NZ Income Tax: How PAYE, Tax Codes, and Investment Tax Work (2025-26)
On an $85,000 salary, you pay $17,928 in income tax for the 2025-26 year, an effective rate of 21.1% (IRD). New Zealand collects income tax through the PAYE (Pay As You Earn) system. Your employer deducts tax from every pay based on your tax code, and IRD reconciles the total at the end of the tax year. Most salary and wage earners never need to file a return, because PAYE handles it automatically.
Use the Forge Money PAYE calculator to get your exact take-home pay.
How PAYE works
PAYE is not a separate tax. It's the method New Zealand uses to collect income tax from wages and salaries during the year, rather than requiring a lump-sum payment at year end (IRD).
Your employer calculates how much tax to withhold from each pay based on two things: the current tax brackets and the tax code you've provided. The withheld amount is sent directly to IRD on your behalf. At the end of the tax year (31 March), IRD compares the total PAYE deducted with your actual tax liability. If there's a difference, you either get a refund or owe a small amount.
NZ uses a progressive tax system. Each dollar is taxed at the rate for the bracket it falls in, not a single flat rate on your entire income. A pay rise into a higher bracket only affects the dollars above that threshold. You never lose money by earning more.
Tax brackets (2025-26)
These rates apply from 1 April 2025 to 31 March 2026 (IRD).
| Income bracket | Tax rate |
|---|---|
| $0 to $15,600 | 10.5% |
| $15,601 to $53,500 | 17.5% |
| $53,501 to $78,100 | 30% |
| $78,101 to $180,000 | 33% |
| $180,001 and above | 39% |
On a salary of $85,000, you pay $17,928 in PAYE. That's an effective tax rate of 21.1%, well below the 33% marginal tax rate on your top dollar (IRD).
For a detailed breakdown of how progressive tax works and what you pay at every income level, see the NZ tax brackets guide.
Tax codes explained
Your tax code tells your employer how much PAYE to deduct from each pay. Using the wrong code means you'll either overpay or underpay tax during the year and need to square up with IRD after 31 March (IRD).
| Tax code | Who uses it | What it means |
|---|---|---|
| M | Primary job, no student loan, no special credits | Standard deductions at progressive PAYE rates |
| ME | Primary job, eligible for IETC | Standard PAYE minus up to $10/week for the Independent Earner Tax Credit |
| M SL | Primary job with student loan | Standard PAYE plus 12% student loan deduction on income above $22,828 |
| M SL HEC | Primary job with student loan and high earner charge | Standard PAYE plus student loan with higher repayment obligations |
| S | Secondary job, no student loan | Flat-rate deduction at your expected marginal rate (17.5%, 30%, 33%, or 39%) |
| SH | Secondary job, income between $53,501 and $78,100 | Flat 30% deduction on secondary income |
| ST | Secondary job, income between $78,101 and $180,000 | Flat 33% deduction on secondary income |
| SA | Secondary job, income above $180,000 | Flat 39% deduction on secondary income |
| S SL | Secondary job with student loan | Secondary tax rate plus 12% student loan repayment |
| SH SL | Secondary job ($53,501-$78,100 range) with student loan | Flat 30% plus 12% student loan repayment |
| ST SL | Secondary job ($78,101-$180,000 range) with student loan | Flat 33% plus 12% student loan repayment |
| CAE | Casual agricultural worker | Special rate for short-term seasonal farm work |
| NSW | No notification provided | Employer deducts at the top rate (39%) as a default |
To find your correct tax code, use the IRD tax code finder at ird.govt.nz or check the IR330 form (IRD).
How secondary tax codes work
If you have two or more jobs, one is your primary employment (using the M code) and the others are secondary (using an S-series code). The secondary code ensures the correct amount of total PAYE is deducted across your combined income (IRD).
The secondary code you use depends on your total expected annual income from all sources:
| Expected total income from all jobs | Secondary tax code |
|---|---|
| $15,601 to $53,500 | S (17.5%) |
| $53,501 to $78,100 | SH (30%) |
| $78,101 to $180,000 | ST (33%) |
| $180,001+ | SA (39%) |
Secondary tax is not "extra" tax. It's the correct marginal rate applied to your additional income. When IRD does your year-end assessment, they calculate tax on your total income from all sources. If PAYE from your primary and secondary jobs was accurate, there's nothing more to pay. If there's a mismatch, you'll get a refund or a small bill.
How to file a tax return
Most salary and wage earners in NZ don't need to file a tax return. IRD automatically calculates your end-of-year position using PAYE information from employers, interest income from banks, and dividend data from companies. They call this an income tax assessment, and it's issued from late May each year (IRD).
