NZ Tax Brackets 2026–2027: A Simple Guide to PAYE Tax Rates

While working for an employer in New Zealand, you will get the salary or wages through a system called PAYE — Pay As You Earn. Using this system, your employer calculates how much to withhold from each pay. The deductions are primarily based on your tax code and are also affected by ACC, KiwiSaver, student loans, etc.

PAYE is a progressive tax system, which means your income is split into chunks, and each chunk is taxed at a different rate. This means you do not pay a single flat rate on everything you earn in a tax year. Only the earnings that fall within each bracket get taxed at that bracket's rate. To be clearer, if someone says "I'm in the 33% tax bracket," that does not mean they pay 33% on their entire salary. Only a portion of their salary comes inside that bracket.

There are still many Kiwis afraid of a pay rise as they think they will "lose money" by moving into a higher bracket. Keep in mind that a pay rise will always leave you better off. This is because only the additional dollars above the threshold are taxed at the higher rate.

There are five income tax brackets for the tax year running from 1 April 2026 to 31 March 2027. These are the rates applies when you get your salary or wage using the standard M tax code:

Source: IRD — Tax rates for individuals. These brackets have been unchanged since 1 April 2025.

There is an additional "Tax on This Bracket" column. This shows the maximum tax payable if your income fills that entire bracket. For example, if you earn exactly $53,500, the total PAYE on that income would be $1,638.00 + $6,632.50 = $8,270.50. So the effective tax rate for that salary is about 15.5%.

Example 1 - How Tax Brackets work for a $55,000 salary?

When you compare an $55,000 salary, it belongs to the 30% Tax rate. However, you do not pay 30% on the full amount. The first $15,600 salary portion is taxed at 10.5%, which is $1,638. The next $37,900 (from $15,601 to $53,500) is taxed at 17.5% that is $6,632.50. Finally, the remaining $1,500 at 30% which is $450. So altogether your total tax obligation comes to $8,720.50, which is effectively about 15.9%.

Example 2 - How Tax Brackets work for an $85,000 salary?

Now let's analyse with an $85,000 salary, which comes under the 33% bracket. Exactly how we calculated the above $55,000 salary, the first three brackets total an income tax of $15,650.50. For the remaining portion, 33% of tax applies. Which means for the $6,900 above $78,100, $2,277 applies. Altogether, the total PAYE is $17,927.50, which means the effective rate is about 21.1%, not 33%.

Example 3 - How Tax Brackets work for a $200,000 salary?

Now let's discuss a top-tier salary of $200,000. Someone with this salary belongs to the top 39% bracket. However, they don't need to pay 39% of $200,000 in taxes. Similar to the first two examples shown above, tax on the first four brackets totals $49,277.50. Add this to the 39% on the $20,000 above $180,000, which is $7,800. So the total PAYE is $57,077.50, which means an effective rate of 28.5%.

While browsing on tax-related websites or on payroll websites, you may have seen the terms marginal tax rate and effective tax rate. Even though both terms represent tax rates, they mean quite different things. Marginal tax rate is the tax rate that is applied to the last dollar you earn during a financial year. It is the tax bracket your annual income falls into. The effective tax rate will always be less than your marginal tax rate, and it can be calculated by dividing your total tax by your total income.

Suppose if someone is earning $60,000 in a tax year, the marginal rate is 30%. This is because $60,000 sits between $53,501 and $78,100 tax slab, and the tax rate is 30%. Now comes to the effective rate, which is only about 17%. ($10,220.50 ÷ $60,000). You can see the difference in marginal tax rate and effective rate is because the majority of your income is taxed at the lower 10.5% and 17.5% rates.

This type of comparison really matters when you are comparing a pay rise or accepting a new job offer with higher pay. Suppose you earn $53,500 and get offered $5,000 more, you are not taxed 30 cents for the whole $58,500. It is onl only that extra $5,000 that comes under the new tax bracket. So you will always take home more money from a pay raise.

Another key deduction that every salary and wage earner sees on their payslip is the ACC Earner's Levy. This deduction is for the Accident Compensation Corporation, who are responsible for administering NZ's no-fault accidental injury compensation. These deductions cover your treatment and provide income support if you are injured at work or anywhere else. New Zealand's accident cover is universal and no-fault, and in exchange, you cannot sue for personal injury.

ACC levy rate is 1.75% of your gross income in the 2026-2027 tax year. The maximum liable earnings threshold is now $156,641, which means the most you will ever pay in ACC is $2,741.22 per year. Suppose if you earn below the threshold, ACC is just 1.75 cents on every dollar you earn. ACC is automatically deducted from your salary along with your other deductions whenever you get paid by your employer.

For self-employed people, ACC will send an invoice based on the income tax filing.

The Independent Earner Tax Credit (IETC) is another important term related to the NZ tax system, which gives a tax break of up to $520 per year. In order to be fully eligible for this tax credit, the yearly income should be between $24,000 and $70,000. This is also for those who do not receive any government assistance, like Working for Families.

Those who have an annual income between $24,000 and $66,000, they will receive the full $520 credit. If the salary is above $66,000, it is reduced by 13 cents for every dollar earned and phases out completely at $70,000. The IETC is enabled, your tax code will be ME instead of M, and your employer will deduct slightly less PAYE each pay period to account for the credit.

