PAYE: the employer deducts income tax and the ACC earners' levy per the tax code on the employee's IR330 declaration — no IR330 means the 45% non-declaration rate. The income tax bands (in force since 1 April 2025 and current for 2026–27): 10.5% to $15,600, 17.5% to $53,500, 30% to $78,100, 33% to $180,000, 39% above. The earners' levy for 2026–27: $1.75 per $100 on earnings up to $156,641 (max $2,741.22).
KiwiSaver: auto-enrol new employees aged 18–65; they can opt out from day 14 to day 56. The default employee deduction and the compulsory employer contribution are both 3.5% since 1 April 2026 — both rise to 4% on 1 April 2028, already legislated. ESCT comes off the employer's contribution at 10.5%–39%.
Also inside the pay: student loan deductions at 12% of pay over $24,128 a year (threshold frozen); child support per IRD's deduction notice, capped at 40% of net earnings. Employment information files with IRD within 2 working days of each payday (electronic).
PAYE: the employer deducts on declared codes
New Zealand runs withholding through PAYE — pay as you earn. Inland Revenue's description bundles two things into it: "your employer will deduct tax and the ACC earners' levy before they pay you. These deductions are known as PAYE." The employer's side of the bargain is mechanical by design: "You make PAYE deductions based on the tax code your employee has given you."
The code comes from the employee, on the IR330 tax code declaration — the form carries a flowchart the employee works through to find their own code (M for a main job, codes with SL appended when a student loan attaches, and the secondary codes SB, S, SH, ST and SA for second jobs, which map to the 10.5%–39% bands by total annual income). The employer applies the declared code using IRD's deduction tables (IR340 weekly/fortnightly, IR341 four-weekly/monthly) or payroll software built to IRD's payroll calculation specification — the employer applies the code, it does not pick one.
The enforcement mechanism is the non-declaration rate. Per IRD: "If you do not give your employer an IR330, they'll deduct tax from your pay at the non-declaration rate of 45%." The same applies when a form arrives with required details missing. It is deliberately punitive — which is why the IR330 belongs in the onboarding pack next to the employment agreement, not in a follow-up email after the first pay run.
The 2026–27 numbers inside PAYE
Two components, both annual-rated. The income tax bands, as shown on IRD's tax-rates page (fetched 10 July 2026; in force since 1 April 2025):
- $0 – $15,600 → 10.5%
- $15,601 – $53,500 → 17.5%
- $53,501 – $78,100 → 30%
- $78,101 – $180,000 → 33%
- $180,001 and over → 39%
On top of income tax, PAYE carries the ACC earners' levy — the flat levy that funds cover for non-work injuries. For the tax year 1 April 2026 – 31 March 2027 it is $1.75 per $100 (1.75%, GST-inclusive), deducted on earnings up to $156,641, for a maximum levy of $2,741.22. The following year is already published: $1.83 per $100 up to $160,244 (max $2,932.47) for 2027–28. Earnings above the maximum attract no levy.
The New Zealand tax year runs 1 April to 31 March, and rates in this article carry that label — "2026–27" means 1 April 2026 to 31 March 2027. Beware IRD's own shorthand: some IRD pages label a year by its end date, so "the 2026 tax year" on ird.govt.nz is the year that ended 31 March 2026. Every 1 April is a payroll event: the ACC levy, KiwiSaver settings and ESCT thresholds have all moved on that date in recent years.
KiwiSaver: enrolment is the default, opting out is the exception
KiwiSaver is opt-out, not opt-in, for new hires. Per IRD, the employer must automatically enrol "new employees aged 18 to 65 who meet the KiwiSaver eligibility criteria", give them the enrolment pack — the KS3 information booklet, the KS2 deduction form and the KS10 opt-out form — within 7 days of the start date, and send IRD the new employee's details on the IR346K before the first payday or with the employment information filing. Deductions start from the first pay.