You receive your assessment through myIR. If you've overpaid, IRD issues a refund automatically (usually within a few weeks). If you've underpaid, they'll send you a bill with payment options.
When you do need to file an IR3
You need to file an individual income tax return (IR3) if you (IRD):
- Earned self-employment or sole trader income
- Earned income from a partnership or look-through company
- Earned rental income
- Had overseas income
- Earned more than $200 in income not taxed at source
- Received schedular payments and have expenses to claim
- Are a provisional tax payer
The IR3 is due 7 July each year (or 31 March the following year if you use a tax agent). Late filing attracts penalties and interest (IRD).
What is provisional tax?
Provisional tax is a way of paying your income tax in instalments during the year, rather than in a lump sum after year end. It applies if your residual income tax (tax to pay after PAYE and other withholding credits) is more than $5,000 in a year (IRD).
Provisional tax mostly affects self-employed people, rental property owners, and investors with significant untaxed income. If you're a salary-only earner with correct PAYE deductions, provisional tax likely doesn't apply to you.
There are three methods for calculating provisional tax: standard (based on last year's tax plus 5%), estimation (you choose the amount), and the accounting income method (AIM) for businesses using compatible accounting software (IRD).
Resident withholding tax (RWT) on investment income
If you earn interest from a bank account or dividends from NZ company shares, Resident Withholding Tax (RWT) is deducted at source before you receive the income (IRD).
Your bank or share registry deducts RWT at a rate that matches your income tax bracket. You choose your RWT rate when you open an account or update it through myIR.
RWT rates (2025-26)
| RWT rate | Applies to people with taxable income in this bracket |
|---|---|
| 10.5% | $0 to $15,600 |
| 17.5% | $15,601 to $53,500 |
| 30% | $53,501 to $78,100 |
| 33% | $78,101 to $180,000 |
| 39% | $180,001+ |
If you don't provide your IRD number to your bank, RWT is deducted at the default rate of 33% on interest or 33% on dividends (IRD).
The key point: RWT rates go up to 39% and must match your marginal tax rate. If your RWT rate is lower than your actual marginal rate, you'll owe the difference at year end. If it's higher, you'll get a refund.
Prescribed investor rate (PIR) on PIE investments
A Portfolio Investment Entity (PIE) is a type of managed fund, including most KiwiSaver funds, many term deposits, and managed investment funds. Income from PIE investments is taxed at your Prescribed Investor Rate (PIR), not your marginal tax rate (IRD).
PIR rates (2025-26)
| PIR rate | Applies if your taxable income plus PIE income is... |
|---|---|
| 10.5% | $14,000 or less (in either of the last two years) |
| 17.5% | $14,001 to $48,000 (in either of the last two years) |
| 28% | $48,001 or more |
The PIR thresholds use older income bands (they haven't been updated to match the 2024 bracket changes). The maximum PIR is 28%, which is lower than the 30%, 33%, and 39% marginal rates that many earners face. This makes PIE investments more tax-efficient for anyone earning above $48,000 (IRD).
RWT vs PIR comparison
| Your taxable income | RWT rate on bank interest | PIR rate on PIE income | Saving with PIR |
|---|---|---|---|
| $0 to $14,000 | 10.5% | 10.5% | None |
| $14,001 to $48,000 | 17.5% | 17.5% | None |
| $48,001 to $53,500 | 17.5% | 28% | PIR is higher* |
| $53,501 to $78,100 | 30% | 28% | 2% |
| $78,101 to $180,000 | 33% | 28% | 5% |
| $180,001+ | 39% | 28% | 11% |
*For income between $48,001 and $53,500, PIR (28%) is actually higher than the RWT rate (17.5%). This is because PIR thresholds use older income bands. In this narrow range, a standard bank account is more tax-efficient than a PIE for interest income.
For most earners above $53,500, PIE investments have a clear tax advantage. On $10,000 of investment income, someone on a 33% marginal rate saves $500 per year by holding it in a PIE (28%) versus a bank account (33%) (IRD).
PIR is a final tax. Once it's been deducted, you don't include PIE income in your tax return, and you can't owe more on it later. This is different from RWT, where the tax withheld may need to be topped up or refunded at year end (IRD).
Tax credits
Independent Earner Tax Credit (IETC)
The Independent Earner Tax Credit gives you up to $520 per year ($10 per week) if your annual income is between $24,000 and $44,000. The credit abates between $44,000 and $48,000 and is not available above $48,000 (IRD).
To qualify, you must not receive any of the following during the tax year: a government benefit, New Zealand Superannuation, Working for Families tax credits, or a student allowance (IRD).
