Taxes

Taxes in New Zealand

New Zealand has a relatively straightforward tax system with progressive income tax, automatic PAYE withholding, and a flat GST. Understanding the system, especially special provisions for new migrants, is important for financial planning.

Tax Year

New Zealand Fiscal Year: April 1 - March 31

Referred to as "tax year ending" the March 31 date.

Example: "2026 tax year" = April 1, 2025 - March 31, 2026

Income Tax Rates (2025-2026)

New Zealand uses five progressive PAYE tax brackets:

Progressive System: Each portion of income is taxed at the applicable rate for that bracket, not a single flat rate on whole income.

No Tax-Free Threshold: PAYE withholding deducts tax (and ACC levy) from every dollar earned.

Example Tax Calculations

Example 1: NZD $50,000 Income

• $0 - $15,600 at 10.5% = $1,638
• $15,601 - $50,000 at 17.5% = $6,020
• Total tax: $7,658 (15.3% effective rate)
• Take-home (before ACC): $42,342

Example 2: NZD $80,000 Income

• $0 - $15,600 at 10.5% = $1,638
• $15,601 - $53,500 at 17.5% = $6,632.50
• $53,501 - $78,100 at 30% = $7,380
• $78,101 - $80,000 at 33% = $627
• Total tax: $16,277.50 (20.3% effective rate)
• Take-home (before ACC): $63,722.50

Example 3: NZD $120,000 Income

• Progressive calculation through brackets
• Total tax: $28,657.50 (23.9% effective rate)
• Take-home (before ACC): $91,342.50

PAYE (Pay As You Earn)

Automatic Withholding:

• Employers deduct income tax from every paycheck
• Automatically calculated based on tax code
• Sent directly to IRD (Inland Revenue Department)
• Most employees receive net pay only

Tax Codes:

• Primary employment: Usually "M" code
• Secondary job: "S" code (higher withholding)
• Student loan: "SL" code
• Employer gets code from you or IRD

Advantage: No large tax bill at year end for most employees

ACC Earner Levy (2025-2026)

Rate: 1.67% of liable earnings

Cap: Maximum NZD $152,790 in wages

• Maximum levy: NZD $2,551.59 per year

Purpose: Funds ACC (Accident Compensation Corporation) for injury coverage

Deducted: Alongside PAYE by employer (or with provisional tax if self-employed)

Universal: Everyone pays, everyone covered for accidents

GST (Goods and Services Tax)

Rate: 15% on most goods and services

Already Included: Displayed prices include GST (unlike USA sales tax)

What's Included:

• Almost everything (food, clothes, electronics, services)
• Exceptions: Financial services, residential rent, some exported goods

Business Registration: Required once turnover exceeds (or likely to exceed) NZD $60,000 per annum

Consumer Impact: What you see is what you pay (no surprise tax at checkout)

Tax Credits and Deductions

Independent Earner Tax Credit (IETC):

• Available to individuals earning between NZD $24,000 and $70,000 per year
• Provides up to NZD $20 per fortnight (maximum NZD $520 per year)
• Automatically applied if eligible
• Reduces tax burden for middle-income earners

Donation Tax Credits:

• 33.33 cents for every dollar donated to approved charities
• Minimum donation: NZD $5
• Approved donee list on IRD website
• Claim in annual tax return

KiwiSaver Tax Credits:

• Government contributes up to NZD $521.43 per year if you contribute
• Must contribute at least NZD $1,042.86 annually
• Automatic for KiwiSaver members
• Significant boost to retirement savings

Rebates for Specific Situations:

• Childcare tax credit (income-tested)
• Housekeeper/childcare rebate (specific circumstances)
• Most claimed via tax return

Limited Deductions:

• NZ has fewer deductions than USA
• Work expenses generally not deductible for employees
• Self-employed can claim business expenses
• No mortgage interest deduction for personal residence

Who Must File a Tax Return

Must File IR3 (Individual Return):

• Self-employed individuals
• Those with untaxed or overseas income
• Those claiming expenses or rebates
• Rental property owners
• Shareholders/directors with significant income

Don't Need to File:

• Employees with only PAYE employment income
• Tax automatically deducted correctly
• No overseas income
• No expenses to claim

Most employees don't file returns - PAYE system handles everything

Filing Deadline: July 7 if filing individually; March 31 (following year) if using registered tax agent

Tax Agents

When to Use:

• Self-employed or business owner
• Complex tax situation
• Overseas income
• Claiming deductions
• First year filing in NZ

Costs: NZD $200-600 for individual returns (higher for complex situations)

Benefits:

• Extended filing deadline (March 31)
• Expertise in deductions and credits
• Reduces errors and audit risk

