Table of Contents
Introduction
Understanding tax rates in New Zealand is essential for managing your personal finances, budgeting effectively, making informed employment decisions, and ensuring you’re not underpaying or overpaying tax throughout the year. While the NZ tax system appears simple on the surface — especially relative to other countries — many Kiwis misunderstand how tax brackets actually work, how PAYE is calculated, and how the ACC earners’ levy affects their annual tax burden. This ultra-chunky guide breaks down the entire system in detail, covering 2025 income tax thresholds, PAYE deductions, secondary tax rates, student loan deductions, KiwiSaver contributions, and common mistakes that lead to unexpected tax bills at the end of the financial year.
The New Zealand tax system uses a progressive tax structure, meaning different portions of your income are taxed at different rates. Contrary to a widespread myth, earning more does not mean all of your income suddenly gets taxed at a higher bracket. Only the amount that exceeds the bracket threshold is taxed at the higher rate. Many workers, especially those with multiple jobs or variable income streams, end up on the wrong tax code — resulting in underpayment or overpayment. Understanding your tax rate empowers you to check your payslip, confirm your tax code, improve budgeting accuracy, and avoid unexpected IRD adjustments.
For deeper income-related guides:
🔗 PAYE Calculator NZ — https://newzealand-finance.nz/paye-calculator-nz/
🔗 Salary in New Zealand — https://newzealand-finance.nz/salary-in-new-zealand/
NZ Income Tax Rates for 2025
These are the current tax rates for 2025:
| Income Range | Tax Rate |
|---|---|
| $0 – $14,000 | 10.5% |
| $14,001 – $48,000 | 17.5% |
| $48,001 – $70,000 | 30% |
| $70,001 – $180,000 | 33% |
| $180,001+ | 39% |
How progressive tax works (simple example)
If you earn $60,000, you do NOT pay 30% on your entire salary.
Your tax is split into brackets:
- First $14,000 → 10.5%
- Next $34,000 → 17.5%
- Final $12,000 → 30%
This ensures fairness and prevents income jumps from causing sudden tax shocks.
PAYE in New Zealand (How It Actually Works)
PAYE (Pay As You Earn) is the system employers use to deduct tax directly from your wages. Each payday, your employer calculates:
1️⃣ Income tax (based on brackets)
2️⃣ ACC earners’ levy
3️⃣ KiwiSaver contributions (if applicable)
4️⃣ Student loan deductions
The correct tax code is essential. Incorrect codes lead to IRD refunds or bills later.
Your PAYE depends on:
- Gross income
- Tax code
- Secondary income
- KiwiSaver rate
- Student loan obligations
ACC Earners’ Levy – Often Forgotten
Every employee in New Zealand pays the ACC Earners’ Levy — a 1.46% charge applied to income up to a set maximum. This funds injury cover for all New Zealanders.
For someone earning $65,000, ACC alone costs around:
$65,000 × 1.46% = $949
It significantly affects take-home pay but is not technically “income tax.”
Secondary Tax Rates (For People With 2+ Jobs)
If you earn income from more than one job, your second job uses a secondary tax rate.
These higher rates prevent underpayment.
Examples:
- S – Main tax rate for second job
- SB – Second job + student loan
- SH – Higher bracket secondary income
- ST – Top bracket secondary income
Using the wrong secondary tax code is one of NZ’s most common tax mistakes.
How KiwiSaver Affects Tax
KiwiSaver contributions (3–10%) reduce your take-home pay but are not taxed themselves.
Employer contributions ARE taxed before being added to your account (ESCT tax).
Internal link:
🔗 What Is Finance? — https://newzealand-finance.nz/what-is-finance/
Resident vs Non-Resident Tax Rates NZ
NZ tax residents pay tax on worldwide income.
Non-residents pay tax only on NZ-sourced income but at slightly different rates.
Residency depends on:
- Days spent in NZ
- Permanent place of abode
- IRD rulings
Common Tax Mistakes Made by New Zealanders
- Using the wrong tax code
- Not accounting for secondary income
- Forgetting about ACC levy
- Believing entire income is taxed at highest rate
- Unexpected student loan deductions
- Changing jobs without updating IRD
- Underpaying tax during freelance or contractor work
FAQs — Tax Rates NZ
1. What are the tax rates in NZ?
Ranging from 10.5% to 39% in 2025.
2. How does NZ’s progressive tax system work?
Each portion of your income is taxed at different rates.
3. What is the ACC earners’ levy rate?
1.46% applied to income up to the levy cap.
4. What is the top tax rate in NZ?
39% for income over $180,000.
5. How is PAYE calculated?
Based on income, tax brackets, ACC levy, KiwiSaver, and tax code.
6. Why is my take-home pay lower than expected?
ACC and KiwiSaver reduce net income.
7. Do I pay tax on bonuses?
Yes — taxed at your marginal rate.
8. Do students pay tax?
Yes — plus student loan repayments if applicable.
9. What is secondary tax?
Higher withholding tax for second jobs.
10. Are NZ tax rates changing in 2025?
Current 2025 tax brackets remain unchanged.
11. How do I check my tax code?
Through IRD or your employer.
12. Can I get a tax refund?
Yes — if too much PAYE was deducted.
13. Do non-residents pay the same tax?
Non-residents pay slightly different rates.
14. Is KiwiSaver taxed?
Employee contributions are not taxed; employer contributions are.
15. Do contractors pay PAYE?
No — they pay provisional tax instead.
16. Do I pay more tax with two jobs?
No — but secondary income uses higher withholding to prevent underpayment.
17. What is the 17.5% tax bracket?
Income from $14,001–$48,000.
18. What tax bracket is $60,000 in NZ?
Your top marginal rate is 30%.
19. How much tax do I pay at $100k?
Top marginal rate is 33%.
20. Who pays 39% tax in NZ?
Only income over $180,000 is taxed at 39%.