The employee then has a window to leave: "between 2–8 weeks of starting work (that's on or after day 14 and on or before day 56)", using the KS10, which the employer forwards to IRD. After day 56 an opt-out needs IRD approval — "up to 3 months after we get your employee's first contribution, but only in some situations." Two traps worth knowing: employees who opted in by choice cannot opt out later (a savings suspension is their pause button); and if deductions were already paid to IRD before a valid opt-out, IRD refunds the employee directly — the employer must not refund them again from its own account.
KiwiSaver: who pays what
The employee chooses a deduction rate on the KS2: 3.5%, 4%, 6%, 8% or 10% of gross pay. No choice means the default rate of 3.5%. Rate changes are allowed once every 3 months unless the employer agrees to more often. Since 1 April 2026, employees who want to stay at the old 3% can apply to IRD for a temporary rate reduction — 3 to 12 months at a time, renewable indefinitely; when IRD notifies the employer, the deduction drops to 3%, and the employer may (but need not) lower its own contribution to 3% to match.
The employer pays a compulsory contribution of 3.5% of gross salary or wages (2026–27) on top of pay, for every employee who is a KiwiSaver or complying-fund member aged 16 and over and under 65 with deductions coming from their pay — members of defined benefit schemes excepted. Note the asymmetry: auto-enrolment still starts at 18, but a 16- or 17-year-old who is already a member and contributing must now get the employer contribution too (new from 1 April 2026).
The employer contribution is taxed before it lands: ESCT — employer superannuation contribution tax — is deducted from it, at a rate set per employee. Per IRD, "the rate depends on how much your employee earns and how long they've worked for you" (broadly: last year's salary plus gross employer contributions, or an estimate for newer employees). The bands, in force from 1 April 2025:
- $0 – $18,720 → 10.5%
- $18,721 – $64,200 → 17.5%
- $64,201 – $93,720 → 30%
- $93,721 – $216,000 → 33%
- $216,001 and over → 39%
The alternative, by agreement with the employee, is to treat some or all of the employer contribution as salary or wages and tax it under the PAYE rules instead of ESCT.
The Budget 2025 phase-in: dates that matter
Budget 2025's KiwiSaver package is legislated, not proposed — the Taxation (Budget Measures) Bill passed the House on 23 May 2025. The moving parts, each with its own start date:
- 1 July 2025 — government contribution halved and means-tested. The annual government contribution fell to 25 cents per dollar the member contributes, capped at $260.72; members with annual taxable income over $180,000 get nothing; 16 and 17 year olds became eligible for it. (This lands in the member's fund, not in payroll — but employees will ask.)
- 1 April 2026 — 3% became 3.5%. The default employee deduction and the compulsory employer contribution both rose to 3.5%; existing members on 3% moved up automatically unless they secured a temporary rate reduction; contributing 16–17 year olds began qualifying for compulsory employer contributions.
- 1 April 2028 — 3.5% becomes 4%. Per IRD: "The default KiwiSaver contribution rate will rise again to 4% (from 3.5%) for you and your employer." Anyone budgeting employment costs past April 2028 should price the employer side at 4% plus ESCT.
Between now and April 2028 a compliant system must hold per-employee KiwiSaver states, not one company-wide rate: members on the 3.5% default, members on chosen rates (4/6/8/10%), members with an active temporary rate reduction at 3% (with its expiry date, since IRD resets them to the default after 12 months), employees inside their day 14–56 opt-out window, and 16–17-year-old members who get employer contributions but were never auto-enrolled. Then reprice the defaults again on 1 April 2028.
Student loans and child support
Student loans ride on the tax code: an employee with a loan uses a code ending in SL, and the employer deducts 12% of every dollar over the pay-period repayment threshold. The annual threshold is $24,128 — $464 weekly, $928 fortnightly, $1,856 four-weekly, $2,010.66 monthly. IRD's page (fetched 10 July 2026) labels those figures for its "2026 tax year", and Cabinet decided in March 2025 to suspend the annual inflation adjustment and hold the threshold at $24,128 "for the foreseeable future" — so the same numbers carry forward until the policy changes.
