to clause 13 of the

Contract for Services, where the Inland Revenue Department requires the University to pay, deduct or withhold Tax from any of the contact payments to which the declaration relates, the Contractor must refund the amount of that Tax to the University of Auckland.

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