Income tax rates

The brackets above are marginal rates: each one applies only to the slice of income that falls inside its band. Your top bracket is the rate on your next dollar, not the rate on all your dollars.

This is worth being concrete about, because the misunderstanding is stubborn and costs people money. Someone earning $90,000 does not pay 33% on $90,000. They pay 10.5% on the first $15,600, then 17.5% on the next slice, and so on — with only the portion above $78,100 taxed at the higher rate. Their effective rate, total tax divided by total income, is far below their marginal rate.

The practical consequence: a pay rise can never leave you worse off, and turning down income or overtime “because it pushes me into the next bracket” is always a mistake. Only the dollars above the threshold are taxed more heavily. The effective rate rises as income rises but always trails the marginal rate, and it approaches the top rate only asymptotically.

Where the reasoning does hold water is with abatement. Working for Families, the IETC and student loan repayments all withdraw as income rises, and those clawbacks can stack into a genuinely high effective marginal rate over specific income ranges — sometimes higher than the top tax bracket. That is an abatement effect, not a bracket effect, and it is the only version of this concern that survives contact with the numbers.

A second job is taxed at a flat rate chosen by your combined income across all sources. That produces the familiar complaint that second jobs are “taxed more” — and on a per-payslip basis it looks true, because the second employer deducts at a single rate from the first dollar with no low bracket applied.

But the logic is sound. Your first job has already consumed the low brackets. If the second employer also applied 10.5% to your first $15,600, you would end the year badly underpaid on tax and facing a bill. The flat secondary rate is an approximation of the marginal rate your extra income genuinely attracts.

The system misfires when your income mix shifts during the year, or when the two jobs are close in size. Picking a code based on outdated total income leaves you over- or under-taxed until IRD squares it up at year end. If no code is supplied at all, the no-notification rate of 45% applies, which is punitive by design and should always be fixed rather than tolerated.

The brackets on this page cover income tax only. Three other deductions come out of a typical salary and none of them appear above, which is why adding up bracket percentages never reproduces a real payslip.

• The ACC earners' levy, a separate flat charge that is capped above a ceiling.
• KiwiSaver, if you are contributing — your share reduces take-home pay while your employer's does not appear in it at all.
• Student loan repayments, if you use an SL tax code, charged only on income above the annual threshold.

New Zealand also has no general capital gains tax, no social security tax separate from ACC, and no state or regional income tax — so this table plus those three items is genuinely the whole picture for most salary earners. Our take-home pay calculator applies all four together and shows each as its own line.