Running payroll in New Zealand: PAYE, KiwiSaver, ACC, and IR rules in 2026

Employees must complete an IR330 (Tax Code Declaration) before their first payday or when their tax code changes. The main codes are M (no student loan, no IETC), M SL (with student loan), ME / ME SL (with the Independent Earner Tax Credit), SB / SH / ST (secondary income at 10.5 % / 17.5 % / 30 %), WT (schedular contract payments), and CAE (casual agricultural employees). Where no IR330 is provided, the employer must withhold at the no-declaration rate of 45 %.

The Independent Earner Tax Credit (IETC) eligibility band was extended from NZD 24,000-48,000 to NZD 24,000-70,000 from 31 July 2024 under Budget 2024. The credit provides up to NZD 520 per year, or NZD 10 per week.

Employees earning between NZD 24,000 and NZD 66,000 receive the full weekly credit. The entitlement then abates at 13 cents per dollar earned above NZD 66,000, reducing to zero at NZD 70,000.

To receive the IETC through payroll rather than through year-end assessment, employees must select tax code ME or ME SL on their IR330. The credit is not available to individuals receiving Working for Families, income-tested benefits, NZ Superannuation, or a Veteran’s Pension.

The Earner Levy for 2026/27 is NZD 1.75 per NZD 100 of liable earnings (1.75 %), up from NZD 1.67 in 2025/26. Maximum liable earnings rise to NZD 156,641, capping the annual levy at NZD 2,741.22.

The levy is embedded in the IRD PAYE tables; for employers it requires no separate calculation. Earnings above NZD 156,641 are not subject to the Earner Levy, but PAYE continues at 33 % or 39 % as applicable.

For 2026/27, the annual repayment threshold is NZD 24,128. The repayment rate is 12 % of every dollar earned above the threshold. Pay-period thresholds: NZD 464 weekly, NZD 928 fortnightly, NZD 1,856 four-weekly, NZD 2,010.66 monthly. For secondary jobs, the threshold does not apply: 12 % is deducted on all secondary earnings.

The default minimum KiwiSaver employer contribution increased from 3 % to 3.5 % on 1 April 2026, with a further increase to 4 % already legislated for 1 April 2028. The new rate applies to all pay days on or after 1 April 2026, even where the pay period spans both March and April.

Key operational points:

• The entire contribution for a pay cycle is calculated at 3.5 % if the pay day falls on or after 1 April 2026.
• The legacy 3 % employee rate is only available through a temporary rate-reduction application lasting 3-12 months.
• Employer contributions are calculated on gross earnings, including overtime, bonuses, and commission.

From the same date, employer contributions also became compulsory for KiwiSaver members aged 16 and 17 for the first time. Permanent employees aged 18-65 continue to be automatically enrolled from their first pay, with an opt-out window between day 14 and day 56 of employment.

The KiwiSaver stapling rules introduced in November 2021 continue to apply. Contributions must follow the employee’s existing scheme where one already exists; otherwise, Inland Revenue allocates the employee to a default scheme.

Employer KiwiSaver contributions are not salary and are not subject to PAYE directly. They bear Employer Superannuation Contribution Tax (ESCT), deducted from the employer contribution before it reaches the employee’s account. The ESCT rate is set by the employee’s prior-year salary plus employer superannuation contributions combined, banded as:

For employees with less than one full tax year of service, the employer uses an estimate based on expected first-year earnings. Employers can alternatively apply the PAYE inclusion method, treating employer contributions as part of gross salary and deducting PAYE directly. Threshold values published in IRD’s Payroll Calculations Specification are authoritative.

The average Work Levy for 2026/27 is NZD 0.69 per NZD 100 of liable earnings. Actual rates vary materially by Classification Unit, ranging from NZD 0.02 per NZD 100 for some low-risk professional services to more than NZD 9.00 per NZD 100 for higher-risk sectors such as logging and construction.

A separate Working Safer Levy of NZD 0.08 per NZD 100 applies at a flat rate and is collected by ACC on behalf of WorkSafe NZ and MBIE.

