Minimum Wage Tax Impact in 2025-26: Your Full Breakdown
How much tax a minimum wage worker pays in 2025-26 New Zealand, including income tax, ACC levy, KiwiSaver, and take-home pay calculations.
Published 22 March 2026 · Reviewed by NZ Tax Tools Editorial Desk
New Zealand’s minimum wage increased on 1 April 2025, affecting the income — and therefore the tax and deductions — of hundreds of thousands of workers. This article calculates the full tax picture for minimum wage earners in 2025-26: how much income tax they pay, what the ACC earner’s levy costs, how KiwiSaver affects take-home pay, and what reaches their bank account each week.
The 2025-26 Minimum Wage
From 1 April 2025, the minimum wage rates in New Zealand are:
| Category | Hourly rate |
|---|---|
| Adult minimum wage | $23.50 |
| Starting-out wage | $18.80 |
| Training minimum wage | $18.80 |
The adult minimum wage applies to most workers aged 16 and over who are not in their first six months with a new employer. The starting-out and training wages apply to specific situations such as those in a training programme or a new worker aged 16–19.
For this article we use the adult minimum wage of $23.50 per hour.
Annual Income at Minimum Wage
Using the standard New Zealand work year of 40 hours per week for 52 weeks:
| Measure | Calculation | Amount |
|---|---|---|
| Hourly rate | — | $23.50 |
| Weekly gross | 40 × $23.50 | $940.00 |
| Fortnightly gross | $940 × 2 | $1,880.00 |
| Monthly gross (approx.) | $940 × 52 / 12 | $4,073.33 |
| Annual gross | $940 × 52 | $48,880.00 |
Income Tax at $48,880 Per Year
New Zealand’s income tax is calculated progressively — each rate applies only to the portion of income within its bracket.
| Bracket | Rate | Taxable amount | Tax |
|---|---|---|---|
| $0 – $15,600 | 10.5% | $15,600 | $1,638.00 |
| $15,601 – $48,880 | 17.5% | $33,280 | $5,824.00 |
| Total income tax | $7,462.00 |
The effective income tax rate at $48,880 per year is approximately 15.3% — significantly lower than the 17.5% marginal rate, because the first $15,600 is taxed at the lower 10.5% rate.
ACC Earner’s Levy
The ACC earner’s levy is 1.67% on all earnings up to $152,790. At minimum wage:
$48,880 × 1.67% = $816.30 per year
This works out to approximately $15.70 per week.
KiwiSaver Contributions
KiwiSaver participation is optional for employees (you can opt out), but most minimum wage workers who are enrolled contribute at the 3% minimum rate.
| Rate | Annual employee contribution | Employer adds (3% min.) |
|---|---|---|
| 3% | $1,466.40 | $1,466.40 |
| 4% | $1,955.20 | $1,466.40 |
| 6% | $2,932.80 | $1,466.40 |
Note: The employer’s 3% contribution is not deducted from the employee’s pay — it is an additional contribution on top of the gross wage. Employer contributions are subject to Employer Superannuation Contribution Tax (ESCT).
Student Loan Repayments
If you have a student loan, 12% of earnings above the $24,128 annual threshold is automatically deducted through PAYE.
At $48,880 per year:
($48,880 − $24,128) × 12% = $24,752 × 12% = $2,970.24 per year
This adds up to $57.12 per week. For minimum wage workers with a student loan, this is a significant deduction that substantially reduces take-home pay.
Take-Home Pay Scenarios
The table below shows weekly take-home pay at minimum wage under different combinations of KiwiSaver and student loan status.
Annual earnings: $48,880 | Weekly gross: $940.00
| Scenario | Income tax | ACC levy | KiwiSaver | Student loan | Weekly take-home |
|---|---|---|---|---|---|
| No KiwiSaver, no loan | $143.50 | $15.70 | $0 | $0 | $780.80 |
| KiwiSaver 3%, no loan | $143.50 | $15.70 | $28.20 | $0 | $752.60 |
| KiwiSaver 3%, with loan | $143.50 | $15.70 | $28.20 | $57.12 | $695.48 |
| KiwiSaver 4%, with loan | $143.50 | $15.70 | $37.60 | $57.12 | $686.08 |
Note: income tax per week = $7,462 / 52 = $143.50 (rounded). ACC = $816.30 / 52 = $15.70.
The Independent Earner Tax Credit (IETC)
Minimum wage workers earning between $24,000 and $70,000 may qualify for the Independent Earner Tax Credit (IETC) of up to $10 per week ($520 per year). At $48,880, the income is well within the $24,000–$66,000 full-credit zone, so full-time minimum wage workers who are not receiving Working for Families or a main benefit qualify for the full $520 annual credit.
To claim it, ask your employer to apply the ME tax code on your IR330.
Working for Families
Many minimum wage workers with dependent children may also qualify for Working for Families tax credits. The Family Tax Credit, Best Start payment, and In-Work Tax Credit can add significant weekly income for families. These credits are means-tested and abate as income rises. See the separate article on Working for Families rates for 2025-26 for full details.
Impact of the Wage Increase
If the adult minimum wage increased from a previous rate to $23.50 on 1 April 2025, those earners received both higher gross pay and higher tax deductions. The net effect is always positive: more tax is paid but the after-tax income increase is larger than the tax increase, because New Zealand does not operate a taper that would eliminate all of the benefit.
Key Facts at a Glance
| Item | Annual | Weekly |
|---|---|---|
| Gross earnings | $48,880 | $940.00 |
| Income tax | $7,462.00 | $143.50 |
| ACC earner’s levy | $816.30 | $15.70 |
| KiwiSaver (3%) | $1,466.40 | $28.20 |
| Net pay (KiwiSaver 3%, no loan) | $39,135.30 | $752.60 |
| Effective income tax rate | 15.3% | — |
For precise, personalised calculations including any student loan or specific KiwiSaver rate, use the Take-Home Pay Calculator on this site.