New Zealand Income Tax Codes and Rates Explained

Your tax code tells your employer how much to deduct from each pay. The right code brings the amount deducted close to what you will owe for the year, so your take-home pay is predictable and you avoid an unnecessary bill or months of overpayment. It cannot settle everything in advance, because other income, a mid-year change in earnings or a tax credit can still leave a difference for Inland Revenue to square up at year end. Choosing a code also changes only the timing of what you pay, not the amount of tax you owe.

The code itself is a short letter combination on the IR330 form you complete when starting a new job, picking up a second role, or beginning to receive a benefit or pension. It reflects your circumstances: whether the income is your primary or secondary source, whether you carry a student loan, and whether you qualify for the Independent Earner Tax Credit. Your employer uses the code to work out the deduction under Inland Revenue (IRD) rules, a system known as pay as you earn, or PAYE, so your tax is settled progressively across the tax year, which runs from 1 April to 31 March, rather than in a lump sum.

Which tax code should you use?

Your main income is the source expected to pay you the most over the year, not necessarily your first job or the one with the most hours. Most situations then resolve as follows:

• One job and no student loan: M, or ME if you qualify for the Independent Earner Tax Credit (IETC).
• One job with a student loan: M SL, or ME SL if you qualify for the IETC.
• A second job alongside your main income: the main income keeps its M or ME code and the second job takes a secondary code chosen from your expected combined income for the year, with SL added if you have a student loan.
• A main benefit or New Zealand Superannuation (NZ Super) alongside paid work: the benefit or pension generally uses M, with the code set through the Ministry of Social Development, and the paid work takes a secondary code.
• Casual agricultural, recognised seasonal or election-day work: a special code applies, described below.

Contracting income, irregular earnings and a bill or refund which arrives every year need more care, and each is covered in the sections which follow. The IRD's tax code finder is the authoritative check if your situation is unusual.

If you hand your employer no declaration at all, they must deduct tax at the non-notified rate of 45 percent plus the ACC earner's levy, the most expensive outcome of all.

Primary tax codes

Most New Zealanders use one of the following codes for their main source of income:

• M is the default for a single job or primary income source. It applies the standard progressive tax rates based on your total annual earnings.
• ME may apply if your annual income falls between $24,000 and $70,000. The income range is not the whole test: you must be a New Zealand tax resident, and neither you nor your partner can be receiving Working for Families, and you cannot be receiving an income-tested benefit, NZ Super, a Veteran's Pension, or an overseas equivalent. The ME code builds the IETC into your regular pay rather than leaving it to a year-end refund. The credit is $10 a week, or $520 a year, on income up to $66,000, then shrinks by 13 cents for every dollar above that until it runs out at $70,000. Because entitlement is worked out on the whole year, ME suits a stable salary inside the range. If your income is close to $70,000, or you expect to start receiving Working for Families, the IETC paid through your wages can be clawed back at year end, and M with a refund later is the safer choice. If your main job pays less than $24,000 but your combined income is inside the range, ME will not deliver the credit correctly; the IRD's options are a tailored code during the year or receiving the credit through the year-end assessment.
• M SL is used when your primary income is salary or wages and you carry a student loan. The SL suffix ensures compulsory repayments are deducted alongside income tax: 12 percent of every dollar above the repayment threshold, which is $24,128 a year for 2026/27. If repayments were due but SL was omitted, nothing is withheld and the shortfall can appear as a debt at year-end.
• ME SL combines both: the Independent Earner Tax Credit and student loan repayments in a single code.

Secondary tax codes

If you earn income from more than one source at the same time, your second (and any subsequent) employer must deduct tax using a secondary code. Each secondary code applies a flat withholding rate aligned to the marginal tax band your combined income is expected to fall within. The purpose is to approximate the correct total tax across all your income sources, because your primary code alone cannot account for earnings from other jobs. The secondary codes are:

• SB applies when combined annual income from all sources is $15,600 or less. Secondary income is taxed at 10.5 percent.
• S applies when combined income sits between $15,601 and $53,500. Secondary income is taxed at 17.5 percent.
• SH applies when combined income sits between $53,501 and $78,100. Secondary income is taxed at 30 percent.
• ST applies when combined income is between $78,101 and $180,000. Secondary income is taxed at 33 percent.
• SA applies when combined income exceeds $180,000. Secondary income is taxed at 39 percent.

