PAYE Tax in NZ: How It Works
Quick answer: PAYE (Pay As You Earn) is the way income tax is taken from your pay before it reaches your bank account. Your employer works it out each pay day and sends it to Inland Revenue (IRD) for you. You usually do not need to file a tax return if PAYE is your only income, because IRD checks everything after 31 March each year.
Try our [Salary Calculator] to see your own numbers.
What is PAYE?
PAYE stands for Pay As You Earn. Instead of paying one big tax bill at the end of the year, tax is paid a little at a time with every pay. It applies to wages, salaries, bonuses and most other employment income.
How PAYE is worked out?
Your employer looks at three things:
- How much you earn in the pay period (weekly, fortnightly or monthly).
- Your tax code, which you give your employer on an IR330 form. It tells them which rates to use.
- IRD’s tax tables, which turn those details into the amount of tax to deduct.
Because New Zealand taxes income in slices (see our NZ Tax Brackets guide), the first part of your income is taxed at a lower rate than the last part.
Gross pay
Your pay before anything is taken out
Deductions
PAYE income tax, ACC levy, KiwiSaver, student loan
Take-home pay
What lands in your bank account
What can come out of your pay?
|
Deduction |
What it is |
Who it applies to |
|---|---|---|
|
PAYE income tax |
Tax on your earnings, paid to IRD |
Everyone earning income |
|
ACC earners’ levy |
Funds injury cover; 1.75% for 2026/27, up to earnings of $156,641 |
Everyone earning income |
|
KiwiSaver |
Your retirement savings contribution |
If you are enrolled |
|
Student loan repayment |
12% of income above the threshold |
If you have a student loan |
Payslip decoder: a $60,000 example
This example uses tax code M, a 3.5% KiwiSaver rate and no student loan.
|
Line on your payslip |
Per year |
Per week (÷ 52) |
|---|---|---|
|
Gross pay |
$60,000.00 |
$1,153.85 |
|
PAYE income tax |
$10,220.50 |
$196.55 |
|
ACC earners’ levy (1.75%) |
$1,050.00 |
$20.19 |
|
KiwiSaver (3.5%) |
$2,100.00 |
$40.38 |
|
Take-home pay |
$46,629.50 |
$896.72 |
Add a student loan (code M SL) and a further $4,304.64 a year, about $82.78 a week, is deducted, so take-home becomes about $42,324.86 a year (about $813.94 a week).
Do I need to file a tax return?
Most people who only earn salary or wages do not. IRD does an automatic assessment after the tax year ends on 31 March and tells you if you are owed a refund or have a bill. You may still need to file if you have other income, such as rental income, or you are self-employed.
Why you might get a tax bill or refund?
- You used the wrong tax code (for example M on a second job).
- You had two jobs and earned more than expected.
- You changed jobs part-way through the year.
- You had a tax credit that was not applied through payroll.
How to check you are being taxed correctly?
- Look at your payslip and find the tax code.
- Compare it with the right one on our Tax Codes page.
- Log in to myIR and check your tax summary.
- If something looks wrong, speak to your employer or IRD.
PAYE vs other ways of paying tax
- PAYE: for employees, deducted for you.
- Withholding tax (WT): for some contractors and schedular payments.
- Provisional tax: for self-employed people and some business owners, paid in instalments.
Frequently asked questions
Related calculators and guides
Disclaimer
This guide is general information for the 2026/27 tax year and is not tax advice. Confirm your situation with Inland Revenue (ird.govt.nz) or a tax professional.