Income you pay tax on
When you pay tax or do a tax return you need to know what to include as income. Check to see what counts as a source of income.
Your income includes everything you earn in New Zealand and, in some cases, from overseas. The tax you pay depends on your gross (before tax) income from all sources of income.
Income from working
Most of the time your employer passes tax on to Inland Revenue from your pay. If you’re an employee and you’re on the right tax code for all your income, you should not have to do anything at the end of the tax year. IR contacts you if they think you need to do a tax return.
The following sources of income from work are taxed:
- salary and wages
- compensation for loss of earnings paid by ACC
- some bonus payments — these are taxed differently if you get a lump sum or if they’re paid in regular amounts
- allowances paid to you by your employer in some circumstances, such as travel, accommodation or relocation costs
- your pay from a job you did in NZ for an overseas employer.
Casual or contract work
It’s your responsibility to pay tax on:
- contract work or casual work — including cash jobs or ‘under the table’ payments
- income from being self-employed.
In some cases your employer deducts tax from your contract or casual income payments. These payments are called schedular payments.
You’ll usually get schedular payments if:
- you’re a contractor with a labour hire business — a business that contracts you to other businesses, or
- you do any of the types of work listed at the end of IR’s IR330C form.
The IR330C form is the IR form you need to complete to choose the rate of tax you have deducted from your payments.
You can download the form by following the steps to complete a tax code declaration on the IR website.
The amount of tax your employer takes may not be all the tax you need to pay. Check with IR to find out if you need to pay more tax, ACC earner’s levies or money you owe on your student loan.
Income from benefits
Tax is deducted from most benefits before you receive them, including:
- NZ Superannuation and the Veteran’s Pension, including the personal allowance you’re paid if you get the Residential Care Subsidy or Hospital Rate
- Jobseeker Support
- Young Parent Payment
- Youth Payment
- Sole Parent Support, including Woman Alone (formerly the DPB)
- Supported Living Payment
- Student Allowance.
Income from assets and investments
You pay tax on:
- investments in NZ or overseas, for example your savings account or KiwiSaver
- rent paid to you by tenants, boarders or from renting out a holiday home
- Māori Authority distributions, such as having your electricity bill paid or buying land from the authority at a discounted price
- income from selling capital assets in some circumstances — for example, if you sell a property within an applicable bright-line period that is not excluded from the bright-line property rules or capital assets such as machinery that you have claimed depreciation on.
The IR website has more information on:
Income from prizes or volunteering
Check with IR whether you need to pay tax if you get:
- a sum of money for your work as a volunteer or for doing charitable work — often called an honorarium
- more than $500 in prize money, for example as a sports prize.
If you win money from Lotto or Bonus Bonds, you do not have to pay tax on your prize, but you pay tax on any interest you earn if you invest the money.