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Paying tax

What is income tax?

Income tax is money taken out of your earnings. Unless you're self-employed, your employer takes out the income tax before you get paid. The main types of income tax are:

Want to know more?

Working for yourself


Why do you pay income tax?

Inland Revenue collects taxes on behalf of the government.

Everyone who earns money in New Zealand must pay their share of tax. The government uses taxpayers' money to pay for services we all need - such as healthcare, education and environmental protection and recreation.

Here's how the government spent our taxes in 2009-10

A graph showing how the government spent our taxes in 2009-10.

Larger version of image

 

If people don't pay their fair share, everyone misses out.


When and how do you pay income tax?

If you earn salary, wages or schedular payments (formerly withholding payments), your tax will be taken out of your pay during the income year by your employer.

Information
For most people the income year starts on 1 April and finishes on 31 March the following year.

So the 2011 income year relates to income from 1 April 2010 to 31 March 2011.

If at the end of the income year you still owe income tax, you'll have to pay it directly to Inland Revenue by 7 February of the following year.

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How much income tax do you pay?

What if you don't pay the right amount of income tax?

Working for yourself


How much income tax do you pay?

How much tax you pay depends on your income.

Important:
Find out if you need a tax code before going any further.

If you need a tax code but don't complete a Tax code declaration (IR330), your employer will take out PAYE (pay as you earn tax) using the no-notification rate (previously no-declaration rate), which is either:

  • PAYE of 45 cents in the dollar (plus ACC earners' levy*) for employees, or
  • 15 cents in the dollar on top of the normal tax on schedular payments rate - formerly withholding payments (listed on the back of the IR330).

If you have a tax code, the current rates are:

1 April 2010 – 30 September 2010
Income range Tax rate
$0 to $14,000 12.5%
$14,000 to $48,000 21%
$48,001 to $70,000 33%
$70,001 and higher 38%
1 October 2010 onwards
Income range Tax rate
$0 to $14,000 10.5%
$14,000 to $48,000 17.5%
$48,001 to $70,000 30%
$70,001 and higher 33%

*If you're on salary or wages, your employer will take out an extra percentage (for every $100 you earn) from your pay for the ACC earners' levy. See the ACC website.

If you earn less than $9,880, or between $24,000 and $48,000, in a tax year you may be entitled to claim tax credits (formerly rebates) which will lower the amount of tax to pay.

Give it a go

Use our PAYE calculator to work out your tax.

Note:
If you're entitled to a tax credit for children (formerly child tax rebate), you might not have to pay so much tax. The tax credit is not included in the calculation. The calculator only works out income tax on the taxable income entered.


What if you don't pay the right amount of income tax?

If you haven't paid enough

If you owe tax, and have received a personal tax summary or filed an individual income tax return, you must pay the amount owing by 7 February of the following year. We've made it really easy to meet your tax obligations - you can make tax payments electronically through your bank, by cheque or at most branches of Westpac.

If you don't pay the full amount of your tax on time, you are liable for any penalties that may apply - so it's best to make sure your tax is all paid up by the due date.

If you've paid too much

If you've paid too much tax or have received a tax credit (formerly rebate), and think you're entitled to a refund, you need to request a summary of earnings (SOE) and calculate your personal tax summary. If you then work out that you're due a refund, you can request a personal tax summary in order to receive the refund.

Give it a go

Use our PAYE calculator to work out how much tax you'll need to pay.

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For more info on government services go to newzealand.govt.nz

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