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Income tax in New Zealand is imposed on the income of the employed people of New Zealand. Income tax is also imposed on the income generated by the business entities in New Zealand. Income tax in New Zealand can be broadly categorized as Individual Income Tax and Business Income Tax.
Individual income tax
Every resident individual in New Zealand is required to pay taxes on their income. Every non-resident individuals of New Zealand also need to pay tax on their income that are sourced from New Zealand.
Income Tax Rates in New Zealand(As at September 2003)
- Income up to $38,000: 19.5%
- Income from $38,001 to $60,000: 33%
- Income of $60,001 and over: 39%
Statistical report reveals that in 2005-06, about 43% of the core revenue earned by the Government of New Zealand came from individual's income taxes.
Taxable Income Types in New Zealand
- Salary and wages of an employee in New Zealand
- Income generated by the business and income from self- employment
- Income gained from investments(examples: interest, dividends )
- Income earned from rental services
- Income earned from overseas services
- Income from Social Security Benefits
- Profits earned by the way of selling assets
Business income tax
Businesses in New Zealand need to pay income tax on their net profit, generated in a particular tax year. The Tax Year for business income tax in New Zealand is from 1st April to 31st March. Under normal conditions, in a year, the payments are made in three installments, that are termed as provisional tax payments and at the end of the year, the business entity needs to file a tax return. An underpayment or overpayment, if any, is calculated after the submission of tax return.
Mode of Payment: Income Tax
The tax will be deducted through the PAYE (Pay As You Earn) system, if an individual's income come from salary, wages or from social security benefit.
If any employer provides non-cash benefits to his employees, he is also required to pay a fringe benefit tax on these benefits. The advantage is that the employees would not be taxed on these benefits.