Working While Receiving NZ Super: Tax Codes, IR3 Reconciliation, Worked Examples 2026-27

NZ Super is paid regardless of whether you’re working — it’s not income-tested. But the tax-code interaction with paid work is where many recipients trip up. Pick the wrong codes and you’ll either over-pay PAYE during the year (and wait for an IR3 refund) or under-pay and owe a residual at year-end. This guide covers the right combination for your situation.

The two-income setup

If you receive NZ Super alongside salary, wages, contractor income, or self-employment income, you have two income streams. IRD assigns tax codes to each:

• Primary code (M, M SL): applied to your “main” income. Uses progressive PAYE brackets. Same as if it were your only income.
• Secondary codes (SB, SB SL, S, S SL, SH, SH SL, ST, ST SL, SA, SA SL): applied to additional income. Flat-rate, picked based on your total annual income.

The “M code goes on your main income” convention is just that — a convention to minimise the year-end reconciliation. There’s no rule that Super must be primary or secondary. Most people make the higher-paying income primary.

Picking the right secondary code

Secondary codes apply a flat percentage to the entire secondary income amount. Pick from this table based on your total annual income (Super + salary + other taxable income combined):

Add ” SL” to any code if you have a student loan — it adds 12% repayment above the SL threshold ($24,128, frozen since 2024-25). Note SL is not deducted from NZ Super itself; if you have a student loan and receive Super plus salary, the SL repayment is calculated on the salary side (or reconciled via IR3), since Work and Income doesn’t apply SL deductions to Super payments.

Why secondary codes don’t always match marginal rates exactly

Correctly matched, the secondary-code system reconciles either exactly or produces a small refund — it’s not designed to under-withhold. Here’s why, and when a gap opens up.

Imagine your total income is $60,000: $28,867 NZ Super + $31,133 salary. Your true marginal rate at $60,000 is 30% (the third bracket, $53,501–$78,100). The correct secondary code for a $60,000 total is SH, which is 30% — not 17.5% (that’s the rate for the S band, $15,601–$53,500).

If salary is primary (M) and Super is secondary (SH at 30%, correctly matched):

• M code on salary $31,133 → progressive PAYE ≈ $4,356
• SH on Super $28,867 → 30% flat = $8,660
• Total at-source PAYE: $13,016

Run the combined $60,000 through M progressive brackets:

• $0–$15,600 @ 10.5% = $1,638
• $15,600–$53,500 @ 17.5% = $6,633
• $53,500–$60,000 @ 30% = $1,950
• Total = $10,221

So at-source PAYE is $2,795 higher than reconciled M-progressive PAYE — because SH’s flat 30% applies to the entire $28,867 Super amount, while the true progressive calculation only taxes the portion of Super that sits above the $53,500 boundary at 30% (the rest is still in the 17.5% band). At IR3 time, this produces a refund of $2,795, not a bill.

The gap is structural, not a “wrong code” problem: whenever your primary income alone sits in a lower bracket than your combined total, a correctly-matched secondary code will apply its flat rate to the whole secondary amount and tend to over-withhold (refund). When your primary income alone is already in the same bracket as the combined total, the flat rate and the progressive calculation land on exactly the same number (zero gap) — see Examples 3 and 4 below.

Four worked examples (2026-27 rates)

Example 1 — Single living alone, $40k salary + $28,867 NZ Super = $68,867 total.

• Primary on salary (M, $40k): PAYE $5,908
• Secondary on Super (SH at 30% — combined $68,867 sits in the $53,501–$78,100 band): $8,660
• At-source total: $14,568
• M-progressive on $68,867: $12,881
• Year-end refund: $1,687. The $40k salary alone sits in the 17.5% band, but combined income reaches the 30% band — SH taxes the entire Super amount at 30%, while true progressive tax only applies 30% to the slice of Super above $53,500. That mismatch is the refund.

Example 2 — Couple both qualify, each earning $20k part-time + $28,867 Super = $48,867 each.

• Primary on salary (M, $20k): PAYE $2,408
• Secondary on Super (S at 17.5% — combined $48,867 sits in the $15,601–$53,500 band): $5,052
• At-source: $7,460
• M-progressive on $48,867: $7,460
• Year-end: exact match, $0 gap. The $20k salary alone is already in the same 17.5% band as the $48,867 combined total, so S’s flat 17.5% on the whole Super amount lines up exactly with the progressive calculation.

Example 3 — Working full-time at $80k + $28,867 Super = $108,867 total (single living alone).

• Primary on salary (M, $80k): PAYE $16,278
• Secondary on Super (ST at 33% — combined $108,867 sits in the $78,101–$180,000 band): $9,526
• At-source: $25,804
• M-progressive on $108,867: $25,804
• Year-end: exact match, $0 gap. The $80k salary alone already sits in the same 33% band as the $108,867 combined total, so ST reconciles exactly — the same effect as Example 2, one bracket up.