You claim the IETC by using the ME tax code (or M if you prefer to claim it at year end through your tax assessment). If you're eligible and use the M code, IRD will include it in your automatic assessment.
Donation tax credits
If you make monetary donations of $5 or more to approved charities (donee organisations), you can claim a donation tax credit of 33.33% of the donation amount, up to a maximum of your taxable income (IRD).
For example, if you donate $500 to a registered charity during the tax year, you can claim a tax credit of $167. You need donation receipts and claim the credit through myIR after the tax year ends. IRD will either reduce your tax bill or add it to your refund.
Working for Families
Working for Families (WfF) is a package of tax credits for families with dependent children. The amount depends on your family income, number of children, and children's ages. WfF is a topic in its own right and will be covered in a separate guide. You can check your eligibility and estimate your entitlement through myIR (IRD).
Worked examples
All examples use 2025-26 tax rates. KiwiSaver at 4% unless stated (the default rate from April 2028; the current minimum may be 3% or 3.5%).
Example 1: Primary job only on $65,000
Anna earns $65,000 from her primary job. She has no student loan and contributes 4% to KiwiSaver.
| Deduction | Calculation | Annual | Weekly |
|---|---|---|---|
| PAYE | Progressive rates | $11,721 | $225 |
| ACC earner's levy | $65,000 x 1.67% | $1,086 | $21 |
| KiwiSaver (4%) | $65,000 x 4% | $2,600 | $50 |
| Total deductions | $15,407 | $296 | |
| Take-home pay | $49,593 | $954 |
On $65,000 with 4% KiwiSaver, your take-home is $954/week. See your exact take-home →
PAYE breakdown (IRD):
| Bracket | Rate | Tax |
|---|---|---|
| $0 to $15,600 | 10.5% | $1,638 |
| $15,601 to $53,500 | 17.5% | $6,633 |
| $53,501 to $65,000 | 30% | $3,450 |
| Total | $11,721 |
Anna's effective tax rate is 18.0%. Her tax code is M.
Example 2: Primary job ($60,000) plus secondary job ($15,000)
Ben earns $60,000 from his main job and $15,000 from a weekend side job. He has no student loan and contributes 4% to KiwiSaver through his primary job only.
Primary job (tax code M):
| Bracket | Rate | Tax |
|---|---|---|
| $0 to $15,600 | 10.5% | $1,638 |
| $15,601 to $53,500 | 17.5% | $6,633 |
| $53,501 to $60,000 | 30% | $1,950 |
| Primary PAYE | $10,221 |
Secondary job (tax code SH, flat 30%):
Ben's combined income is $75,000, which falls in the $53,501 to $78,100 range, so he uses the SH code. His secondary employer deducts a flat 30% (IRD).
| Secondary income | Rate | Tax |
|---|---|---|
| $15,000 | 30% | $4,500 |
Combined position:
| Deduction | Annual | Weekly |
|---|---|---|
| Gross income (both jobs) | $75,000 | $1,442 |
| PAYE (primary) | $10,221 | $197 |
| PAYE (secondary) | $4,500 | $87 |
| ACC earner's levy (1.67% total income) | $1,253 | $24 |
| KiwiSaver 4% (primary job) | $2,400 | $46 |
| Total deductions | $18,374 | $353 |
| Take-home pay | $56,626 | $1,089 |
At year end, IRD calculates tax on Ben's total $75,000 income. Total PAYE owed is $14,721 (IRD). His employers deducted $10,221 + $4,500 = $14,721, so the amounts match and there's nothing extra to pay or refund.
Example 3: Salary plus investment income
Claire earns $65,000 salary, $2,000 in bank interest, and $3,000 in returns from a PIE managed fund.
| Income source | Amount | Tax type | Rate | Tax paid |
|---|---|---|---|---|
| Salary | $65,000 | PAYE | Progressive | $11,721 |
| Bank interest | $2,000 | RWT | 30% | $600 |
| PIE fund | $3,000 | PIR | 28% | $840 |
| Total income | $70,000 | $13,161 |
Claire's marginal tax rate on her salary is 30% (income between $53,501 and $78,100). She's set her RWT rate at 30% to match. Her PIE income is taxed at the 28% PIR, saving her $60 compared to what she'd pay if that $3,000 were bank interest taxed at 30% (IRD).
The PIE income is a final tax and doesn't need to appear on Claire's tax return. Her bank interest is reconciled automatically by IRD. Because her RWT rate matches her marginal rate, she won't owe anything extra or receive a refund on the interest.
If Claire had earned the full $5,000 as bank interest (at 30% RWT), she'd have paid $1,500 in tax on it. By holding $3,000 of it in a PIE, she pays $1,440 instead. That's a $60 saving. The gap gets bigger at higher income levels and larger investment amounts.
