NZ Tax Rates: What Are NZ’s Tax Brackets?

Are recent tax debates leaving you overwhelmed and confused? Canstar breaks down what NZ’s tax brackets are and how much you should be paying.

Why are there different tax rates?

New Zealand has five different income tax brackets? To put it simply, the less you earn, the lower your tax bracket. By breaking income down into various tax brackets, all New Zealanders pay a fair amount of tax relative to their income.

What are the five tax brackets?

New Zealand’s five tax brackets are:

New Zealand has a progressive tax system, which means that a person’s marginal income tax rate rises as their income increases. For example, everyone pays the lowest rate on the first $14,000 earned, regardless of total income. This continues through each tax bracket, meaning that the top tax rate of 39% only applies to annual income over $180,000.

For example, if you earn $30,000, you’ll pay 10.5% on each dollar earned up to $14,000, and 17.5% on the next $16,000: a total of $4270.

What is PAYE?

Income tax is typically called PAYE in New Zealand.

PAYE stands for Pay As You Earn. It’s used to collect income tax and an ACC levy from an employee’s salary or wages. The PAYE system ensures that income tax is deducted from a worker’s paycheck before they receive it.

Essentially, PAYE ensures that workers pay their income tax spread throughout the year, rather than receiving a huge tax bill at the end of the financial year.

What are my taxes used for?

The money deducted goes towards many projects and services, including:

  • Health
  • Education
  • Social security and welfare
  • Law and order
  • Defence
  • Housing and community development

PAYE is the reason we have free (and subsidised) public healthcare and education, and receive benefits if we’re unemployed, or unable to work due to illness.

How can I lower my tax rate?

There are two common ways to lower the amount of tax you’re paying:

  • Independent earner tax credit
  • Tax credits for donations

Independent earner tax credits

If you earn between $24,000 – $48,000 in a tax year, you may be eligible for independent earner tax credits. You can receive tax credits by selecting a special tax code if you meet the necessary requirements. You’ll receive:

  • $10/week if you earn between $24,000 – $44,000

If you earn between $44,000 – $48,000 your entitlement will reduce by 13 cents for every dollar you earn over $44,000.

Find out more about independent earner tax credits here.

Tax credits for donations

You can claim 33.33 cents for every dollar you donate to approved charities and organisations. The total amount you can claim in a tax year is the lesser of:

  • 33.33% of your total donations or;
  • 33.33% of your taxable income

If your total donations were more than your taxable income, you can split your donations with your spouse or partner.

Find out more about tax credits for donations here.

About the author of this page

This report was written by Canstar Content Producer, Caitlin Bingham. Caitlin is an experienced writer whose passion for creativity led her to study communication and journalism. She began her career freelancing as a content writer, before joining the Canstar team.

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