Income tax in New Zealand is collected by the Inland Revenue Department (IRD) on behalf of the Government of New Zealand. National taxes are levied on personal and business income, as well as on the supply of goods and services. The types of taxable income are salary and wages, business and self-employed income, income from investments, rental income and overseas income (such as overseas pension). Did you know that a whopping 43% of the New Zealand Government’s core revenue ($22.9 billion) came from individuals’ income taxes in the year 2005-06?
The country of domicile determines whether you’re liable to pay income tax in New Zealand. Residents are taxed on their worldwide income, while non-residents are subject to income tax only on income derived from New Zealand.
Taxpayers in New Zealand are required to complete a Tax Code Declaration (form IR 330) when they take up employment. It’s important that one files the correct data here, as the amount of tax is based on the information provided. The income tax code for most employees is M. If you are a New Zealand tax resident, and have income between $24,000 and $48,000, then your tax code is ME. If you have a student loan, you’re required to use a main tax code that includes “SL” unless you have a repayment deduction exemption. IRD has codes for your secondary source of income such as SB, S, SH or ST, depending on the level of earnings. There are also codes such as WT for schedular payments, CAE for the earnings of casual agricultural employees, EDW for the earnings of Election Day workers and STC for a special tax code, among others.
The country has a system of pay-as-you-earn (PAYE) that ensures that tax is deducted at source from employees’ salaries. The income tax rate was reduced from 66% to 33% and corporate income tax rate from 48% to 33% as on 1 October 2010. Income tax varies depending on your income levels in any specific tax year. For example, earnings of $0–$14,000 are taxed at 10.5%, $14,001–$48,000 at 17.5%, $48,001–$70,000 at 30%, over $70,000 at 33%. The no-notification rate is 45%.
The tax system in New Zealand isn’t particularly complicated. Most people can prepare and file their own tax returns or a tax agent; however, if your tax situation is complicated, you may seek advice from an accountant. The IRD also has a comprehensive website, which has downloadable factsheets to help you file your returns correctly. That apart, the IRD operates a comprehensive help service and publishes numerous factsheets and leaflets for taxpayers.
