What Is a Tax Code NZ, and How Do I Choose the Right One?

Kia ora! Your tax code ensures you pay the right amount of tax in New Zealand. It tells your employer how much tax to deduct from your salary, wages, or benefits. Using the correct tax code prevents surprises like a big tax bill at year-end. This guide explains New Zealand tax codes, how to choose the right one, and common mistakes to avoid.

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What Is a Tax Code?

A tax code is a set of letters that shows your employer how much income tax to deduct from your pay. It’s part of New Zealand’s Pay As You Earn (PAYE) system, which takes tax directly from your salary or wages before you get paid. Tax codes depend on your income source, total income, and factors like student loans. For example, ‘M’ is for your main job, while ‘S’ is for a second job.

Types of Tax Codes

New Zealand tax codes fall into three main categories: primary, secondary, and special. Each matches your income and situation.

Primary Tax Codes

Primary codes apply to your main income source, usually your highest-paying job. Common codes include:

M: Main income, not $24,000–$48,000, no student loan or benefits.
ME: Main income between $24,000–$48,000, eligible for Independent Earner Tax Credit (IETC).
M SL: Main income with a student loan (12% repayment on income over $24,128 in 2025).
ME SL: Main income between $24,000–$48,000 with a student loan.

Secondary Tax Codes

If you have a second job, use a secondary tax code for that income. These codes have higher tax rates based on your total annual income:

SB: Income up to $15,600 (10.5% tax rate).
S: Income $15,601–$53,500 (17.5% tax rate).
SH: Income $53,501–$78,100 (30% tax rate).
ST: Income $78,101–$180,000 (33% tax rate).
SA: Income over $180,001 (39% tax rate).
Add ‘SL’ if you have a student loan, e.g., ‘S SL’.

Special Tax Codes

Special codes apply to specific jobs or situations:

CAE: Casual agricultural workers (e.g., shearers) for up to three months.
EDW: Temporary election work during the two-week voting period.
NSW: Recognized seasonal workers or foreign fishing crew in NZ waters.

For NZ Super or Veteran’s Pension, update your code via Work and Income.

How to Choose the Right Tax Code

Choosing the right tax code ensures your employer deducts the correct tax amount. Follow these steps:

Check Your Income Sources: Identify your main income (highest-paying job) and any secondary income (side gigs).
Consider Your Situation: Do you have a student loan? Are you eligible for IETC ($24,000–$70,000 income, no benefits)?
Use IRD’s Tool: Answer questions on the IRD tax code tool to find your code.
Complete the IR330 Form: Fill out the IR330 Tax Code Declaration and give it to your employer. Without it, tax is deducted at 45%.

Example: Got one job paying $50,000 and no student loan? Use ‘M’. Add a $10,000 side gig? Use ‘S’ for the second job.

Update your tax code if your situation changes, like starting a new job, paying off a student loan, or getting a raise.

The IR330 Form

The IR330 form is your tax code declaration. It tells your employer which tax code to use for PAYE deductions. You must submit an IR330 when you start a job or if your circumstances change (e.g., new job, student loan payoff). Find it at IRD’s website. If you don’t provide an IR330, your employer uses a 45% tax rate, reducing your take-home pay.

Example: Finish paying your student loan? Update your IR330 from ‘M SL’ to ‘M’ to stop extra deductions.

Common Mistakes with Tax Codes

Avoid these errors to keep your tax bill in check:

Wrong Tax Code: Using ‘M’ instead of ‘ME’ for $24,000–$48,000 income may lead to underpaying tax.
Not Updating Codes: A new job or loan payoff requires a new IR330. Forgetting this causes wrong deductions.
Ignoring Secondary Income: Not using a secondary tax code for a second job can lead to a tax bill.

Example: Use ‘M’ for a $40,000 main job but forget ‘S’ for a $10,000 side gig? You might owe tax at year-end.

Consequences of Incorrect Tax Codes

Underpayment: Pay too little tax, and you’ll get a tax bill by March 31, the tax year end.
Overpayment: Pay too much, and you’ll get a refund, but it ties up your money unnecessarily.

If you often face large tax bills or refunds, consider a tailored tax code for a better fit.

Tax Rates and Your Code

Your tax code aligns with 2025 New Zealand tax rates, including ACC levies:

Income Range	Tax Rate	Total PAYE (with ACC)
$0–$15,600	10.5%	12.17%
$15,601–$53,500	17.5%	19.17%
$53,501–$78,100	30%	31.67%
$78,101–$152,790	33%	34.67%
$152,791–$180,000	33%	33%
$180,001+	39%	39%

Example: Earn $50,000 with ‘M’ code? Your tax is $7,658/year, including $960 ACC levy.

Why It Matters

Using the right tax code saves you money and hassle. It ensures your employer deducts the correct tax, so you avoid unexpected tax bills or overpaying. Our PAYE Calculator NZ helps you see how your tax code affects your take home pay.