Tax is withheld by the employer from employee's payments through payroll and paid to the Inland Revenue Department.
Employers and employees contribute to a statutory accident insurance scheme. Employers pay premiums for work-related accidents insurance. Employers have to pay a residual claims levy and an employer levy. The amount of the levy that employers pay is determined according to the industry or risk classification and employees' earnings.
The contributions employers make to an approved superannuation fund (excluding foreign schemes) are subject to ESCT. This includes employer contributions to KiwiSaver (or other qualifying registered superannuation schemes).
ESCT is generally deducted at the employee's applicable progressive rate based on the total salary or wages and employer superannuation cash contributions paid to the employee in the previous year.
|The ESCT rates|
|Employee's income for year ended 31 March||ESCT from 1 April|
|$0 to $16,800||10.50%|
|$16,801 to $57,600||17.50%|
|$57,601 to $84,000||30%|
|$84,001 to $216,000||33%|
The KiwiSaver is a workplace-based superannuation savings scheme that operates on a voluntary basis and is available to all employees older than 18. Employers must contribute on behalf of all employees who are members. Employers must calculate ESCT at a rate equivalent to an employee's annual salary and wage plus the employer's gross yearly contribution. The minimum contribution rate for both employee and employer is 3% each of the gross salary.
New Zealand is one of the countries where employers are responsible for the fringe benefits tax. It's paid on the value of all non-cash fringe benefits provided to employees, and the amount is tax-deductible. Employers can decide to pay the tax at flat rates (63.93% on attributed benefits and 49.25% on pool benefits) or calculate it for each employee and pay the tax based on their marginal tax rate
Under the latter attribution option, the applicable FBT rate will depend on the employee's net salary (including fringe benefits). The calculation takes the fringe benefits' cash value and calculates the FBT as the notional increase in income that would have arisen.
Fringe benefits include:
These are not taxable to the employee, but the value of a benefit from the provision of shares or options, lodging, or housing by an employer is taxable. Other benefits provided to an employee in a non-monetary form are generally not taxable in the employee's hands.
Allowances paid in cash that are no more than reimbursement of business-related expenses incurred within employment are generally not taxable. Certain relocation costs, overtime meal allowances, and accommodation benefits paid by employers are exempt from income tax and FBT. Business tools such as mobile phone or laptop provided for work that do not exceed NZ$5,000 are not subject to FBT.
The tax threshold for exempting unclassified FBT benefits is NZ$300 per employee per quarter and NZ$22,500 per employer per annum.
|NET REMUNERATION IN NZD||Rate|
|Less than 12,530||11.73%|
|12,531 – 40,580||21.21%|
|40,581 – 55,980||42.86%|
|55,981 – 129,680||49.25%|
New Zealand residents are subject to tax on their worldwide income, which includes salary, wages, bonuses, allowances, and retirement gratuities received in cash. Individuals are considered New Zealand residents in the following circumstances:
Non-resident pay tax only on their New Zealand income. They may be exempt from paying New Zealand tax if all the following conditions apply:
There is a temporary four-year tax exemption from income tax on foreign income, which is extended to new immigrants and Kiwis returning to New Zealand after being away for at least ten years. It applies to people becoming residents in New Zealand after April 1, 2006. They can receive the exemption only once in a lifetime. Income from overseas employment performed while living in New Zealand and business income relating to services performed offshore is excluded.
KiwiSaver is a voluntary workplace-based superannuation savings scheme available to all employees over the age of 18. Employers automatically enrol new employees who must opt-out within prescribed time frames if they wanted to. The minimum contribution rate for both the employee and the employer is 3% of gross salary.
This is known as the Accident Compensation Corporation (ACC). Employer premiums fund insurance for work-related accidents while premiums paid by employees fund non-work accident insurance. For the 2022/2023 year, the premium is a flat rate of 1.46% of gross earnings up to NZ$130,911.
|For each dollar of income||Tax rate|
|Up to $14,000||10.50%|
|Over $14,000 and up to $48,000||17.50%|
|Over $48,000 and up to $70,000||30%|
|Over $70,000 and up to $180,000||33%|
|Remaining income over $180,000||39%|
Married people are taxed separately.
Best Start helps families with child care costs after the paid parental leave ends. All families with new babies are entitled to NZ$65 a week during the child's 1st year. If the household income is less than NZ$93,858, they will continue to receive $65 per week until the child turns three.
Individuals with annual income between NZ$24,000 and NZ$48,000, who meet specific requirements are entitled to an 'independent earner' tax credit of NZ$10.00 per week. For eligible individuals who earn over NZ$44,000, the annual entitlement decreases by 13 cents on each additional dollar earned up to NZ$48,000, at which point they no longer qualify for the credit.
An individual can claim a 33.3% tax credit for eligible charitable donations, up to their taxable income.
Employers can choose to provide allowances on top of employees' usual pay in the form of extra money for things like accommodation, meals and clothing. These allowances are taxed through PAYE.
Generally, an accommodation or an accommodation allowance is taxable via PAYE, with some tax-free exemptions:
Allowances to help cover the costs of meals and clothing employees have to buy as part of their job are usually tax-exempt. Some examples include:
These allowances are specifically for employees travelling from their home to work. This allowance is taxed via PAYE unless the employee is:
Cash benefits made in addition to an employee's salary or wages are taxable, and include things like:
Unexpected on-the-job expenses that employees incur, such as paying for meals or travel when they're away from their typical workplace, should be refunded to them by their employer.
Employees are reimbursed either by providing receipts or by the employer, making a reasonable reimbursement estimate. Reimbursements are generally added to the salary of the employee after their PAYE has been deducted. Reimbursed expenses are not taxable. However, if the payment is more than the cost, the excess amount is taxable.
Employers sometimes cover the employee's own and their family relocation costs. The payment may be tax-free if they are relocating to:
Relocation expenses will generally only be tax-free if the employee's home is a substantial travelling distance from the new workplace.