M vs ME Tax Code: Which Should You Use?
Both are primary tax codes. The only difference is whether the Independent Earner Tax Credit (IETC) — worth up to $520/year — is applied through your PAYE during the year, or refunded after IRD's auto-assessment in May.
M vs ME at a glance
| Feature | M | ME |
|---|---|---|
| Use case | Primary job, no IETC during year | Primary job with IETC applied weekly |
| Income range | Any | $24,000 to under $70,000 |
| PAYE rate (income tax) | Progressive 10.5% – 39% | Progressive 10.5% – 39% |
| IETC applied during year | No (refunded at year-end) | Yes (up to $10/week) |
| Eligible while on a main benefit / NZ Super / WfF? | Yes (M is correct) | No |
| Yearly difference vs M (income $50k) | $0 | +$520 in cash flow (same total tax) |
| Mid-year ineligibility (start a benefit / WfF) | No action needed | Switch to M via IR330 immediately |
How the $520 IETC abates between $66,000 and $70,000
The full $520 credit is available from $24,000 up to $66,000 of net income. From $66,001 to $70,000, the credit abates at 13 cents per dollar of income above $66,000:
- $66,000 → $520 (full)
- $67,000 → $390
- $68,000 → $260
- $69,000 → $130
- $70,000+ → $0
Use the IETC calculator to see your exact entitlement at any income level.
Cash-flow vs tax-saved
Many people assume ME saves them money. It doesn't — both M and ME deliver the same total annual tax. ME spreads the IETC across weekly pay, while on M IRD applies it as a lump sum after the year ends. That difference is timing only, but the code is not a free choice: an employee entitled to the IETC must use ME, and M is the code for an employee who is not entitled (Tax Administration Act 1994 sch 5 pt A cl 1(2) and the cl 4 table, rows 1 and 2).
The risk with ME is mid-year ineligibility. If you start receiving Working for Families or a benefit and forget to switch back to M, you'll owe the over-claimed IETC at year-end. M never has this risk.
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Frequently asked questions
What is the difference between M and ME tax codes?
Both are primary tax codes for your main job. M is the standard code with no Independent Earner Tax Credit (IETC). ME adds the IETC — up to $520 per year ($10/week) — applied directly through your PAYE. ME is only for NZ residents with net income of $24,000 to under $70,000 who don't receive a main benefit, NZ Super, a veteran's pension, Working for Families tax credits or an overseas equivalent, and whose partner doesn't receive Working for Families.
Who is eligible for ME?
You qualify for ME if your net income for the tax year is from $24,000 to under $70,000, you're NZ resident, you do not receive a main benefit, NZ Super, Veteran's Pension, Working for Families tax credits or an overseas equivalent, and your partner does not receive Working for Families. IETC is worked out on whole months, so a month in which you receive one of these payments costs you that month's credit only. See IRD IETC eligibility.
How much extra is in my pay packet on ME vs M?
Up to $10/week ($520/year) more for net income between $24,000 and $66,000. Between $66,001 and $70,000 the credit abates by 13c for each complete dollar of net income over $66,000, so the $10/week tapers to zero at $70,000. Above $70,000 there is no IETC, so M and ME deliver identical PAYE.
Should I default to M and let IRD sort the IETC at year end?
The Act says an employee entitled to the IETC must use ME (Tax Administration Act 1994 sch 5 pt A cl 1(2) and the cl 4 table, row 2), and M is the code for someone who is not entitled. If you are unsure whether your income for the year will fall in the IETC range, M does not lose you the credit: IRD applies it at year end in the automatic assessment or your IR3. ME pays the same credit through the year.
What if my income changes mid-year?
If you now expect your income for the year to fall below $24,000 (e.g., reduced hours, parental leave) or reach $70,000, or you start receiving a benefit, NZ Super or Working for Families, you are no longer entitled to ME. The law requires you to tell your employer within 4 days of becoming aware of it (Tax Administration Act 1994 sch 5 pt A cl 4(1)) by giving them a new IR330 with code M. IRD still squares up the IETC at year-end based on your full annual income.
Can I have ME on a second job?
No. ME is only valid on a primary tax code. A second job uses a secondary code (SB, S, SH, ST, SA — and SL variants if you have a student loan). The IETC is worked out at year end on your net income for the tax year (Income Tax Act 2007 s LC 13), not job by job.
What about ME SL (with student loan)?
ME SL combines IETC with the 12% student loan repayment above $24,128. If you're on a primary job, eligible for IETC, and have a student loan, ME SL is the right code.
I receive Working for Families — should I switch from ME to M?
Yes, immediately. Receiving Working for Families makes you ineligible for IETC. Continuing on ME means you'd owe the IETC back at year-end. File an IR330 with your employer to switch to M.