PAYE in New Zealand: what employers deduct and why
Every pay run takes gross pay down to take-home pay through the same four deductions: income tax, the ACC earners’ levy, KiwiSaver and, for some staff, a student loan. Here is how each one is worked out, with one weekly pay calculated line by line.
Summarise with AI
Key takeaways
- PAYE is deducted from every pay using the employee’s tax code from their IR330, and includes the ACC earners’ levy
- Income tax brackets have been 10.5% / 17.5% / 30% / 33% / 39% at $15,600, $53,500, $78,100 and $180,000 since 1 April 2025
- The ACC earners’ levy is 1.75% from 1 April 2026, on earnings up to $156,641 a year
- No IR330 means the non-declaration rate of 45%
- You file employment information within 2 working days of each payday and pay the deductions to Inland Revenue by the 20th of the following month (large employers twice a month)
Use Inland Revenue’s calculator for real pay runs
Inland Revenue’s own PAYE calculator and its IR340 (weekly and fortnightly) and IR341 (four-weekly and monthly) deduction tables are the authoritative source for what to deduct. Your payroll software applies the same rules. This guide explains what those tools are doing so you can check a payslip that looks wrong.
How PAYE works for employers
When someone starts, they complete a Tax code declaration (IR330), which tells you which tax code to use. Each payday you deduct PAYE according to that code and the gross pay for the period, along with any KiwiSaver, student loan or child support deductions. You then report the pay to Inland Revenue through payday filing and pay over what you deducted.
PAYE is calculated on the pay for each period as if it were earned at that rate all year. That is why an employee who works a big week pays a higher share of that week’s pay in tax, and why any over- or under-deduction across the year is squared up by Inland Revenue at year end, not by you.
Income tax rates and thresholds
Inland Revenue’s current table of individual tax rates is headed from 1 April 2025, and it is the table in use for the year that began on 1 April 2026.
| Annual 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% |
Each rate applies only to the slice of income inside its band. The thresholds were raised part-way through the 2024–25 year, which is why that year used blended rates such as 12.82% and 21.64%; from 1 April 2025 the bands above apply on their own.
The ACC earners’ levy
The earners’ levy funds ACC cover for non-work injuries. It is deducted as part of PAYE. For 1 April 2026 to 31 March 2027 it is $1.75 per $100 (1.75%) of earnings, up to maximum earnings of $156,641 — so the most anyone pays in the year is $2,741.22. It was 1.67% on earnings up to $152,790 the year before, and Inland Revenue has published 1.83% on earnings up to $160,244 for the year from 1 April 2027.
Tax codes
The employee chooses their code on the IR330. The ones you will see most:
- M — main source of income.
- ME — main income, for an employee entitled to the independent earner tax credit (income between $24,000 and $70,000; $10 a week in full up to $66,000).
- M SL / ME SL — as above, with student loan repayments deducted.
- Secondary codes for a second job, set by the person’s estimated total annual income: SB ($0–$15,600, 10.5%), S ($15,601–$53,500, 17.5%), SH ($53,501–$78,100, 30%), ST ($78,101–$180,000, 33%) and SA ($180,001 and over, 39%). Each has an SL version.
- ND — no declaration: tax at 45%.
Inland Revenue may suggest a change to an employee on an unsuitable code — using M on two jobs at once is the common one — and can issue a tailored tax code. If you are notified of a code for an employee, apply it.
KiwiSaver and student loan deductions
KiwiSaver. Unless the employee has opted out or has a savings suspension, deduct their chosen rate from gross pay. The default rose from 3% to 3.5% for paydays from 1 April 2026, and you contribute at least 3.5% on top, less employer superannuation contribution tax (ESCT). The details are in our KiwiSaver employer contributions guide.
Student loan. For employees on an SL code, deduct 12% of earnings above the pay-period repayment threshold. Inland Revenue’s published threshold is $24,128 a year — $464 a week, $928 a fortnight or $2,010.66 a month. Check Inland Revenue’s student loan page for the current year’s figure before setting it in payroll.
Worked example: one weekly pay
An employee earns $1,400 gross a week ($72,800 a year), uses tax code M, has no student loan and contributes 3.5% to KiwiSaver. The payday is in the 2026–27 tax year. Their income is above $70,000, so the independent earner tax credit (and the ME code) does not apply.