Suppose you are entitled to this tax credit and still are not receiving it, just make sure your employer has you on the ME tax code. You can make necessary changes by submitting a new IR330 form to your employer. On our PAYE calculator there is the option to enable/disable the IETC settings. If enabled, the tool will automatically adjust the deductions when your income falls within the qualifying range.

KiwiSaver is a voluntary work-based savings scheme mainly for your retirement. When someone is enrolled for this scheme, a percentage of their gross pay is deducted and invested into their KiwiSaver fund. There will be employer contributions and government contributions (conditions apply) that boost the investment. The default employee contribution rate has been increased from 3% to 3.5% from 1 April 2026, and there is an option to temporarily opt down to 3%. Employees can always choose a higher rate such as 4%, 6%, 8%, or 10%.

Choosing a higher KiwiSaver contribution does not reduce your taxable income because it is deducted after PAYE is calculated. Which means only your take-home is affected. Suppose you are one an $100,000 salary and you are at the default 3.5% rate, your yearly KiwiSaver contribution would be $3500. This is exactly $134.62 in a fortnight. Your employer will also make a minimum contribution of 3.5%, and you will have a combined fund of $7,000 by the year's end.

If you want to see exactly how different KiwiSaver rates affect your pay, check out our PAYE calculator. Turn the KiwiSaver on and try with different rates to compare take-home amounts instantly.

In New Zealand, once your student loan gets approved, it is transferred to IRD. You need to repay your loan once you start earning $24,128 a year before tax(as of 2026). Once you start earning above the repayment threshold, your employer will deduct 12% of every dollar you earn. You can see this amount get deducted along with your PAYE, ACC and KiwiSaver.

Suppose you earn an annual salary of NZD 65,000, the amount that comes above the repayment threshold is $65,000 - $24,128 = $40,872. So based on the above 12% rule, $4,904.64 is deducted from your annual salary, which will be about $188.64 per fortnight.

If a student's loan is enabled, your tax code will be either M SL, ME SL(if IETC applied), S SL or SH SL. If you want to clear your student loan debt as early as possible, you can request your employer to make additional repayments.

You can use the M (or ME) tax code only for your main employment. IRD may send an email to you or to your employer if you do a second or third job with the same M tax code. Always keep in mind that secondary tax is not an additional tax. It is a different withholding method, and if you are overpaid your tax, you will get a refund after the financial year ends.

The secondary tax code you use depends on your total combined annual income from all sources. For 2026–2027, the codes are: SB (10.5%) for combined income up to $15,600, S (17.5%) for $15,601–$53,500, SH (30%) for $53,501–$78,100, ST (33%) for $78,101–$180,000, and SA (39%) for income above $180,000.

Doing a second or third job in the M or ME tax code is the most common reason Kiwis end up owing tax at year-end. If you are doing more than one job, check out our Secondary Job Tax Calculator, which helps you to find out what tax code to use.

The tax brackets for the 2026-2027 tax year are similar to those of the 2025-2026 tax year. Even though there is no change for the rates, some changes have happened to ACC, student loans, and default KiwiSaver that affect your take-home pay.

PAYE tax brackets

There is no change for the tax brackets. The 5 tax brackets and their rates are exactly the same as those of the 2025–2026 tax year.

ACC Earner's Levy

ACC Earner's Levy has increased from 1.67% to 1.75%, and the maximum liable earnings threshold is now $156,641. This means the maximum ACC levy is now $2,741.22 instead of $2,551.59.

KiwiSaver default rate

The default KiwiSaver rate is now increased from 3% to 3.5%. There is an option on myIRD website to temporarily set the KiwiSaver rate to 3%. If you haven't reduced to 3%, your contributions will have increased automatically from 1 April 2026.

Student loan threshold

Unchanged at $24,128 per year, with the repayment rate remaining at 12%.

IETC

No change for IETC. Still $520 per year for income between $24,000 and $70,000.

Compare the deductions for the last two tax years side-by-side in our PAYE calculator by changing the tax year dropdown at the top of the page.

There are some tax deduction techniques you can follow to reduce your tax bills.

Claim the IETC

As we talked in the above IETC section, if you earn between $24,000 and $70,000 and do not get any government benefits like working for families, make sure your tax code is ME instead of M. This can give you a tax benefit up to $520 in a year, which is about an extra $20 a fortnight.

Try payroll giving for charitable donations

Payroll giving feature allows you to make donations to charity, and you will receive a 33.33% tax credit immediately through reduced PAYE. If you are making donations otherwise, you have to wait until year-end to claim a donation rebate. So if you are making a $20/week donation, you save about $6.67/week in tax instantly.

Check your tax code is correct

Make sure you have provided the correct tax code to your employer, especially while doing a secondary job. If your situation has changed (new job, second job, paid off your student loan, income changed) make sure you update your tax code with your employer by submitting a new IR330 form.

Review your KiwiSaver rate

KiwiSaver is primarily for your retirement savings, but if cash flow is tight, you can temporarily drop to a reduced rate. Conversely, if you can afford it, increasing your rate gets you a larger employer match (capped at 3% of gross). Use our calculator to see the impact of different rates on your fortnightly take-home.