Tax Facts

If you had more than $5,000 of tax to pay at the end of the year from your last income tax return, you'll have to pay provisional tax the following year.

This usually happens when you earn income without having tax deducted during the year.

Anyone who pays income tax may need to pay provisional tax including individuals, companies and trusts. Provisional taxpayers often earn:

• Self-employed income
• Rental income
• Income earned as a contractor
• Income from a partnership
• Overseas income

Tax to pay at the end of the year is called residual income tax (RIT). Residual income tax is the amount of income tax you pay for the year, less any PAYE and other tax credits you may be entitled to, except for Working for Families Tax Credits.

Provisional tax payment dates

Find out when you need to pay your provisional tax instalments. It's important to pay on time to avoid late payment penalties and interest. For more details, see one of our consultants or tax advisors.

If you made financial donations to a donee organisation, you may be able to claim a tax credit. To claim a tax credit, you need to file a Tax credit claim form (IR526) for the relevant tax year.

You can claim a tax credit if you:

• made a donation of $5 or more to an approved donee organisation where there is no identifiable direct benefit to you or your family
• earned taxable income (such as salary or wages, benefit, NZ Super, self-employed income, interest and dividends) during the year you're claiming for
• were resident in New Zealand at any time during that tax year, and
• are an individual (not a company, trust or partnership)

For more details, see one of our consultants or tax advisors.

General Income Tax Rates

Income tax rates are applied to your combined income at the end of the tax year to work out your tax obligation.

Tax rates for the 2025 year

Secondary tax

Secondary income is taxed at a flat rate throughout the year.

Companies

Companies own the assets and liabilities of the business and are responsible for any debts. Generally, a shareholders' liability for debts is limited to any amounts that remain unpaid on their shares in the company.

A company will make losses for tax purposes if its total expenses exceed its income. If a company has losses it may not have to pay tax and can usually use the loss to reduce its income in the next income year.

LTCs are a special sort of company that is "looked-through" for income tax purposes. The shareholders of the LTC become liable for income tax on the LTC's profits, while also being able to offset the LTC's losses against any other income.

Each owner:

• is responsible for declaring the income on their individual income tax return, and will be
• liable for any tax payable on their LTC income at their marginal tax rate, and is regarded for
• income tax purposes as holding the LTC's assets directly and carrying on the activities of the LTC personally.

Profits earned by a company, except for profits of a LTC, are taxed at the company tax rate of:

• 28 cents in the dollar for income years 2012 and later.
• 30 cents in the dollar for income years 2009 to 2011.
• 33 cents in the dollar for income years 2008 and earlier.

Who pays income tax at the company rate?

The company tax rate (CTR) applies to all:

• registered companies, except for those who elect to become a LTC.
• cooperative companies
• life insurance company's deadline
• incorporated societies
• portfolio investment entity (PIEs) that are not portfolio tax rate entities
• specific savings vehicles defined as being taxed at this rate in Schedule 1 of the Income Tax Act 2007.
• unit trusts
• statutory producer boards
• group investment funds (except for certain income).

How can a company distribute its profits?

Companies can distribute money in three ways:

• Shareholder-employees can periodically draw money from the company. Owners of an LTC can't receive shareholder-employee salaries.
• Shareholder-employees can be paid a regular salary (at least monthly) with PAYE taken out in the normal way.
• The company can pay dividends to shareholders out of the profits that remain after tax.
• Any dividends paid by an LTC are ignored for income tax purposes, as the LTC is "looked-through" to establish each owner's share of LTC income.

If you own a rental property you can claim a variety of expenses. These must relate to the costs of earning rental income and must not include costs for private use.

Expenses you can claim

Insurance and rates

You can claim the cost of insuring your rental property and the rates for the property.

Interest

You can claim the interest charged on money you've borrowed to buy your rental property. However, if you:

• borrowed part of the money for another purpose, or
• topped up the mortgage for another purpose, for example to consolidate debt or to buy the house you live in

you can only claim the interest that relates directly to the rental.

Fees and commission

You can claim fees or commission paid to agents who collect the rent, maintain your rental, or find tenants for you.

Fees paid to an accountant

You can claim the fees for:

• your accounts to be managed
• tax returns to be prepared, and
• advice

but not the costs involved in setting up your rental property.

Repair and maintenance costs

You can claim the costs for any repairs to the property or general maintenance. However, if you're doing the work yourself you can only claim for materials - not your time.

If the work is more of an improvement than a repair then you can't claim the cost as an expense. The distinction between repairs and improvements can be tricky, so if you're unsure whether work done on your property is repairs or maintenance we suggest you talk to a tax agent.

Motor vehicle expenses

You can claim for motor vehicle expenses, such as running costs for travelling to inspect your property or to do repairs. There are two options for claiming motor vehicle expenses - you can either use our mileage rates or claim a percentage of the total running costs and depreciation.

