Appendix 2: New Zealand’s Personal Income Tax Scale
The personal income tax scale is made up of the three-step statutory scale and the Low Income Earner Rebate. ACC earners’ levies also interact with the personal income tax system.
The three-step statutory personal-tax scale has the following tax rates and thresholds:
- 19.5% on income up to and including $38,000;
- 33% on income above $38,000 and equal to or below $60,000; and
- 39% on income above $60,000.
The interaction between this three-step scale and the Low Income Earner Rebate results in a four-step personal tax scale that applies to most incomes and most people.[19] The Low Income Earner Rebate is received at the rate of 4.5 cents per dollar on the first $9,500 of labour income (such as wages, salaries, and main welfare benefits). Investment income (such as rents, interest, dividends, and royalties) is not eligible for the Low Income Earner Rebate (except for the investment income of recipients of New Zealand Superannuation and War and Veterans’ Pensions) and is thus taxed at 19.5% up to $38,000. The Low Income Earner Rebate abates against total income at the rate of 1.5 cents per dollar between $9,500 and $38,000. The rebate is fully abated once total income reaches $38,000.
The interaction of the statutory personal income tax rates and the Low Income Earner Rebate leads to a four-step tax scale for labour income of:
- 15% on income up to and including $9,500;
- 21% on income above $9,500 and equal to or below $38,000;
- 33% on income above $38,000 and equal to or below $60,000; and
- 39% on income above $60,000.
The 1.2% ACC earner’s levy is levied upon gross (before taxation and abatement of assistance) labour income (excluding main welfare benefits) up to $87,185. Payments made under this levy go to the Accident Compensation Corporation, not to personalised social security accounts.
Notes
- [19]A very small number of people are on a five-step tax scale. These people receive a combination of labour and investment income, less than $9,500 labour income, and less than $38,000 total income.
