New Zealand PAYE Tax Explained 2025-26: Tax Codes, KiwiSaver & Student Loan Repayments
Unlike most countries, New Zealand has no tax-free threshold — every dollar you earn is taxed from the very first cent. If you're working in New Zealand, whether as a local employee, a new migrant, or someone juggling two jobs, understanding your PAYE tax code is the difference between getting the right amount of tax deducted each payday and ending up with a surprise bill (or refund) at year-end. This guide breaks down how PAYE actually works, what tax code you should be using, and how KiwiSaver and student loan repayments fit into the picture.
How PAYE Works in New Zealand
PAYE (Pay As You Earn) is New Zealand's system for collecting income tax directly from your salary or wages, deducted automatically by your employer before you're paid. For the 2025-26 tax year (1 April 2025 – 31 March 2026), the progressive tax brackets are:
| Taxable Income | Tax Rate |
|---|---|
| $0 – $15,600 | 10.5% |
| $15,601 – $53,500 | 17.5% |
| $53,501 – $78,100 | 30% |
| $78,101 – $180,000 | 33% |
| $180,001 and over | 39% |
On top of income tax, most employees also pay a 1.67% ACC earner's levy, which funds New Zealand's no-fault accident compensation scheme. This is capped at $152,790 of liable earnings for 2025-26 (a maximum of roughly $2,551.59 per year).
Choosing the Right Tax Code (This Is Where Most People Go Wrong)
Your tax code tells your employer how much tax to deduct from each pay. Picking the wrong one is one of the most common PAYE mistakes in New Zealand — it either leaves you underpaying tax (a bill later) or overpaying it (a refund you didn't need to wait for). The main codes are:
- M — Your main (or only) job, with no student loan. The most common code for a single employment.
- ME — Main job, and you qualify for the Independent Earner Tax Credit (IETC).
- SB, S, SH, ST — "Secondary tax codes," used when you have more than one source of income. Your secondary job gets taxed at a flat rate based on your estimated total annual income across all jobs, because the tax-free portion of the brackets is already being used up by your main job.
- M SL / S SL — Same as above, with "SL" added if you also have a student loan being repaid through PAYE.
A very common mistake: people who pick up a second job sometimes get taxed using the "M" code on both jobs. Since each M code assumes you're only earning from that one job, this results in too little tax being withheld overall — and a bill from Inland Revenue (IRD) at the end of the tax year. If you have more than one job, you should be using a secondary tax code on the lower-paying one.
KiwiSaver: What You Need to Know
KiwiSaver is New Zealand's voluntary workplace retirement savings scheme. If you're an eligible employee and don't opt out, you'll typically be auto-enrolled. Key points:
- Employee contribution rates: 3%, 4%, 6%, 8%, or 10% of your gross pay — deducted from your take-home pay, after tax.
- Employer contribution: Your employer must contribute a minimum of 3% on top of your salary (this isn't deducted from your pay — it's additional).
- Government contribution: Eligible members can also receive an annual government top-up, subject to minimum personal contributions during the KiwiSaver year.
Because the employee portion comes out after tax and the employer portion is paid on top, it's easy to underestimate how much KiwiSaver actually affects your take-home pay versus your total compensation package.
Student Loan Repayments Through PAYE
If you have a New Zealand student loan, repayments become compulsory once your income exceeds $24,128 for the 2025-26 year. Above that threshold, a flat 12% is deducted on the portion of income above $24,128 — automatically collected through PAYE alongside your income tax, using the "SL" suffix on your tax code.
The Independent Earner Tax Credit (IETC)
The IETC is a tax credit worth up to $520 per year, available if your annual income falls between $24,000 and $70,000, and you're not receiving Working for Families tax credits or a main benefit. The full $520 applies up to $66,000 of income, then reduces by 13 cents for every dollar earned between $66,000 and $70,000, phasing out completely at $70,000.
Working for Families: A Separate System Worth Knowing About
Working for Families (WfF) is a package of tax credits for families with dependent children, assessed separately from your PAYE tax code. It includes components like the Family Tax Credit, In-Work Tax Credit, and Best Start payments for young children. If you receive Working for Families, you're not eligible for the IETC at the same time — the two are mutually exclusive, which is an easy detail to miss when estimating your overall take-home income.
A Worked Example
Take someone earning $80,000 gross, on a 3% KiwiSaver contribution, with an active student loan:
- Income Tax (PAYE brackets): approximately $16,277.50
- ACC Earner's Levy (1.67%): $1,336
- KiwiSaver (employee, 3%): $2,400
- Student Loan Repayment (12% above $24,128): approximately $6,704.64
- Total deductions: roughly $26,718
- Net take-home income: roughly $53,282
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Note this doesn't include the additional 3% employer KiwiSaver contribution, which is paid on top of the $80,000 salary rather than deducted from it.
Common Mistakes to Avoid
- Using "M" on more than one job. Only your main job should carry the M or ME code — any additional job needs a secondary tax code.
- Forgetting the ACC earner's levy when estimating take-home pay — it applies automatically alongside income tax.
- Not accounting for the employer KiwiSaver contribution separately from the employee deduction when comparing job offers.
- Assuming IETC and Working for Families stack — they don't; you qualify for one or the other, not both.
- Ignoring student loan thresholds if you have multiple jobs — repayment obligations are based on your total income, not just the income from one employer.
Key Takeaways
- New Zealand has no tax-free threshold — tax starts from the first dollar earned, at 10.5%.
- Choosing the correct tax code (M vs. secondary codes like SB/S/SH/ST) is critical if you have more than one income source.
- KiwiSaver employee contributions (3-10%) come from take-home pay; the 3% employer minimum is paid on top.
- Student loan repayments are a flat 12% above $24,128 of annual income.
- IETC (up to $520) and Working for Families are mutually exclusive — you can't claim both.
If you want to run your own numbers — your exact PAYE, ACC levy, KiwiSaver, and student loan deductions based on your actual salary — you can use the free New Zealand Income Tax Calculator on Quinet Calc, which is kept updated with the current 2025-26 rates and thresholds.
This article is for general informational purposes and reflects New Zealand tax rates and rules as of the 2025-26 tax year. For guidance specific to your situation, consult Inland Revenue (IRD) directly or a New Zealand tax professional.
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