Step 1 — income tax
Annualise the weekly pay ($1,400 × 52 = $72,800) and apply each band:
- $15,600 × 10.5% = $1,638.00
- ($53,500 − $15,600) = $37,900 × 17.5% = $6,632.50
- ($72,800 − $53,500) = $19,300 × 30% = $5,790.00
- Annual tax $14,060.50 ÷ 52 = $270.39 a week
Step 2 — the rest of the deductions
| Line | Calculation | Amount |
|---|---|---|
| Gross pay | — | $1,400.00 |
| Income tax | Step 1 | −$270.39 |
| ACC earners’ levy | $1,400 × 1.75% | −$24.50 |
| KiwiSaver (employee) | $1,400 × 3.5% | −$49.00 |
| Take-home pay | $1,400.00 − $270.39 − $24.50 − $49.00 | $1,056.11 |
Step 3 — the employer’s side
- Employer KiwiSaver contribution: $1,400 × 3.5% = $49.00
- ESCT rate: set from the employee’s annual salary plus your contributions, here about $72,800 + $2,548 = $75,348, which falls in the $64,201–$93,720 band, so ESCT is 30%
- ESCT: $49.00 × 30% = $14.70, so $34.30 reaches the employee’s KiwiSaver account
- Paid to Inland Revenue for this employee this week: PAYE including the levy ($270.39 + $24.50 = $294.89), employee KiwiSaver ($49.00), and the employer’s $49.00 split into $34.30 net contribution and $14.70 ESCT — $392.89 in total
- Total cost of employment for the week: $1,400.00 + $49.00 = $1,449.00
Inland Revenue’s IR340 tables and calculator round within each step, so their PAYE figure can differ from this annualised method by a few cents. Where they differ, the tables are right.
Filing and paying
Every payday you file employment information — within 2 working days if you file electronically. You pay the deductions by the 20th of the following month, or twice a month if you are a large employer. Our payday filing guide covers deadlines, new and departing employees and paper filing.
Most of the risk in PAYE sits upstream of the tax calculation, in the hours. A late or incorrect timesheet makes a late or incorrect pay run, and with payday filing that becomes a late or incorrect return. RosterElf’s payroll integration sends approved hours and rates to your payroll system, which calculates the PAYE.
Related guides
- Payday filing — what to send Inland Revenue, and when
- KiwiSaver employer contributions — 3.5% now, 4% from 2028, and ESCT
- Minimum wage — the gross pay floor before any of these deductions
Sources
Checked on 15 October 2026.
- Inland Revenue — Tax rates for individuals
- Inland Revenue — ACC earners’ levy rates
- Inland Revenue — Tax codes for individuals
- Inland Revenue — Independent earner tax credit
- Inland Revenue — Repaying a student loan from salary or wages
- Inland Revenue — KiwiSaver changes
- Inland Revenue — Payday filing
- Inland Revenue — PAYE calculator
- Inland Revenue — IR340 PAYE deduction tables (April 2026), ESCT rates
Get the hours right and payroll follows
Approved timesheets and pay rates flow to your payroll system, so PAYE is calculated on the hours people actually worked.
This guide summarises PAYE, the ACC earners' levy, KiwiSaver and student loan deductions as they generally apply in the 2026–27 tax year and is not tax or payroll advice. The worked example is illustrative. Use Inland Revenue's PAYE calculator and IR340 tables for real deductions, and check Inland Revenue or take advice before relying on this for a specific case. It does not constitute legal, HR, or professional advice and should not be relied on as a substitute for advice specific to your business, workforce, or circumstances.
PAYE questions
- Pay as you earn — the income tax an employer deducts from each pay and passes to Inland Revenue. In New Zealand the PAYE amount also includes the ACC earners’ levy. KiwiSaver, student loan and child support are separate deductions made in the same pay run.
- Yes. Inland Revenue publishes a PAYE deduction calculator and the IR340 weekly and fortnightly deduction tables. Those are the authoritative figures; the worked example on this page is there to show how the numbers fit together, not to replace them.
- You must deduct tax at the non-declaration rate of 45% until they do. Ask for the Tax code declaration (IR330) before the first pay run.