Finding One: IRD has directory of registered tax agents

Special Provisions for New Migrants

Transitional Resident Status:

• Exempts most foreign-sourced income from NZ tax for first 4 years
• See Banking & Finance section for details
• Major benefit for those with overseas investments
• Must declare foreign income but claim exemption

Tax Residency:

• Become tax resident if in NZ 183+ days in 12-month period
• Or have "permanent place of abode" in NZ
• Tax residents taxed on worldwide income (subject to transitional resident exemption)

Other Taxes

Property Tax (Rates):

• Paid by property owners to local council
• Funds local services (water, waste, parks)
• NZD $1,500-4,000/year typical (varies widely by location and property value)
• Not relevant for renters

Fringe Benefit Tax (FBT):

• Paid by employers on non-cash benefits to employees
• Company cars, low-interest loans, etc.
• Employee usually doesn't pay directly

Resident Withholding Tax (RWT):

• Automatically deducted from bank interest and dividends
• Rates vary based on income
• Final tax for most (no need to declare in return)

No Taxes:

• No capital gains tax (except property speculation)
• No inheritance tax or estate duty
• No payroll tax (for employees)
• No state/local income taxes (only one national rate)

Comparison to Other Countries

vs United States:

• Simpler: No state/local taxes
• Fewer deductions but clearer
• Higher GST (15%) vs varied sales tax (0-10%)
• Top rate 39% vs 37% federal (plus state)
• No capital gains tax vs 15-20% long-term in USA

vs United Kingdom:

• Similar progressive system
• UK top rate 45% vs NZ 39%
• NZ has higher GST (15%) vs UK VAT (20%)
• Simpler than UK system overall

vs Australia:

• NZ simpler, fewer deductions
• Australia top rate 45% vs NZ 39%
• NZ GST 15% vs Australia GST 10%
• No capital gains tax in NZ vs CGT in Australia
• Similar employer retirement contributions (KiwiSaver vs Super)

KiwiSaver and Retirement

KiwiSaver: Voluntary retirement savings scheme

Employee Contribution: Choose 3%, 4%, 6%, 8%, or 10% of gross salary

Employer Contribution: Minimum 3% (required by law)

Government Contribution: Up to NZD $521.43/year

Tax Treatment:

• Contributions from after-tax income (no tax deduction)
• Investment earnings taxed at PIR (Portfolio Investment Rate)
• Withdrawals tax-free (at retirement or first home)

Highly Recommended: Free employer money makes it worthwhile

Tax Payment and Refunds

PAYE Employees:

• Tax paid automatically
• Rarely owe additional tax
• May get small refunds if overpaid

Self-Employed/Business:

• Provisional Tax: Pay in installments (3 times per year)
• Based on prior year or estimated income
• Use-of-money interest if underpay significantly
• Terminal tax due (if any) on filing return

Refunds:

• Processed by IRD
• Direct deposit to bank account
• Usually within 2-4 weeks if return filed correctly

IRD (Inland Revenue Department)

IRD Number: Essential for working, banking, and taxes

• Apply online at ird.govt.nz
• Need passport and visa
• Takes 8-10 business days
• Get this in first week of arrival

MyIR: Online portal for tax affairs

• View returns, make payments
• Update details
• File returns online
• Highly functional

Customer Service:

• Phone: 0800 227 774
• Generally helpful and responsive
• Can call to clarify tax situations

Common Mistakes to Avoid

1. Not getting IRD number immediately: Delays everything

1. Wrong tax code: Results in over/under-withholding

1. Not claiming transitional resident status: Miss out on major benefit

1. Filing when not required: Wastes time (PAYE employees often don't need to)

1. Missing donation tax credits: 33% credit is significant

1. Not joining KiwiSaver: Free employer 3% is substantial

1. Treating NZ like USA tax system: Much simpler, fewer deductions

Tips for Managing NZ Taxes

1. Get IRD number first week: Critical for everything

1. Understand your tax residency date: Important for transitional resident status

1. Join KiwiSaver: Free money from employer and government

1. Check if you need to file: Many don't

1. Use tax agent for complex situations: Worth the cost

1. Track charitable donations: 33% credit adds up

1. Budget for GST: 15% included in prices (but know it's there)

1. US citizens: Get expat tax help: Complex US obligations continue

1. Keep records: At least 7 years for business/investment income

1. Use MyIR portal: Convenient for most tax tasks

Bottom Line: New Zealand's tax system is straightforward compared to many countries. PAYE handles most employees' taxes automatically. No capital gains tax is a major advantage. Combined with potential 4-year transitional resident exemption for foreign income, the tax environment is quite favorable for skilled migrants.