IETC
The Independent Earner Tax Credit (IETC) provides a tax credit of up to $520 per year ($10 per week) for New Zealand tax residents earning between $24,000 and $70,000 who do not receive Working for Families tax credits or a main government benefit.
The full $520 credit applies for income between $24,000 and $66,000. Above $66,000, the credit reduces by 13 cents for each additional dollar of income, phasing out completely at $70,000. For example, at $68,000 income the IETC would be $520 − 0.13 × ($68,000 − $66,000) = $260.
If your employer knows you're eligible, they can apply the IETC through PAYE by using the 'ME' tax code (instead of 'M'), giving you a slightly higher take-home pay each period rather than waiting for a lump sum refund. Otherwise, IRD will credit the IETC in your end-of-year assessment.
Related Terms
Income Tax
New Zealand income tax is calculated using a progressive bracket system.
Working for Families
Working for Families (WFF) is a government scheme that provides tax credits to families with dependent children aged 18 or under (or 16–18 and not receiving a benefit or student allowance).
PAYE
PAYE (Pay As You Earn) is the system that New Zealand employers use to deduct income tax from employees' wages and salaries.
Tax Code
A tax code is a code you provide to your employer (on an IR330 form) that determines how PAYE is calculated on your pay.
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