Expenses you can't claim

You can't claim deductions for capital expenses, private expenses, or expenses that do not relate to your rental. Capital expenses are the costs of buying a capital asset or increasing its value, for example the cost of buying the property and making improvements. Private expenses are things you buy or pay for that are for your own benefit, rather than to generate rental income. Expenses you can't deduct from your rental income in your tax return:

• the purchase price of a rental property
• the capital portion of mortgage repayments
• interest on money you borrow for any purpose other than financing a rental property
• the costs of making any additions or improvements to the property
• the costs of repairing or replacing any damaged part of the property, if the work increases the property's value.

Real estate agent and legal fees

You can't claim real estate agent or legal fees charged as part of buying or selling the property. The only exception is if:

• you are in the business of renting properties, and
• your total legal expenses for the income year are $10,000 or less.

If you are in the business of renting properties, please contact us.

GST

GST is not charged on residential rent. This means you don't show rental income in your GST return. However, when you claim expenses related to your rental property, you claim for the full GST inclusive amount in your income tax return (IR3).

Depreciation

Depreciation is an allowance you can claim to cover the costs of wear and tear and general ageing of furniture and fittings you've bought for your rental. You can combine assets worth less than $5,000 rather than depreciating them separately.

You cannot claim depreciation on the rental's land or buildings. However, this wasn't always the case. Before April 2011, you could claim depreciation on the buildings. If you did this, and you sell the rental for more than its depreciated value, the depreciation you claimed for is taxable. This is a complex area, so we recommend you talk to a tax agent.

Other exceptions

If you have boarders or home-stay students

You can't claim expenses associated with having boarders or home-stay students, unless you have five boarders or more.

If the property isn't rented for the full year

If your rental isn't occupied by tenants, isn't available to be rented out, or is only available for rent for part of the year, you can't claim the full year's ongoing costs (such as rates, insurance and interest).

If you rent out your holiday home

There are different rules for claiming expenses if you have a mixed-use holiday home - this is where you use the holiday home yourself, you rent it out as well, and it's unoccupied for 62 days or more.

If you live in the property

You can't claim for expenses that relate to your personal living costs. For example, if you move into your rental property after not being able to find tenants.

If you're living in a family home that was bought or transferred to a company, partnership, or trust which you own or control, you need to be very careful about claiming expenses. If in effect you're renting the property to yourself, we could view these claims as tax avoidance and you could face penalties, even prosecution.

We recommend you get professional advice from an expert in this area.

When you start employing staff, you must register with us as an employer. You must also decide whether your staff are employees or self-employed contractors as the tax treatment for each is different.

Registering as an employer

You will need an IRD number to register as an employer. Use your existing IRD number if you already have one. If you don't have an IRD number, you will need to apply for one first.

Employer responsibilities

Introduction

When you employ staff you're responsible for deducting from their pay the correct amount of:

• income tax (PAYE)
• KiwiSaver contributions, if they're a member of KiwiSaver
• child support payments, if they owe child support
• student loan payments, if they have a student loan.

If any of your staff are members of KiwiSaver then you must pay your employers' contribution to their fund. This is a minimum of 3% of their annual pay.

• Get your employer schedule in on time with your payment and avoid penalties.
• Make sure the correct IRD number and tax code is next to each person's name.
• Make sure you have entered the right amount for people's KiwiSaver, student loan or child support payments.
• Tell us when someone stops working for you through your employer monthly schedule.
• Filing electronically using ir-File is the most accurate and efficient way to send us your employee information.

Make sure new employees fill in a Tax code declaration (IR330). This will tell you the:

• tax code to use, and
• rate of tax to take out of their wage.

If any employees don't fill in a Tax code declaration (IR330), you must deduct tax from their wages at a higher rate (called the no-notification rate).

Deduct PAYE from your employees' wages

You pay this to us either once or twice a month, depending on the total amount of wages you pay. PAYE includes the ACC earners' levy, to cover the cost of employees' non-work injuries.

Complete employer returns

• Send the Employer deductions (IR345) with your payment by the due date.
• Complete an Employer monthly schedule (IR348) with the details of each employee's deductions.

Pay fringe benefit tax if required

If you supply fringe benefits, eg company cars or parking spaces, to your employees, you will need to send us a fringe benefit tax payment by the due date.

Make any further deductions from employees' wages if required

Other deductions may be child support, student loan, ESCT or KiwiSaver contributions.

Employers must deduct PAYE, including tax on schedular payments (formerly withholding payments) from payments made to staff or contractors. Deductions may also be needed for student loan repayments, child support, KiwiSaver, or any benefits, bonuses or other allowances that you pay.

Tax codes

All employees and contractors receiving schedular payments must complete a tax code declaration. This tells the employer the rate of PAYE or tax to deduct including any student loan repayments.

Accounting for allowances and benefits for staff

Holiday pay, bonuses, allowances, and special benefits paid to employees such as loss of earnings compensation or life insurance premiums are usually liable for tax.

Special types of workers

There are different ways of calculating PAYE for non-residents and other special types of workers.