Common questions
Do I need to file a tax return?
Most salary and wage earners don't. IRD automatically issues an income tax assessment using PAYE data from your employer, RWT data from banks, and other third-party information. You'll see the assessment in myIR from late May. You only need to file an IR3 return if you have self-employment income, rental income, overseas income, or other untaxed income above $200 (IRD).
What tax code do I use?
If you have one job and no student loan, use M. With a student loan, use M SL. If you're eligible for the IETC ($24K-$48K income, no benefits), use ME. For a second job, use S, SH, ST, or SA depending on your combined income level. Add SL to any secondary code if you have a student loan. Check the IRD tax code finder if you're unsure (IRD).
How is secondary income taxed?
Secondary income is taxed at a flat rate based on your total expected income from all jobs. This isn't "extra" tax. It's the correct marginal rate for your combined earnings. For example, if your primary job pays $60,000 and your secondary job pays $15,000, your secondary income is taxed at 30% (the SH code), because your combined $75,000 falls in the 30% bracket. At year end, IRD checks whether the total PAYE from both jobs matches your actual tax on $75,000 (IRD).
What is RWT and how does it work?
Resident Withholding Tax is deducted from interest and dividend income before you receive it. Your bank deducts RWT at a rate you nominate (10.5%, 17.5%, 30%, 33%, or 39%), which ideally matches your marginal tax rate. If you don't provide your IRD number, the default rate is 33%. At year end, IRD reconciles your RWT with your actual tax liability. Too much deducted means a refund; too little means a bill (IRD).
What is PIR and why does it matter?
Your Prescribed Investor Rate is the tax rate applied to income from PIE investments (including KiwiSaver). PIR rates are 10.5%, 17.5%, or 28%. The maximum PIR of 28% is lower than the 30%, 33%, and 39% marginal rates, making PIE investments more tax-efficient for most earners above $48,000. PIR is a final tax, so once it's deducted there's nothing more to pay or reconcile (IRD).
When is tax due in New Zealand?
The tax year runs 1 April to 31 March. PAYE, ACC, and student loan repayments are deducted from each pay throughout the year. IRD issues automatic income tax assessments from late May. If you owe tax, it's due by 7 February the following year (or the date specified on your assessment). If you file an IR3, it's due 7 July (or 31 March the following year with a tax agent). Provisional tax has its own instalment dates (IRD).
How do I get a tax refund?
If you've overpaid tax during the year (for example, through incorrect tax codes or inconsistent income), IRD will calculate your refund automatically as part of your year-end assessment. Refunds are usually processed from late May and paid directly to your bank account within a few weeks. You don't need to apply for a refund unless IRD requests additional information. Make sure your bank account details are up to date in myIR (IRD).
What is provisional tax?
Provisional tax is a system for paying income tax in advance during the year. It applies if your residual income tax (the amount left after PAYE and other credits are subtracted) exceeds $5,000. It mainly affects self-employed people, rental property owners, and investors with substantial untaxed income. There are three calculation methods: standard (prior year plus 5%), estimation, and AIM. Provisional tax is paid in two or three instalments during the year (IRD).
Can I claim expenses against my income?
Salary and wage earners generally cannot claim work-related expenses against their employment income. NZ doesn't have the tax deduction system that some other countries have for employee expenses. If you're self-employed or have rental income, you can claim legitimate business or rental expenses in your IR3 return. Charitable donations of $5 or more qualify for a separate 33.33% tax credit (IRD).
How does KiwiSaver affect my tax?
KiwiSaver contributions don't reduce your taxable income. You pay PAYE on your full gross salary before KiwiSaver is deducted. However, the returns inside your KiwiSaver fund are taxed at your PIR rate (10.5%, 17.5%, or 28%), not your marginal income tax rate. For anyone in the 30%, 33%, or 39% bracket, this means KiwiSaver investment growth is taxed at a lower rate than it would be in a regular bank account. See the KiwiSaver contribution rates guide for more details (IRD).
What to do next
- PAYE calculator: Get your exact take-home pay after PAYE, ACC, KiwiSaver, and student loan
- NZ tax brackets: See all five brackets, effective rates at every income level, and the 2024 threshold changes
- ACC levy explained: How the earner's levy works and what you pay (currently 1.67% for 2025-26)
- KiwiSaver contribution rates: How each rate affects your take-home pay and retirement savings
- Student loan repayment guide: How the 12% repayment works and what you actually pay
Last updated: 30 March 2026. Source: IRD (ird.govt.nz). Tax rates are for the 2025-26 tax year (1 April 2025 to 31 March 2026). This is educational content, not financial advice.
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This is educational content, not financial advice.