New Zealand has a progressive tax system, which means that the amount of tax a person pays on their income increases the more they earn, structured across five income bands.
At the beginning of April, those bands changed, increasing the earning limits applied to each tax rate. They now stand at:
| Income | Tax rate |
| $0-$15,600 | 10.5% |
| $15,601-$53,500 | 17.5% |
| $53,501-$78,100 | 30% |
| $78,101-$180,000 | 33% |
| $180,001+ | 39% |
So if your annual salary is $75,000, you’ll pay:
- 10.5% on the first $15,600 of your salary
- 17.5% on the next $37,901, which takes you to the $53,501 band and then …
- 30% on the last $21,499 of your salary up to $75,000.
This adds up to, approximately: $1638 + $6633 + $6450 = Tax of: $14,721
What is PAYE?
If you are employed and earn a salary, your taxes will be deducted from your wages before you receive them via PAYE, which stands for Pay As You Earn. This ensures that your tax liabilities are spread out evenly across your wages, instead of arriving in the form of a big tax bill at the end of the financial year.
What are my taxes used for?
Income tax revenue is used by the government to pay for the services it provides, including:
- Defence
- Education
- Health
- Housing & community development
- Law & order
- Social security & welfare
How can I lower my tax rate?
There are tax credits available to salaried workers, they include:
- Independent earner tax credit
- Tax credits for donations
Independent earner tax credit
If you earn between $24,000 and $70,000 in a tax year, you may be eligible for the independent earner tax credit (IETC). If you meet the necessary requirements, you can receive:
- $10 per week if you earn between $24,000 and $66,000
Note: if you earn between $66,001 and $70,000, your entitlement will reduce by 13c for every $1 you earn over $66,000.
You can find out more about the IETC here.
Tax credits for donations
You can claim 33.33c for every $1 you donate to approved charities and organisations, this includes any school donations. The total amount claimable in a tax year is the lesser of:
- A third of your total donations
- A third of your taxable income
Note: Inland Revenue allows couples to share their donations. You can find out more about tax credits for donations here.
About the author of this page
Bruce Pitchers is Canstar NZ’s Content Manager. An experienced finance reporter, he has three decades’ experience as a journalist and has worked for major media companies in Australia, the UK and NZ, including ACP, Are Media, Bauer Media Group, Fairfax, Pacific Magazines, News Corp and TVNZ. As a freelancer, he has worked for The Australian Financial Review, the NZ Financial Markets Authority and major banks and investment companies on both sides of the Tasman.
In his role at Canstar, he has been a regular commentator in the NZ media, including on the Driven, Stuff and One Roof websites, the NZ Herald, Radio NZ, and Newstalk ZB.
Away from Canstar, Bruce creates puzzles for magazines and newspapers, including Woman’s Day and New Idea. He is also the co-author of the murder-mystery puzzle book 5 Minute Murder.
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