The correct secondary code depends on your total expected income from all sources, not the amount from the second job alone. If your main job pays $55,000 and your weekend work adds $12,000, combined income is $67,000, placing the secondary role on SH.

The cost of getting this wrong is easy to put a number on. Looking only at income tax, and leaving aside ACC, KiwiSaver and any student loan deductions, the correct tax on $67,000 for the year is $12,320.50. The main employer, on M, deducts $8,720.50 from the $55,000, and the second employer, on SH, deducts $3,600 from the $12,000. The two add up exactly. If the second employer is also told M, it deducts only $1,260, because it treats the $12,000 as the first dollars earned in the year and taxes them at 10.5 percent. The year ends with roughly $2,340 owing. Neither payslip looked wrong, because each employer deducted correctly for the information it was given; the error only exists in the combination, which is how it can stay hidden until the assessment arrives. The secondary code is designed to approximate the right deduction across both incomes, and depending on the timing of earnings the year-end result can still differ a little.

Each secondary code also has an SL variant (SB SL, S SL, SH SL, ST SL, SA SL) for those with a student loan. The repayment threshold does not apply to a second job, because it has already been used against your main income, so 12 percent comes off every dollar of secondary salary or wages. If your main job pays less than the threshold, you can apply to the IRD for a special deduction rate which carries the unused portion across.

Other tax codes worth knowing

WT is for schedular payments. These are payments in a defined list of activities, such as certain contracting work, commission sales and entertainment, where the law requires the payer to deduct tax before paying the contractor, at a rate the contractor nominates, subject to minimum rates, on the IR330C form. Being called a contractor does not by itself put you on WT. Many contractors invoice their clients with no tax deducted at all and account for the income through their own return and, once the bill is large enough, provisional tax.

Income earned outside PAYE and outside the schedular payment rules has no tax code. If you run a side hustle, freelance, or trade as a sole trader alongside a salaried job, the salary keeps its usual code. The business income is declared on an IR3 return after the year ends.

Three special codes exist for narrow situations: CAE for casual agricultural work of up to three months with no other income, NSW for recognised seasonal workers, and EDW for temporary work during a general election.

If none of the standard codes fit, you can apply to the IRD for a tailored tax code, which sets a custom withholding rate based on your specific circumstances. It suits people who end up with a large bill or refund year after year, such as someone combining NZ Super with part-time work, or someone whose hours swing from month to month. If the same sizeable refund or bill returns every year, correcting the deduction pattern is more useful than accepting the adjustment each time. A tailored code changes when the tax is paid, not how much is owed.

Understanding New Zealand's progressive tax brackets

Rather than tax every New Zealander the same amount for the public services they use, New Zealand taxes personal income progressively. Each portion of your income is taxed at the rate for the bracket it falls within, not at a single flat rate on everything you earn. Your tax code exists to translate this graduated system into a practical withholding amount your employer can deduct each pay cycle. The brackets for the 2026/27 tax year (from 1 April 2026) are:

• Up to $15,600: 10.5 percent
• $15,601 to $53,500: 17.5 percent
• $53,501 to $78,100: 30 percent
• $78,101 to $180,000: 33 percent
• Over $180,000: 39 percent

Your marginal rate is the tax on your last dollar earned. Your effective rate is your total tax divided by your total income, and once your income extends beyond the lowest bracket it will be below your marginal rate, because the earlier portions were taxed at lower rates. For instance, take someone earning $60,000:

• First $15,600 at 10.5 percent = $1,638.00
• $15,601 to $53,500 at 17.5 percent = $6,632.50
• $53,501 to $60,000 at 30 percent = $1,950.00
• Total income tax: $10,220.50

In the example above, the marginal rate is 30 percent, but the effective rate is 17 percent. An extra $1,000 at this level would be taxed at 30 cents in the dollar, not 17. Crossing a threshold cannot leave you worse off, because only the portion above it is taxed at the higher rate. The marginal rate is the starting point when weighing up overtime or a second role, since it is the rate the extra income will bear, before any ACC, KiwiSaver or student loan deductions on the same dollars.

