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Your last pay when you retire

When you leave your job because you’re retiring, check that your final pay is taxed correctly. If it’s not, you could get a bill from Inland Revenue at the end of the tax year.

What’s in your final pay

The process of leaving a job because you’re retiring is generally the same as resigning from a job. What you’re eligible for in your final pay and how it’s calculated depends on such things as:

  • how long you have worked for your employer
  • any annual holidays or days in lieu you have not used
  • the notice period given
  • lump sum payments (also called extra pay) in your employment agreement (for example, long service leave, retirement payments negotiated as part of your retirement package, non-taxable allowances).

Unused sick leave or bereavement leave does not legally have to be paid out, but some employers may include it in a final payment.

See more information on the Employment New Zealand and Inland Revenue (IR) websites:

What’s taken out of your final pay

Your employer takes income tax and other payments, if eligible, off the total amount of your final pay. These can include:

  • ACC levies — you do not pay ACC levies on lump sum retirement payments
  • child support — you do not pay child support from lump sum retirement payments
  • KiwiSaver — retirement payments are liable for KiwiSaver deductions
  • student loan repayments — the usual 12% repayment is taken from the total of your final pay before any other deductions or taxes are taken out.

Make sure you pay the correct tax by checking the IR income tax calculator.

Unsure about your final pay

If you do not think that your final pay is correct, talk to your employer first.

Talking to your employer — Employment New Zealand

If you cannot resolve the problem, you can contact:

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