PAYE (Pay As You Earn) is the system your employer uses to deduct tax and levies before paying you. Several separate things come out of your gross pay, and they don't all work the same way.
Income tax is progressive, not a single rate
A common misunderstanding is that earning more pushes allof your income into a higher rate. It doesn't. New Zealand uses stepwise brackets: each slice of your income is taxed at the rate for that band only. For the 2026-27 year the bands are 10.5% up to $15,600, 17.5% to $53,500, 30% to $78,100, 33% to $180,000, and 39% above that.
So a pay rise never leaves you worse off — only the dollars above the threshold are taxed at the higher rate. That's the difference between your marginal rate (the rate on your last dollar) and your effective rate (total deductions divided by gross), which is always lower.
The ACC earners' levy is capped
Separately from income tax, the ACC earners' levy funds cover for non-work injuries. For 2026-27 it is 1.75% (GST-inclusive) on earnings up to $156,641, giving a maximum levy of $2,741.22. Above that ceiling you pay no additional levy — which is why very high earners see their effective rate flatten slightly.
KiwiSaver comes out of your pay; your employer's share doesn't
Your own KiwiSaver contribution is deducted from your pay, so it reduces your take-home. Your employer's contribution is paid on top and never appears in your take-home figure. The default employee and employer rate rose to 3.5% on 1 April 2026, and is scheduled to reach 4% on 1 April 2028.
One detail people miss: employer contributions have ESCT (employer superannuation contribution tax) deducted before they land in your fund, so the amount actually invested is a little less than the headline percentage.
Student loan is a flat 12% above the threshold
If you have a student loan and use an “SL” tax code, 12% of every dollar you earn above $24,128 goes to repayments. It applies to the amount over the threshold, not your whole income.
The IETC for middle incomes
The Independent Earner Tax Credit is worth up to $520 a year for people earning between $24,000 and $70,000 who don't receive Working for Families or a benefit. It's paid in full up to $66,000, then abates by 13 cents per dollar until it reaches nil at $70,000. You claim it with the ME tax code.
Secondary jobs are taxed at a flat rate
A second job uses a secondary tax code (SB, S, SH, ST or SA) chosen by your total income across all sources. It's a flat rate rather than progressive brackets, because your first job has already used up the lower bands. If you don't give your employer a code at all, the no-notification rate of 45% applies.