Deductions from salaries and wages

There are tools available to help employers calculate PAYE and student loan repayment deductions. If child support deductions must be made, we will inform you of the amount. Most employer superannuation contributions are subject to employer superannuation contribution tax (ESCT). Employers must also use the PAYE system to deduct employees' KiwiSaver contributions.

Fringe benefits

Most benefits paid to employees in addition to their salary or wages, for example motor vehicles or low-interest loans, are liable for fringe benefit tax (FBT).

Tax on schedular payments

Employers must deduct tax on schedular payments (formerly withholding payments) from contractors performing activities outlined in schedule 4 of the Income Tax Act 2007. From 1 April 2010, there are legislative changes that impact contractors working in the horticulture and viticulture industries.

Correcting employee tax codes

If an employee is using an incorrect tax code, we will send their employer a letter asking them to correct their employee's tax code.

Charitable organisations can receive many types of income, including subscriptions, grants, subsidies, donations or koha, fees, raffle money, trading profits, and proceeds from selling assets. There are income tax exemptions available if they are registered with Charities Services.

Registering with Charities Services

You can register with Charities Services on their website.

Once Charities Services have approved your registration, they will send you a registration certificate and letter, as well as our leaflet Tax information for charities registered under the Charities Act 2005 (IR256) advising you about the exemptions available to registered charities.

You will be expected to self-assess your tax-exempt status annually.

When charitable organisations are liable for income tax

Charitable organisations are liable for income tax if they:

• operate without written rules, constitution or trust deed
• operate under a set of rules, a constitution or a trust deed that does not meet the requirements for an income tax exemption
• use business income for charitable purposes outside New Zealand
• are not registered by Charities Services.

Paying income tax

Income tax rates can vary for your organisation, depending on whether you're incorporated or unincorporated. You may also need to pay provisional tax.

Getting an IRD number

Any type of charitable organisations you are running will need an IRD number. You can get an IRD number by completing an IRD number application - resident non-individual (IR596) form.

Registering for GST and PAYE

You may also need to register for GST and PAYE.

When charitable organisations are exempt from income tax

The Income Tax Act 2007 and the Estate and Gift Duties Act 1968 set out a number of income tax and duty exemptions. Some of these exemptions give benefits to charitable organisations and some give benefits to people or companies who make donations to these organisations. There are generally two main conditions that a charitable organisation must meet to qualify for any of the exemptions:

• The organisation's aims and activities must be exclusively charitable.
• None of the organisation's income or funds may be used (or be available for use) to benefit any of its members, trustees or associates.

Your responsibilities if you are exempt from income tax

If your charitable organisation is assessed as being fully exempt from income tax, you don't need to file an income tax return unless we ask for one. However, you still need to keep accurate records for the organisation.

Banks and other financial institutions that pay interest are required to deduct RWT (resident withholding tax) from interest. Charities are eligible for an exemption from RWT. You can request an exemption from RWT (resident withholding tax) by completing an Application for exemption from resident withholding tax on interest and dividends (IR451) and sending it to us.

All New Zealand residents and people entitled to live here permanently up to the age of 65 are eligible for KiwiSaver. All new eligible employees must be automatically enrolled in KiwiSaver. However there are some employees who are exempt from automatic enrolment. These include:

• Those under 18 years of age
• Casual agricultural workers or Election Day workers
• Private domestic workers
• Casual and temporary employees employed under a contract of service that is 28 days or less

Employees who are automatically enrolled can opt out but must do so within a specified time (from the end of week 2 of their employment to the end of week 8) by filing the prescribed form (KS10).

All eligible existing employees can join the scheme at any time they wish by notifying their employer.

There are 3 employee contributions rates, being 3.5%, 4% or 8%. The employee can elect the rate at which they want their contributions deducted. If an employee does not elect a rate then the default rate of 3% will be used by the employer for contribution deductions made.

Compulsory Employer Contributions

From 1 April 2008 it became compulsory for employers to contribute to their eligible employees' KiwiSaver scheme unless the employer is already paying into another registered superannuation scheme for the employee.

This minimum compulsory contribution rose to 3.5% from 1 April 2013.

Employer contributions are subject to Employer Superannuation Contribution Tax (ESCT) on a progressive scale based on the employees' marginal tax rate.

Government Assistance

The government also:

• Pays annual member tax credit (for those 18 and over) of up to $521.43 ($260.72 effective from July 2025)
• Funds first home deposit subsidy through Housing NZ if the relevant criteria are met

Prior to 21 May 2015, the government made a $1,000 'kick-start' contribution.

Note: There is no Crown guarantee of KiwiSaver schemes or investment products of KiwiSaver schemes.

Employers must:

• Give new employees and other existing staff who are interested an Employee information pack (KS3)
• Pass employees' details to Inland Revenue to enable them to be enrolled
• Deduct contributions from employees' gross salary and pay these to IRD through the PAYE system

A list of KiwiSaver providers is available at www.kiwisaver.govt.nz

For more information on KiwiSaver and how this may apply to you give us a call or refer to the KiwiSaver for Employers information available on the IRD website.