Taxation in New Zealand

Taxation in New Zealand is collected at a national level by the Inland Revenue Department (IRD) on behalf of the Government of New Zealand. Local property taxes are managed and collected by regional councils.

Individual income tax

New Zealand residents are liable for tax on their worldwide taxable income.

Types of taxable income

salary and wages
business and self-employed income
income from investments (interest, dividends etc...)
rental income
overseas income (including income from an overseas pension)

Tax rates

Income tax varies dependant on income levels in any specific tax year (personal tax years run from 1 April to 31 March).

Income	Tax Rate
$0 - $38,000	19.5%
$38,001 - $60,000	33%
Over $60,000	39%

Rates are for the tax year 1 April, 2006 to 31 March, 2007 and are taken from the IRD website

Tax deducted at source

In most cases employers deduct the relevant amount of income tax from salary and wages prior to these being paid to the individual. This system, known as Pay-as-you-earn, or PAYE, was introduced in 1958, prior to which employees paid tax annually.

In addition, Banks and other financial institutions deduct the relevant amount of income tax on interest and dividends as these are earned. This is known as Residents Witholding Tax.

Personal tax summary

At the end of each tax year individuals who may not have paid the correct amount of income tax are required to submit a personal tax summary, to allow the IRD to calculate any under or overpayment of tax made during the year.

ACC earners levy

All employees pay an earners levy to cover the cost of non-work related injuries. It is collected by Inland Revenue on behalf of the Accident Compensation Corporation (ACC).

The earners levy is payable on salary and wages plus any other income that is subject to PAYE, for example overtime, bonuses or holiday pay. The levy is currently 1.3% and is payable on income up to a maximum of $96,619 (for the tax year 1 April, 2006 to 31 March, 2007).

Business taxes

Business income tax

Businesses in New Zealand pay income tax on their net profit earned in any specific tax year. For most businesses the tax year runs from 1 April to 31 March but businesses can apply to the IRD for this to be changed.

Payments are made in three instalments through the year. These are known as provisional tax payments. At the end of the year the business files a tax return (due on the following 7 July for businesses with a tax year ending 31 March) and any under or overpayment is then calculated.

Companies pay income tax at 33% on profits. Tax rates for individuals operating as a business (eg individuals who are self-employed) are the same as for employees (see individual tax rates above)

Goods and Services Tax

Most products or services sold in New Zealand incur goods and services tax (GST) at a rate of 12.5%. The main exceptions are financial services (eg banking and life insurance) and the export of goods and services overseas.

All businesses are required to register for GST once their turnover exceeds (or is likely to exceed) $40,000 per annum. Once registered, businesses charge GST on all goods and services they supply and can reclaim any GST they have been charged on goods and services they have purchased.