Tax in New Zealand: an overview

Taxation is a vast and often complex subject. This page aims to provide a general outline on the tax system in New Zealand, relevant to potential or new migrants.

Who handles tax in New Zealand?

The Inland Revenue Department (IRD) is responsible for handling taxation issues for individuals, families, businesses, employers, not-for-profit groups, non-residents and visitors in New Zealand.

If you obtain employment in New Zealand, you will need to apply for an IRD number, which will serve as your unique tax identifier. This eight or nine digit unique number will never change, even if you move to another country and then return to New Zealand at some stage in the future.

Will I need an IRD number?

You must obtain an IRD number if:

  • You are earning an income
  • You are starting a business
  • You are registering for Working for Families tax credits
  • You are registering for a student loan
  • Your child has a part-time job
  • You file tax returns
  • You ask the Inland Revenue about your tax
  • You apply for child support

It is not compulsory for every individual (i.e. baby, child) to have an IRD number, but if you or your children are earning income you have to pay tax, and cannot do so without an IRD number.

If you do not have an IRD number, tax will be deducted at the ‘no notification’ rate, which is the highest rate of tax (currently 45 cents for every dollar earned). You can also apply for an IRD number for your child so a lower rate of withholding tax is deducted from interest earned on their bank balance.

Tax rates

In New Zealand you will pay tax on every cent earned. The IRD is explicit in terms of how much tax income earners will owe. See our New Zealand tax guide for a breakdown of the numbers.

Accident Compensation Corporation (ACC) levy

Income that you receive from personal effort is liable for ACC earners' levy. This levy is charged to cover the cost of rehabilitation and compensation following non-work related injuries. The levy is set at 1.7% for the 1 April 2009 to 31 March 2010 tax year and charged to a maximum of $1,810.04.

Earnings subject to the ACC levy include wages, salaries, back pay, holiday pay, overtime pay, long-service pay, bonuses, gratuities, taxable allowances, shareholder-employee salaries, and salaries to partners in a partnership.

Goods & Services Tax (GST)

Goods and services tax (GST) is a tax on most goods and services in New Zealand, most imported goods and certain imported services. GST is added to the price of taxable goods and services at a rate of 12.5%.

Taxable goods include all types of personal and real property and food, while services cover everything other than goods or money, for example TV repairs and doctors’ services.

Tax credits

Certain tax credits have been put in place in New Zealand to aid low- and middle-income families through Working for Families. Adjustments are made regularly to ensure the credits keep pace with inflation. Credits can be paid throughout the year or in a lump sum at the end of each financial year. There are four main categories of Working for Families credits:

  • Family Tax Credit – (previously called family support) is a payment for each dependent child aged 18 or younger.
  • In-work Tax Credit – (previously called in-work payment) is a payment for families working a minimum number of hours each week for a salary or wage.
  • Minimum Family Tax Credit – (previously called family tax credit) is a payment for families earning up to $24,493 a year before tax.
  • Parental Tax Credit – is a payment for a newborn baby for the first eight weeks or 56 days after the baby is born.

In 2009, an additional tax credit option was implemented called the Independent Earner Tax Credit. You may be eligible to receive this tax credit each month through your income.

The Independent Earner Tax Credit is for New Zealand tax residents who earn between NZ$24,000 and $48,000 in a tax year (1 April to 31 March) and who don't receive:

  • Working for Families tax credits
  • an income tested benefit, including domestic purposes benefit, emergency benefit, independent youth benefit, invalids' benefit, sickness benefit, unemployment benefit or widows' benefit
  • NZ Super
  • a veteran's pension, or
  • a foreign equivalent of any of the above.

From 1 April 2009 eligible tax payers earning between $24,000 and $44,000 will be entitled to an extra $10 each week. This will increase to $15 each week from 1 April 2010. For eligible tax payers earning over $44,000 the independent earner tax credit decreases by 13 cents for every additional dollar earned.

Income tax for companies

The Inland Revenue Department is happy to answer any queries or questions you may have. If you are planning to set up a business in New Zealand, it is advisable to contact the IRD to discuss options and how to work out your tax and any other levies that you will be legally required to make.