What is your tax code?
Paying the correct amount of tax in New Zealand.
Talking about tax is never a riveting subject, but a piece of information really worth knowing about is using the correct tax code for salaried work in New Zealand.
Tax codes are lettered codes that you need to put on the Tax Code Declaration form (IR 330) from the Inland Revenue Department (IRD), which your employer should give to you when you start a new job.
If you don’t fill out this form with the correct IRD number and tax code, you could end up being taxed significantly more than you need to. No one needs that cutting through their travel funds!
KEY WORDS: WHAT DOES IT ALL MEAN?
Here are a few terms used by Inland Revenue when talking about tax codes. We’ll go through the main tax codes that usually apply to people on a working holiday or backpacking through New Zealand.
- Source of income – refers to salary, wages, weekly accident compensation payments, NZ Super, Veteran’s Pension or student allowance.
- Tax resident – you are a tax resident if you are in New Zealand for more than 183 days in a 12-month period.
- Annual income – is your yearly income, between 1-April to 30-March, before tax is deducted.
- Student loan – if you have taken out a student loan in New Zealand to fund your higher education.
THE TAX CODE DECLARATION FORM
In any job working for a salary/wage, your employer will give you an IR 330 form to fill out your name, IRD number, tax code, and tick the relevant selection for your entitlement to work in New Zealand – usually to state that you have a valid work visa – before signing and dating.
The IRD number is your individual tax number, which you can read more about here. Your tax code could be M, CAE, NSW, SB, for example. We’ll go through all that in this article.
Once completed, return the form to your employer who will send the information to IRD and also keep the form in their records for seven years following their final wage payment to you.
What are the tax codes?
With your IR 330 form, you’ll be given a flowchart to help determine your tax code. Make sure you refer to this if you think you have an unusual case for being taxed in New Zealand. For now, we’ll go through the tax codes that apply the most to people on a working holiday in New Zealand.
Main Source of Income ‘M’
The most common tax code amongst working holidaymakers is ‘M’. This means the job that the IR 330 form is for is your main/highest source of income, and:
- You do not need to pay off a New Zealand student loan,
- You are not have an annual income between NZ$24000-48000,
- and are not entitled to Working for Families Tax Credits or NZ Super, Veteran’s Pension or any overseas equivalent.
If the IR 330 form is for a job that isn’t your highest source of income, then you need to supply a secondary income tax code. Your secondary income tax code is determined by how much your combined annual income is and whether you are paying off a student loan. As a working holidaymaker isn’t likely to have a New Zealand student loan, these are the likely secondary income tax codes.
- If your annual income from all sources is less than NZ$14000 your tax code is ‘SB’.
- If your annual income from all sources is between NZ$14001 and NZ$48000 your tax code is ‘S’.
- If your annual income from all sources is between NZ$48001 and NZ$7000 your tax code is ‘ST’.
Other Tax Code Options
There are a few other tax code options for specific occupations in New Zealand, which may well apply to people on a working holiday, especially if working in farming for a wage. These are as follows:
- Casual agricultural workers – these are casual seasonal workers working on a day-to-day basis for up to three months, including shearers and shearing shedhands. The tax code is ‘CAE’.
- Election day workers – the tax code is ‘EDW’.
- Recognised seasonal workers – this refers to people employed under the Recognised Seasonal Employers’ Scheme in the horticulture or viticulture industries, with a valid visa or Recognised Employer Work Policy permit.
- Schedular payments – this tax code is for independent contractors, not employees. Refer to the list of types of contractor work on page four of the IR 330 form in order to fill out your schedular payment activity on the first page of the IR 330 form. The tax code is ‘WT’.
- Special tax code – you’ll need a special tax code certificate for this and will need to attach a copy to the IR 330 form. The tax code is ‘STC’.
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