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This article is not tax advice. I am not your tax advisor. The article below is the the opinion of the writer and is for entertainment purposes only. Consult your own tax professionals if you need assistance filing your tax return.
Your tax code tells your employer how much tax to deduct from your paycheck.
All people who have a job in New Zealand require a tax code.
You will be asked to enter your tax code on an IRD form on your first day of work.
It is your responsibility to select the right tax code.
For most people their tax code will be "M", but this will change depending on your circumstances.
If you choose the wrong tax code, you may end up paying the wrong amount of tax, and be subject to interest and penalties from IRD.
You can determine your correct tax code using the IRD guidelines, which are summarised below.
A tax code determines how much tax is deducted from every paycheck you receive.
For most people, your paycheck will be from a job, i.e. wages or salary.
However, a tax code may still be required even if you are receiving NZ Super or a government allowance, or an income-tested benefit.
You will need to declare your tax code on a form called an IR330, which will usually be given to you on your first day of work.
If you don't know what your tax code is, don't worry!
Our guide below will outline all the common tax codes, and how to determine your tax code if it's not listed.
Generally, most people's tax code will be "M".
However, your tax code will change depending on your circumstances.
For example, if you have a student loan outstanding, your tax code will change to "M SL".
A summary of the main tax codes are below.
Remember - you need to satisfy all the conditions for that tax code to apply to you.
M
M
M
ME
M SL
M SL
M SL
ME SL
s
s SL
sB
sB SL
sH
sH SL
sT
sT SL
sA
sA SL
CAE
WT
EDW
nsw
Don't worry!
The IRD has a widget that will help you find your correct tax code.
You will just need to answer a series of 2-8 questions and IRD will recommend a code for you.
You can access the quesionnaire here.
You will not get in trouble for not submitting a tax code.
In fact, the IRD might even be happy, because you will pay even more tax!
When you haven't declared a tax code, your employer will still deduct taxes from your paycheck, but they will deduct it at the default rate of 45%.
As the highest tax rate in NZ is currently 39%, not submitting a tax code simply means you will be paying more tax than you need to.
What is most likely to happen is IRD will contact you and ask you to change your tax code.
In some situations, they will change it for you.
For example, if you use the tax code M, but you have a student loan outstanding, the IRD will likely contact you or your employer and suggest you change the code to M SL.
You should always aim to submit the code that best fits your situation, or ask your employer for assistance.
However, understanding the tax system is not easy for most people, so mistakes are bound to happen.
If you do find yourself in a situation where you've been on the wrong tax code, you should contact the IRD and your employer and let them know immediately. Most errors can be corrected in your tax return.
If you believe you've been on the wrong tax code for several years and have filed incorrect tax returns and/or paid incorrect amounts of tax, it's best to speak to an accountant and let the IRD know as soon as possible. You may need to refile tax returns, and pay penalties/interest.
In rare cases where you are suspected to have knowingly/intentionally used the wrong code to evade or underpay tax, you could be liable for criminal charges.
It is possible for tax codes to change.
If your situation changes, it is up to you to notify your employer or the IRD.
For example, if you have two jobs, your second job will be on tax code S.
If you then quit your main job and your second job becomes your only job, you will need to tell your employer to change your tax code from S to M.
Changing your tax code is your responsibility.
If this has happened to you - don't worry!
You can get the taxes you have overpaid refunded to you by filing a tax return at the end of the year.
You can also top-up your tax paid if you have underpaid during the year.
If you have underpaid tax, you may be subject to interest and/or penalties.
Similarly, if you have overpaid tax, you may be eligible to receive some interest along with your refund.
You can learn how to file your own tax return with my guide here.
Note: This article is a guide only, and should not be used as official guidance from the IRD. You should check your tax code on IRD's website by clicking here.
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