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Income Tax Rates and Codes In NZ: How Much Do I Really Need To Pay?

Date 331addf45bb3516008aff5fb298ee62ac379c2c3a2b3907f5779c303044d921a Feb 1, 2021
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Income Tax In New Zealand, a GLIMPse:

  • But first, what is Income Tax?
  • Income Tax Rates in NZ
  • New Zealand tax rates
  • Do I have to pay taxes if I am unemployed?

There’s no getting around to paying taxes in New Zealand. Everyone's required to pay their dues according to how much they earn, and the type of industry they’re in. Whether you’re a sole proprietor, a corporation, organisation, or a partnership, you should know where, when, and how to pay your taxes. 

But first, what is Income Tax?

NZ has over five million people, most of which are taxpayers. Whether you're employed or running a business, each one of us contribute to funding healthcare, transportation, and other government services that will benefit all Kiwi citizens, as well as our permanent residents.

New Zealand operates an easier tax system that only requires two types of taxes: Income tax, and GST (goods and services tax). GST is the tax which is included in the goods and services in New Zealand, so it's only actually income tax that Kiwis are paying on either a weekly or fortnightly basis, or whenever they earn money. 

Income Tax

For starters, income tax is the amount deducted from your earnings, and is computed depending on your income. But before you get taxed on your profit, whether it’s from a job, pension or benefits, you must first get an IRD number from the Inland Revenue Department — NZ’s public government agency who is responsible for implementing tax policies, public disbursements, and tax collection.

You can use your IRD number for taking out a loan, opening a bank account or Kiwisaver, working for families tax credits, tax returns, and identification for other dealings you have within the country.

You’ll need to apply for an IRD number if you’re a citizen living in New Zealand, residing overseas, and if you’re arriving in New Zealand with a resident, work, or student visa. 

Income Tax Rates in NZ

How much tax do I need to pay?

The amount you pay for your NZ tax will always depend on how much you’re earning. If you’re employed in a company who gets a fixed and regular payment, you just need to give your tax code to your employer and he should deduct accordingly from your salary over the year. If, however, you have several sources of income, you will need to get a secondary tax code for that or ask for a tailored tax code based on your individual circumstances.

Tax codes in NZ

Primary tax codes are normally selected for your highest or only source of income. This only applies to employees and self-employed taxpayers in NZ. 

M - those who earn an annual income between $24,000 and $48,000, without a student loan, you or your spouse receive NZ Super, veteran’s pension, Working for Families Tax Credits. 

M SL - those who meet the above criteria but have a student loan.

ME - no student loan, no NZ super, pension and income tested benefit, but receives an annual income between $24,000 and $48,000. 

ME SL - those who meet the criteria in ME but with student loans. 

Secondary tax codes are given to those with several jobs and whose total amount should be taxed accordingly as well. So, you get to be taxed for one and the other separately if you have a primary and secondary jobs. 

SB - annual income of all jobs do not exceed $14,000.

S - annual income of all jobs is between $14,001 and $48,000.

SH - total amount of annual income ranges between $48,001 and $70,000.

ST - total annual income of all jobs is more than $70,000. 

If an individual earner meets one of the criteria but has a student loan, “SL” will be added next to the tax code given to him. A 12 cent automatic deduction is implemented for every dollar earned upon filing tax code declaration IR330 by the employer. 

Other tax codes also include:

CAE -  for casual agricultural employees, or those engaged in seasonal work for up to 3 months. 

EDW -  casual election day workers.

NSW - those who work in the horticulture or viticulture industries under the supervision of a registered NZ employer. 

STC - special tax code that can be modified or changed according to your personal circumstances. 

WT - contract workers

For those who are doing their taxes alone, it can be helpful to use an online tax calculator to get an idea of which tax code will likely be given to you. 

For R1130 should be completed for tax code declaration which should be submitted to your employer/.  

New Zealand tax rates-bracket

Employers in NZ follow the PAYE method or Pay As You Earn system whereby they deduct a certain amount from their employee’s salary on the day that they receive their salary. It can be on a weekly or fortnightly basis. You simply have to give your employer your tax code, and they’ll do the rest of the taxing. 

Total amount of earnings (PAYE) Tax Rate
Up to $14,000 10.5%
Over $14,000 and up to $48,000 17.5%
Over $48,000 and up to $70,000 30%
Remaining income over $70,000 33%

Do I have to pay taxes if I am unemployed?

No. You’re not required to pay income tax if you didn't earn money for a certain period, and only those who reach the $14,000 threshold are subject to being taxed at 10.5%. You should still however file after the end of the year for any tax refunds from the IRD.

Do I get a tax refund at the end of the year? 

A tax refund will be determined after the IRD receives a tax return from you. In the previous years, taxpayers are the ones who send their tax returns to the IRD. The tax year in NZ is from April 1 to March 31. Today, the IRD will be the one to send you the following after March 31 of the following year: 

  • An income tax assessment of your tax refund.
  • A request for more information to determine the total amount of refund you’re entitled to.
  • Form IR3 in myIR (IRD’s portal) for you to complete your tax return. 

Forms and other information regarding your individual taxes can be found in IRD’s official website, which you can also access on your mobile phones. When you got the time, wherever you are, you can easily go through multiple references online that will help you understand how NZ taxes work. 

Having unlimited mobile data can come in handy, especially when getting updates on how and when to pay your taxes, and filing your tax returns. Mobile plans in NZ offer bundles that are tailored to your needs and budget. Head over to glimp and find the best mobile deal for you!

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