1. PAYE Calculator

This calculator is provided as part of our partnership with Calculate.co.nz.

New Zealand's PAYE (Pay As You Earn) system involves employers deducting income tax directly from their employees' wages or salaries. This system ensures that income tax is calculated and collected in an efficient and timely manner. We explain the key points:

Tax Code Declaration: Employees must complete an IR330 tax code declaration form to determine their appropriate tax code. This tax code depends on various factors like multiple income sources, tax residency status, eligibility for credits like the Independent Earner Tax Credit (IETC) or obligations like student loan repayments.

Employer’s Responsibility: It is the employer’s duty to calculate and deduct the correct PAYE amount, which includes income tax, ACC levies, student loan repayments and KiwiSaver contributions. These deductions are based on the employee's declared tax code and salary/wage details.

Calculation Method: PAYE tax is calculated in tiered brackets based on the employee's earnings. Different income brackets are taxed at varying rates, making the system progressive.

ACC Levies: Part of the PAYE deductions includes ACC levies. These levies fund New Zealand’s accident and injury compensation scheme, applicable to all employees and employers.

KiwiSaver Contributions: Employees can choose to contribute a portion of their salary to KiwiSaver, a voluntary work-based savings initiative to help with retirement savings. Employers also make contributions to an employee's KiwiSaver account.

Student Loan Repayments: For employees with student loans, repayments are calculated and deducted through PAYE once their earnings exceed a certain threshold.

Independent Earner Tax Credit: Employees earning within a specific income range are eligible for the IETC, which is automatically calculated and applied through PAYE.

The PAYE system simplifies tax obligations for both employees and employers, ensuring accurate and consistent tax collection in line with New Zealand tax laws.

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