PAYE
PAYE (Pay As You Earn) is the system that New Zealand employers use to deduct income tax from employees' wages and salaries. Employers calculate the correct amount of tax based on IRD-set tax codes and pay it directly to Inland Revenue on the employee's behalf. This means most employees do not need to file a separate tax return at year end.
PAYE covers more than just income tax — ACC earner's levy, KiwiSaver contributions, and student loan repayments are all deducted through the same system. Your employer uses the tax code you provide (e.g. M, ME, S) to determine the correct deduction rates.
If your tax code is wrong or you have untaxed income, you may end up with a tax bill or refund after IRD completes your end-of-year income assessment. You can check and update your tax code through myIR at any time.
How it works
Each pay period, your employer works out the correct PAYE deduction using the tax code you've given them on an IR330 form. They apply the progressive income tax brackets to your pay, deduct the amount, and pay it to Inland Revenue on your behalf — you never handle the tax payment yourself. This is why most people on a single PAYE job never need to file a tax return: IRD already has a full record of what you earned and what was deducted.
PAYE is really an umbrella system rather than just income tax. The same payroll process also deducts your ACC earner's levy, any KiwiSaver contributions you've chosen, and student loan repayments if you have a loan. Each of these shows up as its own line on your payslip, but they're all calculated and forwarded together by your employer under the PAYE banner.
The most common PAYE problem is a mismatched tax code — for example, using the main M code on a second job instead of a secondary code, which under-deducts tax and leaves you with a bill at year end. If you spot a mistake, you can update your tax code with your employer at any time and check your year-to-date deductions through myIR to confirm they line up with what you expect.
Example: what PAYE deducts from a $50,000 salary
On a $50,000 salary for 2026-27, income tax is calculated in bracket order: 10.5% on the first $15,600 ($1,638), then 17.5% on the remaining $34,400 up to $50,000 ($6,020). That's $7,658 in income tax for the year.
On top of that, the ACC earner's levy at 1.75% (2026-27) adds $875 (1.75% × $50,000). Together, PAYE deducts $8,533 in income tax and ACC levy alone before any KiwiSaver or student loan repayments are added on top.
Frequently asked questions
Do I need to do anything if I'm only paid through PAYE?
Usually not — if your only income is salary or wages with the correct tax code, IRD automatically assesses your tax after 31 March using what your employer reported, so you don't need to file a return.
What happens if my tax code is wrong?
You'll either overpay tax through the year (leading to a refund at your income tax assessment) or underpay it (leading to a bill), so it's worth checking your code in myIR whenever your job situation changes.
Does PAYE cover more than just income tax?
Yes — the same PAYE deduction on your payslip typically bundles income tax, ACC earner's levy, KiwiSaver contributions, and student loan repayments into one combined amount forwarded by your employer.
Related Terms
Income Tax
New Zealand income tax is calculated using a progressive bracket system.
Tax Code
A tax code is a code you provide to your employer (on an IR330 form) that determines how PAYE is calculated on your pay.
IRD
Inland Revenue Department (IRD), commonly known as Inland Revenue or simply IRD, is the New Zealand government agency responsible for collecting taxes, distributing social support payments, and enforcing tax compliance.
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Use our free tool to see how paye affects your tax.