Tax & Income guide · New Zealand
How PAYE Works in NZ — Income Tax Guide
See what PAYE means on a New Zealand payslip, how income tax and the ACC earners’ levy are withheld, and why the result can change from one payday to the next.
Reviewed 26 August 2026
Reviewed by KiwiTools editorial team — NZ calculator researchers; tax settings checked against Inland Revenue
General information only, not tax, financial, employment or legal advice. Check your tax code and current Inland Revenue guidance for your circumstances.
Key points
The short version
PAYE is the income tax and ACC earners’ levy withheld from salary or wages before the money reaches you.
Your employer uses the tax code and gross earnings for that pay period; KiwiSaver and student-loan repayments are separate deductions.
A yearly estimate is excellent for planning, but the official pay-period calculation is the right comparison for one particular payslip.
What a $2,000 fortnightly payslip can contain
This example separates PAYE from deductions that people often call “tax”. Exact payroll results depend on the tax code, period tables and rounding.
| Check | How it is worked out | Effect on banked pay |
|---|---|---|
| Income tax and ACC | PAYE tables for the declared code | Reduces take-home pay |
| Employee KiwiSaver | Selected rate × eligible gross pay | Reduces take-home; goes to KiwiSaver |
| Student loan | 12% above the period threshold for main income | Reduces take-home; repays the loan |
| Employer KiwiSaver | Employer contribution less ESCT | Usually does not reduce banked pay |
What is actually inside PAYE?
On a payslip, PAYE is not shorthand for every dollar taken from your gross pay. It combines individual income tax with the ACC earners’ levy. For the tax year from 1 April 2026 to 31 March 2027, that levy is 1.75% on liable earnings up to $156,641.
KiwiSaver, student-loan repayments, child support and payroll giving may sit nearby, but they do different jobs. Keeping them on separate lines is the quickest way to understand why take-home pay changed.
How does payroll turn one payday into a tax deduction?
Payroll starts with the gross amount for the period and the tax code you declared on IR330. Inland Revenue publishes separate calculations for weekly, fortnightly, four-weekly and monthly pay. The employer withholds the result and reports it to Inland Revenue.
That is why “my salary divided by 26” is not the complete fortnightly calculation. The gross amount is only the starting point. Tax code, pay frequency, ACC, rounding and any extra pay all matter.
Read the related salary after tax guideRead the related nz income tax brackets guideRead the related secondary tax guide
Here is what trips people up on a real payslip
Suppose an employee normally earns $2,800 a fortnight, then works an extra shift. Payroll calculates that period using the larger gross amount. The PAYE line jumps, even though the employee has not been assigned a permanent new annual salary. Across the year, Inland Revenue assesses the person’s actual total income.
A second common surprise is the ACC cap. Below the cap, PAYE includes income tax plus the levy. Above it, the levy stops growing, so two online tools can disagree if one treats PAYE as income tax only or ignores the maximum liable earnings.
Why might the calculator and payslip disagree?
First check the boring details: the same gross pay, the same period and the same tax code. Then look for a bonus, back pay, unpaid leave, a tailored code or a deduction notice. Inland Revenue’s ordinary PAYE calculator does not cover every extra-pay or special-rate situation.
For budgeting, an annual take-home estimate is usually the cleanest view. For disputing a specific payroll line, use the official calculator for that exact period and ask payroll to explain the inputs. A transparent difference is more useful than a calculator that happens to land on the same total for the wrong reason.
Frequently asked questions
Is PAYE the same as income tax in New Zealand?
Not quite. The PAYE amount withheld from ordinary employment income includes individual income tax and the ACC earners’ levy.
Does PAYE include KiwiSaver?
No. Employee KiwiSaver is a separate payroll deduction, even when it appears beside PAYE on the same payslip.
Why did my PAYE increase for one week?
Overtime, a larger shift, back pay or another payment can lift that period’s gross earnings. Compare the exact period and payment type before assuming the tax code is wrong.
Is the ACC earners’ levy included in PAYE?
Yes for liable employment earnings. For 1 April 2026 to 31 March 2027, the rate is 1.75% up to the maximum liable earnings of $156,641.
Can I use the PAYE calculator for a bonus?
Inland Revenue says its ordinary calculator does not handle extra pays such as special bonuses. Bonus and lump-sum withholding uses separate payroll rules.
What happens if I give my employer the wrong tax code?
Too little may leave tax to pay and too much may produce a refund. Give the employer a new IR330 when the correct code changes and check myIR for Inland Revenue messages.
Put the guide into practice
Continue with related KiwiTools calculators
Test your own numbers, compare scenarios and return to the guide to check assumptions and limitations.