NZ Tax Codes Explained — M, ME, S, SH, ST and More

M and ME: the two common main-income codes

Use a main code for your main or highest source of salary or wages. M is the standard main-income code. ME is for a main income when you qualify to receive the Independent Earner Tax Credit (IETC) through payroll. The credit reduces PAYE during the year; ME is not simply a lower-tax option anyone can choose.

For the current settings, IETC may apply to a New Zealand tax resident with annual income from $24,000 to $70,000 who meets the other rules. You cannot use ME if you or your partner receive Working for Families, or if you receive a main benefit, NZ Super, Veteran’s Pension or an overseas equivalent covered by the restriction. If you are eligible but keep M, IRD can calculate the credit in the end-of-year assessment.

See how PAYE works on a payslipUnderstand secondary tax in more detailSee how a wrong code can affect your refund

S, SH, ST and the other secondary codes

Use a secondary code when another job or PAYE income source already uses your main code. Estimate total annual PAYE income across the main job and every secondary source, then use the band in IR330. The code is based on that combined estimate, not only the amount paid by the second employer.

This is why secondary withholding can look high beside a main-job payslip. Your main income has already used the lower annual tax bands. Secondary PAYE aims to collect closer to the marginal tax expected on the combined income. Final income tax is still worked out across the full year, so over-withholding can lead to a refund and under-withholding can lead to a bill.

What SL, ND and STC mean

Add SL to the relevant employee code when New Zealand student-loan deductions apply: M SL, ME SL, SB SL, S SL, SH SL, ST SL or SA SL. For secondary income, the standard student-loan deduction is generally added from the first dollar because the repayment threshold is normally used against the main job. An approved exemption or special rate can change that treatment.

ND is the non-notified code used when an employee does not provide a complete IR330; it produces a deliberately high withholding rate. STC identifies a tailored tax code authorised by Inland Revenue. WT relates to schedular payments for contractors and uses the IR330C process rather than the ordinary employee flow chart.

When to complete a new IR330

Give an IR330 to each employer when you start work. Complete a new one if your main job changes, your estimated total income moves into another secondary band, you become eligible or ineligible for ME, or you take out or repay a student loan. Do not wait for the next tax year if the current code is clearly no longer right.

If your income varies or standard codes repeatedly create a large refund or bill, a tailored code may produce more suitable withholding. Apply through Inland Revenue; an employer cannot invent a custom rate. Check the next payslip after any change and keep a copy of the declaration.

How the wrong tax code affects a refund or bill

A code controls withholding, not the final annual tax rules. Too much PAYE may become part of a refund; too little can leave tax to pay. Using ME without qualifying for IETC can also create a shortfall when IRD completes the assessment.

Correct the code as soon as circumstances change, then use myIR to watch the reported income and deductions. Changing the code fixes future pay periods; it does not rewrite deductions already made. The end-of-year assessment reconciles the full-year position.