Your last pay when you retire

When you retire from your job, you’re responsible for checking your final pay is taxed correctly. If it isn’t, you could get a bill from IRD at the end of the tax year.

What’s in your final pay

Hours worked

Your final pay includes all the hours you’ve worked since your last pay until you leave your job. If you get your final pay before your last day at work, you need to check you’re paid up until your finishing time on your final day.

Unused annual leave or days in lieu

You’ll be paid for any annual leave or days in lieu (alternative holidays) you’ve built up but haven’t used.

How much you’ll be paid out for each unused leave day depends on how long you’ve been in the job. If you’ve been there for: 

  • at least 12 months, you’ll be paid out at your normal pay rate
  • less than 12 months, you’ll be paid out at 8% of your normal pay rate.

If you’ve been in the job for at least 12 months, your last day is your final working day plus any leave you haven’t taken. You’ll be paid for any public holidays that fall in that extra period.

Example

If your last day is 18 December and you’re paid out for 6 days of unused leave, your last day is actually 30 December — so you’ll also be paid for Christmas Day and Boxing Day if you've been in the job for at least 12 months.

Lump sum payments

Any other payments will be:

  • written in your employment agreement, or
  • negotiated as part of your retirement package.

What will be taken out of your final pay

Your employer will take tax and other payments off the total amount you’re paid out. It’s your responsibility to make sure they’ve taken the right amounts.

Income tax

You’ll pay tax on the entire amount of your final pay.

Your tax rate might change if you’re being paid a lump sum. You should make sure that you have paid the correct tax by using the IRD calculator.

IRD tax on annual income calculator

ACC levy

You pay the ACC levy on:

  • wages
  • annual leave payments.

If your employer is paying you a lump sum bonus as part of your retirement package there’s no ACC levy on it.

KiwiSaver

Your KiwiSaver contributions will be taken out of your:

  • wages
  • annual leave payments.

KiwiSaver contributions don’t come out of lump sum retirement payments.

If you're 65 you can withdraw your Kiwisaver savings as a lump sum.

KiwiSaver withdrawals after you turn 65

Example

If you contribute 3% of your income to KiwiSaver, and you receive a final pay of:

  • $1,000 wages
  • $200 of unused annual leave
  • $2,500 lump sum retirement payment

you’ll pay $36 of KiwiSaver contributions (($1,000 + $200) x 3%).

Student loan repayments

If you’re repaying a student loan, the usual 12% repayment will be taken from the total of your final pay, before any other deductions or taxes are taken out.

Example

If you receive a final pay of:

  • $1,000 wages
  • $200 of unused annual leave
  • $2,500 lump sum retirement payment

you’ll pay $444 towards your student loan ($3,700 x 12%).

Child support

If you pay child support, the usual amount you pay will be taken out of your:

  • wages
  • annual leave payments.

You don’t pay child support from lump sum retirement payments — but they might change what you have to pay in the future.

You should contact IRD if your circumstances change.

Changes IRD need to know about, and how to tell them

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