Taxes can be a bit of a mare to deal with. Add tax codes to that and it can be doubly so.
Many kiwi taxpayers struggle with getting tax codes right, that in some cases they end up receiving a surprise tax bill at the end of the year due to using wrong tax codes.
If you’re an NZ taxpayer, you might be a bit confused about what tax codes to use. Let us walk you through NZ tax codes to make it simpler.
What are tax codes?
A tax code is a code, made up of letters that indicate to your employer which percentage of tax should be deducted from your salary.
What is my tax code?
Depending on what you’re filling your IR 330 form for, your tax code changes. There are different tax codes for your main income, secondary income, if you have a student loan, if you’re receiving NZ Super or veteran pension, etc.
So if you don’t know what your tax code is, don’t be gutted. Follow this guideline to find the code that suits you.
What is the M tax code in NZ?
M is the tax code that applies to your main income. Take a squiz at the following criteria:
- This job is your main/highest source of income.
- Your annual earnings do not fall between NZD 24,000 and NZD 48,000.
- You do not need to pay off a NZ student loan.
- You are not entitled to benefits like Working for Families, Tax Credits, NZ Super, Veterans Pension, or other similar overseas benefits.
If you meet these requirements, then you can use the tax code M for your main income on your IR 330 form.
But what if you don’t meet one or more of these requirements?
You can simply take IRD’s Determine what tax code to use questionnaire and find out what tax code applies to you.
What is the SH tax code in NZ?
SH is a secondary income tax code. If you’re filling out an IR 330 form for your secondary income, your specific tax code depends on your total annual income from all sources and whether or not you are paying off a student loan.
Accordingly, if you don’t have to pay off a student loan, depending on your total annual income you can use SB, S, SH, ST, or SA tax codes.
What if I have to pay off a student loan?
The code SL is used to distinguish between taxpayers who have a student loan and taxpayers who do not. In this case, depending on your total annual income, the tax codes will vary from SB SL, S SL, SH SL, ST SL, and SA SL.
You can find out which code applies to you through IRD’s Determine what tax code to use questionnaire.
What if I’ve used the wrong tax code?
If the IRD notices that you’re using the wrong tax code, they will ask you to change it. Alternatively, you can apply for a tailored tax code.
If you often receive a large tax bill at the end of the year, tailored tax codes will help you pay the right amount of tax. You can find out which tailored tax option is right for you on IRD’s website.
What if I receive NZ Super and/or Veteran Pension?
In this case you can get your tax code through the Ministry of Social Development’s website.
What are the other tax codes in NZ?
There are other specific tax codes in NZ. For instance, if you’re a casual agricultural worker your tax code will be CAE. If you’re an election day worker, your tax code will be EDW. If you’re employed under the Recognised Seasonal Employers scheme (RSE scheme) your tax code will be NSW. This code can also be used if you do foreign fishing work (hold a work visa as foreign crew of a fishing vessel in New Zealand waters).
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