M vs ME Tax Code: Which Should You Use?
Both are primary tax codes. The only difference is whether the Independent Earner Tax Credit (IETC) — worth up to $520/year — is applied through your PAYE during the year, or refunded after IRD's auto-assessment in May.
M vs ME at a glance
| Feature | M | ME |
|---|---|---|
| Use case | Primary job, no IETC during year | Primary job with IETC applied weekly |
| Income range | Any | $24,000 – $70,000 |
| PAYE rate (income tax) | Progressive 10.5% – 39% | Progressive 10.5% – 39% |
| IETC applied during year | No (refunded at year-end) | Yes (up to $10/week) |
| Eligible while on a main benefit / NZ Super / WfF? | Yes (M is correct) | No |
| Yearly difference vs M (income $50k) | $0 | +$520 in cash flow (same total tax) |
| Mid-year ineligibility (start a benefit / WfF) | No action needed | Switch to M via IR330 immediately |
How the $520 IETC abates between $66k and $70k
The full $520 credit is available from $24,000 up to $66,000 of taxable income. From $66,001 to $70,000, the credit abates at 13 cents per dollar of income above $66,000:
- $66,000 → $520 (full)
- $67,000 → $390
- $68,000 → $260
- $69,000 → $130
- $70,000+ → $0
Use the IETC calculator to see your exact entitlement at any income level.
Cash-flow vs tax-saved
Many people assume ME saves them money. It doesn't — both M and ME deliver the same total annual tax. ME just spreads the IETC across weekly pay, while M lets IRD pay it as a lump sum after the year ends. If you prefer steady weekly income, choose ME. If you treat the year-end refund as a forced savings boost, M works.
The risk with ME is mid-year ineligibility. If you start receiving Working for Families or a benefit and forget to switch back to M, you'll owe the over-claimed IETC at year-end. M never has this risk.
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Frequently asked questions
What is the difference between M and ME tax codes?
Both are primary tax codes for your main job. M is the standard code with no Independent Earner Tax Credit (IETC). ME adds the IETC — up to $520 per year ($10/week) — applied directly through your PAYE. ME is only for people earning $24,000–$70,000 who don't receive a main benefit, NZ Super, or Working for Families tax credits.
Who is eligible for ME?
You qualify for ME if your annual taxable income is between $24,000 and $70,000, you're a NZ tax resident, and you do not receive a main benefit, NZ Super, Veteran's Pension, or Working for Families tax credits at any point in the year. See IRD IETC eligibility.
How much extra is in my pay packet on ME vs M?
Up to $10/week ($520/year) more for incomes between $24,000 and $66,000. Between $66,001 and $70,000 the credit abates at 13c per dollar of income over $66,000, so the $10/week tapers to zero at $70,000. Above $70,000 there is no IETC, so M and ME deliver identical PAYE.
Should I default to M and let IRD sort the IETC at year end?
You can. If you stay on M, IRD applies the IETC during the automatic income tax assessment (or via your IR3) and refunds the credit as a lump sum. ME front-loads the same money into your weekly pay. Cash-flow preference, not tax-saving difference.
What if my income changes mid-year?
If you move below $24,000 (e.g., reduced hours, parental leave) or above $70,000 mid-year, IRD reconciles the IETC at year-end based on your full annual income. You don't need to switch codes mid-year unless you start receiving a benefit, NZ Super, or Working for Families — those make you ineligible and you must change to M (file an IR330).
Can I have ME on a second job?
No. ME is only valid on a primary tax code. A second job uses a secondary code (SB, S, SH, ST, SA — and SL variants if you have a student loan). The IETC is reconciled across all your jobs at year-end based on combined income.
What about ME SL (with student loan)?
ME SL combines IETC with the 12% student loan repayment above $24,128. If you're on a primary job, eligible for IETC, and have a student loan, ME SL is the right code.
I receive Working for Families — should I switch from ME to M?
Yes, immediately. Receiving Working for Families makes you ineligible for IETC. Continuing on ME means you'd owe the IETC back at year-end. File an IR330 with your employer to switch to M.