Two operational changes also take effect in this levy year:

• Interest now applies to ACC levy payment plans from 1 April 2026. Previous payment plans were interest-free.
• The No-Claims Discount mechanism is being discontinued from the 2027 levy year onwards, with Work Levy rates moving to a CU-only model.

The maximum liable earnings threshold for both the Work Account and Earner Levy in 2026/27 is NZD 156,641.

The single FBT rate of 63.93 % applies to all benefits regardless of the employee’s income, the simplest method. The alternate rate, available in quarters 1-3 with a full wash-up in Q4, applies 49.25 % to non-attributed benefits to non-shareholder employees and 63.93 % to attributed benefits and benefits to shareholder-employees.

Quarterly returns are due within 20 days of each quarter end (Q4 by 31 May); an annual income-year return is available to employers whose PAYE plus ESCT did not exceed NZD 1 million in the prior year. The de minimis exemption applies to unclassified benefits up to NZD 300 per employee per quarter and NZD 22,500 per employer per year.

When paying annual leave, the employer must pay the greater of OWP and AWE. For employees with stable fixed salaries and no variable pay, OWP equals AWE. For commission earners, sales staff, or employees doing regular overtime, AWE is typically higher, and failure to apply the greater-of rule is the primary source of Holidays Act non-compliance. Headline current-Act entitlements:

New Zealand recognises 11 nationwide statutory public holidays in 2026, alongside regional anniversary days. Key 2026 dates include ANZAC Day (Mondayised to 27 April), Matariki (10 July), and Boxing Day (Mondayised to 28 December). Matariki, introduced under the Te Kāhui o Matariki Public Holiday Act 2022, falls on a variable date linked to the Māori lunar calendar.

Public holiday payment obligations depend on whether the day qualifies as an otherwise working day (OWD) and whether the employee works the holiday:

• If the employee works on an OWD public holiday, the employer must pay time-and-a-half plus an alternative day off.
• If the public holiday falls on an OWD and the employee does not work, the employer must pay Relevant Daily Pay (RDP).
• If the employee works on a public holiday that is not an OWD, the employer must pay time-and-a-half only, with no alternative day entitlement.

On termination, employers must pay accrued but untaken annual leave weeks at the greater of OWP or AWE, plus 8 % of gross earnings since the last anniversary date for the partial accrual year not yet converted to a full week entitlement.

Foreign companies hiring remote employees in New Zealand can create permanent establishment (PE) exposure under New Zealand’s tax treaty framework. The OECD’s 2025 Commentary update introduced a two-part test focused on how regularly the employee works from the home office and whether the arrangement serves a genuine commercial business purpose rather than employee convenience alone.

IRD may also view a New Zealand-based employee as creating a PE where they habitually conclude contracts or act with significant authority on behalf of the foreign employer. PE analysis remains highly fact-specific.

Since 23 December 2023, all employers can use 90-day trial periods for eligible new employees, regardless of company size. To be enforceable, the clause must be included in the written employment agreement, signed before work begins, and clearly explain the employer’s dismissal rights and notice process.

Trial periods cannot be used for employees who previously worked for the employer or for Accredited Employer Work Visa holders.

Under section 6 of the Employment Relations Act 2000, New Zealand courts assess the real nature of the relationship rather than the contract label itself. The Supreme Court’s 2025 Rasier decision involving Uber drivers reinforced that contractor wording alone will not prevent reclassification where the practical relationship operates like employment.

The Employment Relations Amendment Act 2026 introduced a new specified contractor gateway with a five-part statutory test. If any requirement is missing, the broader Bryson “real nature of the relationship” analysis continues to apply.

For office-based employees, the typical statutory employer cost stack includes:

• KiwiSaver employer contributions
• ESCT on employer KiwiSaver contributions
• ACC Work Levy
• Working Safer Levy

In practice, employer-side statutory costs often sit around 5-8 % above gross salary for lower-risk office roles, excluding EOR fees or benefits costs.