Effective Tax Rate by NZ Income Decile 2000-2026
How has the NZ income tax burden shifted across income groups over the past 26 years? This analysis applies historical tax brackets + ACC levies to Inland Revenue's distribution of individual taxable incomes, showing the effective tax rate each group actually paid at 5-year snapshots from 2000 to 2025.
Effective tax rate by decile (income tax + ACC)
| Decile | 2000-01 | 2005-06 | 2010-11 | 2015-16 | 2020-21 | 2025-26 | Change 2000-01→2025-26 |
|---|---|---|---|---|---|---|---|
| D1 (Lowest)† | 20.8% | 20.7% | 13.5% | 11.9% | 11.9% | 12.2% | n/a† |
| D2† | 20.8% | 20.7% | 13.5% | 12.0% | 11.9% | 12.2% | n/a† |
| D3 | 20.8% | 20.7% | 13.6% | 12.9% | 13.5% | 13.9% | -6.9% |
| D4 | 20.8% | 20.7% | 14.9% | 14.2% | 14.6% | 15.3% | -5.5% |
| D5 (45th Percentile) | 20.8% | 20.7% | 16.2% | 15.2% | 15.5% | 16.1% | -4.7% |
| D6 | 20.8% | 20.7% | 17.7% | 16.3% | 16.5% | 17.0% | -3.8% |
| D7 | 20.8% | 20.7% | 18.5% | 16.9% | 18.0% | 19.5% | -1.3% |
| D8 | 20.8% | 21.9% | 19.2% | 19.4% | 20.7% | 22.0% | +1.2% |
| D9 | 22.6% | 24.6% | 22.5% | 22.2% | 23.5% | 24.9% | +2.4% |
| D10 (Highest) | 27.1% | 29.3% | 27.1% | 26.6% | 27.6% | 28.4% | +1.3% |
Effective rate = (income tax + ACC earners' levy, capped at each year's maximum liable earnings) / gross income. Each column is the income year starting 1 April. Decile midpoints from Inland Revenue's taxable income distribution of individuals (see the midpoints table below). Statutory tax scale applied per income year (2010-11 uses the composite rates for the 1 October 2010 cut). Rebates and tax credits (low income rebate, IETC, WFF), GST and KiwiSaver excluded — the low income rebate that applied before 1 October 2008 is not modelled, so the 2000-01 and 2005-06 rates shown for the lower deciles overstate what those taxpayers actually paid.
† D1 and D2's Change column reads "n/a": from the 2019 tax year IRD's distribution also counts people whose only income is interest or dividends taxed at source, many of them children, so their midpoints collapsed to double-digit dollars (D1 is $66 in 2025-26) and are not comparable to the pre-2019 snapshots. Their per-year effective rates are still shown for reference; headline claims elsewhere on this page use D3 upward.
Key observations
- D3 and D4 fell furthest among comparable deciles. Their effective rates fell 5.5–6.9 points between 2000-01 and 2025-26, mainly because the bottom rate dropped from 19.5% on the first $38,000 to 10.5% on the first $15,600. The 2000-01 figures exclude the low income rebate that applied before 1 October 2008, so part of that fall is overstated. D1 and D2 are excluded from this comparison — see the note below the table above.
- Middle and top deciles are close to where they started. D5–D10 effective rates are within 4.7 points of their 2000-01 level. Their midpoint incomes rose into higher brackets over the period, offsetting the lower rates — enough that D8, D9 and D10 now pay a higher effective rate.
- The 39% rate is not new. In 2000-01 it applied to income over $60,000 (D10 at these midpoints). It ended on 31 March 2009 and returned in 2021-22 on income over $180,000 — in 2025-26 that reaches no decile midpoint.
- ACC is a flat levy up to a cap. At 1.20–2.02% of earnings across the snapshot years, ACC adds that much to every decile below the cap. Above the cap ($152,790 in 2025-26, D10 at these midpoints) the levy is fixed, so its share of income shrinks as income rises.