Payroll deductions beyond income tax

The ACC earner's levy and KiwiSaver contributions also reduce your take-home pay. For the 2026/27 tax year the ACC earner's levy is $1.75 per $100 of liable earnings including GST, up to maximum liable earnings of $156,641. It funds New Zealand's no-fault accident compensation scheme, and on a $60,000 salary it adds roughly $1,050 a year.

From 1 April 2026, the default KiwiSaver Scheme employee contribution rose to 3.5 percent of gross pay (up from 3 percent), with the employer's compulsory contribution rising to match. Only the employee contribution reduces your pay; the employer's share is separate, although whether it sits on top of your quoted salary or inside a total remuneration package depends on your employment agreement, and it is taxed before it reaches your account. At $60,000 the employee contribution is $2,100 a year. You can apply through the IRD for a temporary reduction back to 3 percent for between three months and a year if the increase creates affordability pressure.

Put together, an employee on $60,000 for the full year, with no student loan, no IETC and a 3.5 percent KiwiSaver Scheme contribution, takes home roughly $46,630 before any other payroll deductions. The effective income tax rate of 17 percent understates the total reduction from gross pay considerably, and the net figure is the one to plan spending and saving around.

Tax bracket creep

Bracket creep is the process by which inflation pushes incomes into higher tax brackets without any real increase in purchasing power. New Zealand's thresholds were last adjusted in July 2024, the first move since 2010, covering roughly a quarter of the cumulative inflation over those 14 years. If your pay has kept pace with inflation since 2010, your effective tax rate is probably higher now.

When income tax was first implemented in 1891, most of the population was exempt (anyone earning under £300 a year), and the top rate was only 5 percent. By the First World War roughly 12,000 people, out of an adult population of about 700,000, paid it. Wartime spending multiplied the take elevenfold and made income tax the country's largest single tax, and it remains central to government revenue today. PAYE deductions from wages began in 1958. In the year to June 2025, individuals paid about $60 billion in income tax, roughly half of the $117 billion Inland Revenue collected. A levy designed for a small minority of high earners became the main way the government is funded, and PAYE made it largely invisible: for most people income tax is a smaller deposit rather than a bill they consciously pay.

The year-end assessment

From late May, the IRD issues automatic income tax assessments to people whose income has already been reported to it and who do not need to file an IR3, which covers most salary, wage, pension, benefit and taxed-investment-income recipients. For the 2025 year it issued 3.63 million automatic assessments, refunded 2.37 million people, and sent bills to 337,000. Those figures exclude anyone who has to file an IR3. Possible causes of a bill include a wrong code, income from a second source, an extra pay period in the year (27 fortnightly pays instead of 26), an IETC claimed when you were not entitled to it, and investment income taxed at too low a rate. Compare the assessment with the income summary in myIR before concluding the tax code was responsible. Bills of $50 or less are generally written off, although not where the code or rate was wrong, and anything larger is due by 7 February the following year, or the next working day. A refund feels pleasant, but where it arose because too much PAYE was deducted, it is cash you could have used during the year.

Common tax code mistakes and how to avoid them

Using M for a second job. An expensive mistake, because it taxes the second income as though it were the first dollars earned. Your secondary code must reflect total income from all sources, not the amount from the second job alone.

Ignoring the student loan suffix. Omitting SL from your code does not waive your repayment obligation. The amount owed simply accumulates and arrives as a lump sum later.

Overlooking the ME code. If you earn between $24,000 and $70,000, neither you nor your partner receives Working for Families, and you do not receive a main benefit, NZ Super, or a Veteran's Pension, you may be eligible for the IETC. If you qualify but do not use ME, the credit usually arrives through the year-end assessment instead, so the difference is when you receive the money rather than whether you do.

Forgetting life changes. Reaching NZ Super age, paying off a student loan, or picking up a second income source all warrant a code review. Your employer applies whatever code you last gave them.

Checking and changing your code

Each source of PAYE income needs its own declaration, so the sequence is short. Identify the likely code for each payer from the sections above. Sign in to myIR to check the code most recently reported for each source, and confirm it against your latest payslip. If one is wrong, give the employer concerned a completed IR330; the form goes to the payer, not to Inland Revenue, and applies to future pays. Then revisit the codes whenever you start or leave a job, add an income source, expect your annual income to change materially, take out or repay a student loan, or gain or lose IETC eligibility. A five-minute check can prevent months of needless overpayment or an avoidable bill at year end.