Example 4 — High earner $150k + $28,867 Super = $178,867 total (single living alone).

• Primary on salary (M, $150k): PAYE $39,378
• Secondary on Super (ST at 33% — combined $178,867 is still under the $180,000 ceiling): $9,526
• At-source: $48,904
• M-progressive on $178,867: $48,904
• Year-end: exact match, $0 gap. Same mechanism as Example 3 — $150k alone is already in the ST band.

Switching Super to SA (39%) here would be a mistake, not a refinement — combined income is still under $180,000, so SA would over-withhold for no reason and just tie up cash you’d have to wait a year to get back. ST is exactly right at this income level.

The pattern across all four: a gap (refund) only opens when adding the secondary income pushes the combined total into a higher bracket than the primary income reaches on its own (Example 1). When the primary income alone already reaches the same bracket as the combined total (Examples 2–4), a correctly-matched secondary code reconciles exactly.

What does the IR3 do?

IRD automatically issues an income tax assessment at year-end (the IR3 process). It:

1. Sums all your income (Super, salary, interest, dividends, etc.)
2. Computes the correct progressive PAYE on the total at M-equivalent rates
3. Compares to total at-source PAYE deducted across the year
4. Issues a refund (if over-deducted) or assessment (if under-deducted)

If you have only Super + a single PAYE-deducted salary, you don’t usually need to file IR3 yourself — the auto-assessment catches it. If you have additional income (rental, contractor, dividends not at the highest RWT rate), you do need to file IR3 (typically due 7 July, or 31 March via tax agent).

Avoiding surprise tax bills

Three approaches:

1. Check the code matches your current combined income. As shown above, a correctly-matched secondary code reconciles exactly or slightly over-withholds (refund) — it shouldn’t leave you owing. A residual bill almost always means the code is stale (set for an old, lower combined income) or was never updated after a pay rise or new work.
2. Accept the wash. If at-source PAYE is close to reconciled PAYE, the IR3 difference is small. Don’t optimise — just budget for a small refund or top-up.
3. Use the calculator. The NZ Super calculator has a “with other income” mode that shows you the at-source vs reconciled PAYE for your exact numbers, so you can pick the secondary code that minimises year-end surprises.

Special cases

ACC earner’s levy doesn’t apply to NZ Super. Income-tested benefits, NZ Super, and Student Allowance are explicitly excluded from ACC earner’s levy — it’s only your salary/wage or self-employment income that has the levy deducted (or paid direct to ACC for the self-employed). Source: IRD — Benefits, NZ Superannuation and Student Allowance: “Income-tested benefits, NZ Super and Student Allowance are not liable for the ACC earners’ levy, so it will not be deducted from your payments.”

Self-employed income alongside Super. Self-employed income isn’t PAYE-deducted; you pay provisional tax on it. NZ Super continues with whichever PAYE code you’ve nominated (M or secondary). The IR3 reconciles all income types at year-end.

Casual or relief work. A casual code (CAE) can be applied for short-term casual employment if it’s below 6 months and won’t recur. Most working-while-receiving-Super recipients with regular part-time work are better off using M / S / SH / ST / SA than the casual codes.

Switching Super on/off. You can apply for and stop Super at any time. Some retirees stop Super temporarily during a high-income year to avoid the residual tax bill. This is rare and rarely worth the friction; the IR3 reconciliation handles it more cleanly.

Frequently asked questions

Can I change my tax code mid-year? Yes — apply via Work and Income to change your Super tax code, or fill in an IR330 form for your employer. Changes apply going forward, not retroactively.

What happens if I get the secondary code wrong? Nothing immediate — PAYE just gets deducted at the wrong rate. The IR3 reconciliation at year-end fixes it. The downside of a code that’s too low is a residual tax bill; too high means you waited 12+ months for a refund.

Should NZ Super be primary or secondary? Convention: whichever income is bigger is primary (M). For most working-and-Super recipients earning a normal salary, salary is bigger and primary. If you only work a few hours, Super may be the bigger income — make it primary.

Are SL deductions made on NZ Super? Not at source. NZ Super doesn’t deduct student loan repayments via PAYE. Recipients with a loan reconcile via IR3 — IRD calculates the SL repayment on combined income at year-end.

Why is there no IETC for NZ Super recipients? The Independent Earner Tax Credit is explicitly withheld from anyone who receives NZ Super, a main benefit, or Working for Families — it’s not really an age-65 cutoff, it’s that receiving NZ Super itself is one of the disqualifying criteria on the IR330 tax code declaration. So even someone who defers Super (and is 65+ but not yet receiving it) could still qualify on income grounds, while anyone actually receiving Super cannot claim ME/IETC on the M code.

For a quick check of your exact at-source PAYE on Super at any code, plus the IR3 reconciliation prediction, run your numbers through the NZ Super calculator — the “with other income” mode shows the full picture including which secondary code minimises year-end balance owing.