PAYE stands for Pay As You Earn. It's the system New Zealand uses to collect income tax directly from your wages or salary. Instead of paying a big tax bill once a year, your employer deducts tax from every pay and sends it to Inland Revenue (IRD) on your behalf.
What PAYE includes
The "PAYE" deducted from your pay actually bundles two things:
- Income tax — calculated from the progressive tax brackets.
- ACC earner levy — a flat 1.75% of your income (up to a cap), funding New Zealand's accident compensation scheme.
KiwiSaver contributions and student loan repayments are deducted separately — they're not part of PAYE, though they come out of the same pay.
How PAYE is calculated
Your employer applies your tax code and the income tax brackets to each pay. For example, on a $60,000 salary the income tax is worked out band by band, then spread evenly across your pays (weekly, fortnightly or monthly). Add the 1.75% ACC levy, and that's your PAYE.
Tax codes
Your tax code tells your employer how much to deduct. The most common is M (main job, no student loan). Others include:
- M SL — main job, with a student loan
- ME — main job, eligible for the independent earner tax credit
- S, SH, ST, SA — secondary tax codes for a second job or extra income
Using the wrong code is the most common reason people over- or under-pay tax during the year.
See your PAYE in seconds
The free NZ Pay Calculator shows your PAYE, ACC, KiwiSaver and take-home pay instantly. You can also browse by salary — for example $60,000 after tax.