Taxation in New Zealand is collected at a national level by the Inland Revenue Department (IRD) on behalf of the Government of New Zealand. National taxes are levied on personal and business income, as well as on the supply of goods and services. There is no capital gains tax although certain "gains" such as profits on the sale of patent rights are deemed to be income. Local property taxes (rates) are managed and collected by councils. Some goods and services carry a specific tax, referred to as an excise or a duty such as alcohol excise or gaming duty. These are collected by a range of government agencies such as the New Zealand Customs Service. There is no Social Security (Payroll) tax in New Zealand.
New Zealand went through a major program of tax reform in the 1980s. The top marginal rate of income tax was reduced from 66% to 33% (increased to 39% in April 2000, 38% in April 2009 and 33% on 1 October 2010) and corporate income tax rate from 48% to 33% (reduced to 30% in 2008 and to 28% on 1 October 2010). Goods and services tax was introduced, initially at a rate of 10% (then 12.5% and now 15% as [of 1 October 2010]).
Tax reform continues in New Zealand. Here are some issues:
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New Zealand residents are liable for tax on their worldwide taxable income. In 2005–06, 43% of the New Zealand Government's core revenue ($22.9bn) came from individuals' income taxes.[4]
Income tax varies dependent on income levels in any specific tax year (personal tax years run from 1 April to 31 March).
| Income | Tax rate |
|---|---|
| $0 – $14,000 | 10.5% |
| $14,001 – $48,000 | 17.5% |
| $48,001 – $70,000 | 30% |
| Over $70,000 | 33% |
| No-notification rate | 45% |
Rates are for the tax year 1 April 2011 to 31 March 2012, and are based on tax code M (primary income without student loan).[5]
In New Zealand, the income is taxed by the amount that falls within each tax bracket. For example, if persons who earn $70,000 will pay only 30% on the amount that falls between $48,001 and $70,000 rather than paying on the full $70,000. Consequently, the corresponding income tax for that specific income will accumulate to $14,020— which comes to and overall rate of 20.02% of the entire amount.
The amount of tax actually payable can be reduced by claiming tax credits, e.g. for donations, childcare and housekeeper, independent earners, payroll donations, income under $9,880, and children.[6]
In most cases employers deduct the relevant amount of income tax from salary and wages prior to these being paid to the individual. This system, known as pay-as-you-earn, or PAYE, was introduced in 1958, prior to which employees paid tax annually.
In addition, banks and other financial institutions deduct the relevant amount of income tax on interest and dividends as these are earned. This is known as Residents Withholding Tax.
At the end of each tax year, individuals who may not have paid the correct amount of income tax are required to submit a personal tax summary, to allow the IRD to calculate any under or overpayment of tax made during the year.
Individuals who are tax resident in more than one country may be liable to pay tax more than once on the same income. New Zealand has double taxation agreements with various countries that set out which country will tax specific types of income.[7]
| Australia | India | Singapore |
| Austria | Indonesia | South Africa |
| Belgium | Ireland | Spain |
| Canada | Italy | Sweden |
| Chile | Japan | Switzerland |
| China | Korea | Taiwan |
| Czech Republic | Malaysia | Thailand |
| Denmark | Mexico | Turkey |
| Fiji | Netherlands | United Arab Emirates |
| Finland | Norway | United Kingdom |
| France | Philippines | United States of America |
| Germany | Poland | |
| Hong Kong | Russian Federation |
Some agreements protect pension payments as well. The agreement with the United States, for example, prohibits New Zealand from taxing American social security or government pension payments, and the reverse is also true.[8]
All employees pay an earner's levy to cover the cost of non-work related injuries. It is collected by Inland Revenue on behalf of the Accident Compensation Corporation (ACC).
The earner's levy is payable on salary and wages plus any other income that is subject to PAYE, for example overtime, bonuses or holiday pay. The levy is 2.04% for the year from 1 April 2011 to 31 March 2012. It is payable on income up to $111,669.[5]
Businesses in New Zealand pay income tax on their net profit earned in any specific tax year. For most businesses the tax year runs from 1 April to 31 March but businesses can apply to the IRD for this to be changed.
A provisional tax payer is a person or a company that had a residual income tax of more than $2500 in the previous financial year. There are three options for paying provisional tax; standard method, estimated method and GST Ratio option.
At the end of the year the business files a tax return (due on the following 7 July for businesses with a tax year ending 31 March) and any under or overpayment is then calculated.
Companies pay income tax at 28% on profits.[11] Tax rates for individuals operating as a business (that is, individuals who are self-employed) are the same as for employees.[12] (See individual tax rates, above.)
Goods and services tax (GST) is an indirect tax introduced in New Zealand in 1986. This represented a major change in New Zealand taxation policy as until this point almost all revenue had been raised via direct taxes. GST now makes up 19% of the New Zealand Government's core revenue.[4]
Most products or services sold in New Zealand incur GST at a rate of 15%. The main exceptions are financial services (e.g. banking and life insurance) and the export of goods and services overseas.
All businesses are required to register for GST once their turnover exceeds (or is likely to exceed) $60,000 per annum.[13] Once registered, businesses charge GST on all goods and services they supply and can reclaim any GST they have been charged on goods and services they have purchased.
Employers are liable to pay Fringe benefit tax (FBT) on benefits given to employees in addition to their salary or wages (e.g. motor vehicles or low interest loans)[14]
There are several methods available for calculating FBT liability, including an option of paying a flat rate of 64% on all benefits provided.[15]
In New Zealand, excise or duty is charged on a number of products, including alcohol products, tobacco products, and some fuels.[16]
The rates for alcohol products are as follows:
| Product | Alcohol content | Rate |
| Beer | More than 1.15%, but not more than 2.5% | 39.025¢ per litre |
| More than 2.5% | $26.021 per litre of alcohol | |
| Wine (of fresh grapes) | Not more than 14% | $2.6021 per litre |
| More than 14% | $47.392 per litre of alcohol | |
| Other fermented beverages (such as cider, perry, mead), spirits, spirituous beverages, liquers, cordials and ice cream | More than 1.15% but not more than 2.5% | 39.025¢ per litre |
| More than 2.5%, but not more than 6% | $26.021 per litre of alcohol | |
| More than 6%, but not more than 9% | $2.0816 per litre | |
| More than 9%, but not more than 14% | $2.6021 per litre | |
| More than 14% | $47.392 per litre of alcohol |
There are also excise duties on tobacco products, with a rate of $294.62 per thousand cigarettes, and $368.72 per kilo of tobacco, on other tobacco products.
The excise duties on fuel are 42.524¢ per litre (plus 8¢ per gram of lead) on motor fuel, 30.2¢ per litre on Methanol and 10.4¢ per litre on Liquified petroleum gas. Compressed natural gas has an excise of $3.17 per gigajoule.
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