Income Tax
New Zealand income tax is calculated using a progressive bracket system. Unlike many other countries, there is no personal allowance or tax-free threshold — tax applies from the first dollar earned. For 2025-26, the rates are: 10.5% on income up to $15,600, 17.5% on $15,601–$53,500, 30% on $53,501–$78,100, 33% on $78,101–$180,000, and 39% on income over $180,000.
Because the system is progressive, each bracket rate only applies to income within that range. For example, someone earning $60,000 pays 10.5% on the first $15,600, then 17.5% on the next $37,900, then 30% on the remaining $6,500 — giving an effective tax rate of about 17%, well below the 30% marginal rate.
Income tax applies to salary, wages, self-employment income, rental income, interest, dividends, and certain capital gains (such as bright-line property sales). Most employees have income tax deducted automatically through PAYE.
Related Terms
PAYE
PAYE (Pay As You Earn) is the system that New Zealand employers use to deduct income tax from employees' wages and salaries.
Effective Tax Rate
The effective tax rate (also called the average tax rate) is your total income tax divided by your gross income, expressed as a percentage.
Marginal Tax Rate
Your marginal tax rate is the tax rate that applies to your next (or last) dollar of income — in other words, the rate of the highest tax bracket you fall into.
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Use our free tool to see how income tax affects your tax.