Contract day rate to take-home pay.
Annual take-home
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Gross billings
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Tax + ACC
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Net per week
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Your breakdown
Updates live as you type| Step | Amount |
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From day rate to money in the bank
A contract day rate looks generous next to a salary until you trace it all the way to your bank account. This tool does that trace. It multiplies your day rate by the billable days you expect to work in a year to get gross billings, subtracts your business expenses to reach taxable profit, then applies New Zealand’s progressive income tax and the ACC earners' levy. What is left is your genuine annual take-home, plus a weekly figure so you can compare it to a payslip. Contractors are taxed as self-employed individuals on their net profit, using the same income brackets as everyone else, which is why a contractor and a salaried employee on the same taxable income end up with similar tax, but very different security.
A $800 day rate over 220 days
Take a contractor billing $800 a day, working 220 days in the year after allowing for holidays and gaps between contracts, with $10,000 of genuine business expenses such as software, insurance, and accounting. Here is how the tool turns that into take-home.
Tax and ACC together come to about $47,209, an effective bite of roughly 28 percent of profit. Note the ACC levy sits at $2,552, not 1.67 percent of the full $166,000, because profit above the $152,790 cap is levy-free. The waterfall below steps from gross billings down through expenses, tax, and ACC to the take-home that actually lands.
The GST step contractors forget
This calculator deliberately leaves GST out, and you need to understand why. At $176,000 of billings you are far over the $60,000 registration threshold, so GST registration is compulsory. That means you add 15 percent GST on top of your fees, collect roughly $26,400 from clients, and pass it to Inland Revenue after deducting the GST on your own expenses. That money is never part of your take-home; it flows through you. New contractors routinely make the mistake of treating GST-inclusive invoices as income, then get a nasty shock at their first GST return. So read the take-home here as the after-income-tax position on your fees, with GST handled as a separate pass-through. If your clients are themselves GST-registered businesses, the GST is neutral to them anyway, so charging it does not make you more expensive.
Why your rate must beat a salary
The take-home figure is only half the comparison. A contractor gets no paid annual leave, no sick days, no public holidays, no employer KiwiSaver contribution, and no income between contracts. A permanent employee on a lower headline salary quietly receives four weeks of paid leave, eleven public holidays, sick leave, and a 3 percent employer KiwiSaver top-up. To come out genuinely level, a contract rate has to be meaningfully higher than the salary it replaces. A practical rule of thumb is to load your target salary by at least 20 percent, often more, before dividing into a day rate, so the extra covers the unpaid days and the benefits you are giving up. Also be realistic about billable days: 220 already builds in downtime, but a quiet market can push it lower, and your take-home falls dollar for dollar with it.
Do I need to pay provisional tax as a contractor?
Almost certainly. Once your residual income tax for a year tops $5,000, Inland Revenue expects you to pay the next year’s tax in instalments rather than one lump, usually three times a year. On $166,000 of profit you are well past that line. The smart habit is to set aside roughly a third of every invoice in a separate account for tax, ACC, and GST, so the provisional tax dates do not catch you short. Contractors who spend the gross and scramble at tax time are the ones who get into trouble.
What counts as a deductible business expense?
Costs incurred in earning your contracting income, such as professional indemnity insurance, accounting fees, work-related software and subscriptions, a portion of home-office costs if you work from home, and business travel. Personal spending does not qualify, and mixed-use items like a phone need to be apportioned to the business share. Genuine expenses reduce your taxable profit, which is why the tool subtracts them before tax. Keep clean records and receipts, because Inland Revenue can ask you to substantiate every claim.