Decile income midpoints used
| Decile | 2000-01 | 2005-06 | 2010-11 | 2015-16 | 2020-21 | 2025-26 |
|---|---|---|---|---|---|---|
| D1 (Lowest)† | $1,620 | $1,702 | $2,426 | $2,962 | $61 | $66 |
| D2† | $6,863 | $7,600 | $9,427 | $11,349 | $7,688 | $6,694 |
| D3 | $10,074 | $12,158 | $14,202 | $16,324 | $18,073 | $20,846 |
| D4 | $12,117 | $14,792 | $17,012 | $20,546 | $22,640 | $28,082 |
| D5 (45th Percentile) | $14,689 | $18,208 | $21,218 | $26,434 | $28,884 | $35,292 |
| D6 | $19,781 | $25,681 | $30,181 | $36,643 | $41,112 | $49,885 |
| D7 | $26,652 | $33,641 | $39,127 | $46,712 | $52,247 | $64,186 |
| D8 | $34,194 | $41,573 | $48,706 | $58,068 | $65,357 | $79,961 |
| D9 | $43,780 | $53,552 | $62,936 | $74,350 | $83,706 | $104,088 |
| D10 (Highest) | $66,145 | $79,928 | $93,999 | $116,076 | $133,281 | $164,166 |
Taxable income of the individual in the middle of each decile (5th, 15th, …, 95th percentile), individuals above nil, nearest dollar. Source: Inland Revenue — Taxable income distribution of individuals, tax years 2001, 2006, 2011, 2016, 2021, 2025 (the 2025-26 column uses 2025, the latest published). From the 2019 tax year the series includes people whose only income is interest or dividends, which pulls D1 below $100.
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Frequently asked questions
What is an income decile?
Income deciles split people into 10 equal groups by their own taxable income for the year. Decile 1 is the lowest 10%, Decile 10 the highest. Each decile's midpoint is the income of the person in the middle of that group: the 5th, 15th, …, 95th percentile.
How do you calculate effective tax rate?
Effective tax rate = (income tax + ACC earners' levy) / gross income × 100. This IS NOT the marginal rate — it's what you actually pay as a percentage. Income tax is the statutory basic scale for each income year; the ACC earners' levy is charged only up to that year's maximum liable earnings. We use ACC because it's a mandatory deduction from salary and wages.
Which decile saw the biggest tax change?
Between 2000-01 and 2025-26, rates moved in both directions (D8, D9 and D10 rose). D1 and D2 are excluded from this comparison — a 2019 IRD coverage change means their midpoints are not comparable across the period (see below). Among the comparable deciles, the biggest falls are at D3 and D4 (−6.9 and −5.5 points), where the 2000-01 scale started at 19.5% on the first $38,000. From D5 upward no decile moved by more than 4.7 points. The 39% rate is not new: in 2000-01 it applied to income over $60,000; since 2021-22 it applies over $180,000.
Does this include GST, KiwiSaver, or Working for Families?
No. This analysis covers income tax + ACC only, and excludes every rebate and tax credit — including the low income rebate that applied before 1 October 2008 and the independent earner tax credit (IETC) — so the lowest deciles' rates in the early years are overstated. GST is regressive (hits lower incomes harder). WFF credits offset tax for many lower- and middle-income families with children. KiwiSaver is voluntary (you can opt out). A full tax-incidence study would include all three.
Where does the decile income data come from?
Inland Revenue's taxable income distribution of individuals, which counts people in $1,000 bands of taxable income for each tax year from 2001. We take everyone above nil and read off the 5th, 15th, …, 95th percentile, interpolating within the band. Each column uses the tax year ending 31 March after its income year starts (2000-01 → 2001), except 2025-26: the latest published year is 2025 (the 2024-25 income year), so that column pairs the 2025-26 scale with it. From the 2019 tax year IRD also counts people whose only income is interest or dividends taxed at source, many of them children, which is why D1 falls to under $100 from 2020-21; D1 and D2 are not comparable across that change. Source: Inland Revenue — Tax on taxable income datasets.
How has the tax burden shifted over time?
Among comparable deciles (D1 and D2 excluded — see below), the lower deciles (D3 and D4) show the largest falls, 5.5–6.9 points, mostly because the bottom rate dropped from 19.5% (2000-01) to 10.5% (from 1 October 2010) — though the 2000-01 figures exclude the low income rebate that applied before 1 October 2008, so part of that fall is overstated. D5-D10 are within 4.7 points of their 2000-01 rates: the 39% top rate ended on 31 March 2009 and returned in 2021-22 only over $180,000.