Child support is different: it arrives as an instruction, not a code. IRD sends the employer a deduction notice saying how much to deduct and when to start. The one statutory shield in the system sits here: "the maximum amount of child support you can deduct is 40% of their net earnings (after tax)" — the other 60% is the employee's protected net earnings. If the notice asks for more than the cap allows, deduct only up to 40%; IRD arranges the balance with the employee directly — "you do not need to make up the missing amount in future pays."
Is there a priority order?
IRD's public pages do not publish a single ranked sequence for when a pay cannot carry everything. What the fetched pages do establish: PAYE comes out first by construction (the child support cap is measured on net earnings, after tax); child support is the only deduction with a protection cap; and the protection does not spill over — "Protected net earnings only apply to child support. You should still make other deductions in full, even if these add up to more than 40% of your employee's pay." For genuinely insufficient-pay edge cases, work from the current Employer's guide (IR335) or ask IRD before improvising an order.
What goes to Inland Revenue, and when
Everything above funnels into payday filing: the employer files employment information with IRD "every time you pay your employees" — within 2 working days of each payday electronically, or 10 working days on paper (electronic filing is compulsory once annual PAYE and ESCT reach $50,000). The money follows on a slower cadence: smaller employers pay the deductions to IRD by the 20th of the following month, while large employers pay twice monthly. The filing channels, due-date mechanics and correction flows deserve their own article — a dedicated guide to payday filing and remitting is coming in this series.
Quick answers
What happens if a new employee does not give me an IR330?
You deduct PAYE at the non-declaration rate of 45%. Inland Revenue puts it plainly: if an employee does not give their employer an IR330, tax comes out of their pay at 45 cents in the dollar. So the IR330 tax code declaration belongs in the onboarding pack next to the employment agreement: the employee works out their own code using the flowchart on the form, the employer deducts according to that code from the first pay, and if the code changes — a second job, a student loan, a new special tax code — the employee hands over a new IR330. The employer's job is to apply the declared code, not to choose one for the employee.
Do I have to put every new employee into KiwiSaver?
You automatically enrol every new employee aged 18 to 65 who meets the KiwiSaver eligibility criteria, give them the information pack (KS3, the KS2 deduction form and the KS10 opt-out form) within 7 days of their start date, send Inland Revenue the new employee details (IR346K), and start deductions from the first pay. The employee can then opt out between 2 and 8 weeks after starting — on or after day 14 and on or before day 56 — using the KS10. Late opt-outs need Inland Revenue approval and are accepted only in some situations, up to 3 months after Inland Revenue receives the first contribution. Employees who opted in by choice, rather than being auto-enrolled, cannot opt out later — their route to a pause is a savings suspension.
What changed for KiwiSaver on 1 April 2026 — and what changes next?
Budget 2025 rewired the contribution settings, and the changes are law — the Taxation (Budget Measures) Bill passed on 23 May 2025. From 1 April 2026 the default employee deduction rate and the compulsory employer contribution both rose from 3% to 3.5%, and contributing employees aged 16 and 17 qualify for compulsory employer contributions for the first time. On 1 April 2028 both rates rise again, from 3.5% to 4%. Employees who want to stay at 3% can apply to Inland Revenue for a temporary rate reduction lasting 3 to 12 months, renewable as often as they like; when notified, the employer lowers the deduction to 3% and may — but does not have to — reduce its own contribution to 3% as well. Separately, from 1 July 2025 the government contribution halved to 25 cents per dollar contributed, capped at $260.72 a year, was removed above $180,000 of annual taxable income, and was extended to 16 and 17 year olds.
Is the employer KiwiSaver contribution paid on top of wages — and is it taxed?
Yes on both counts. The compulsory employer contribution — 3.5% of gross salary or wages in the 2026–27 year — is paid on top of the employee's pay, for every KiwiSaver or complying-fund member aged 16 and over and under 65 who has deductions coming from their pay (defined benefit fund members excepted). And it is not tax-free: employer superannuation contribution tax (ESCT) is deducted from the contribution before it reaches the fund, at a rate set per employee from the ESCT bands — 10.5% up to $18,720, 17.5% to $64,200, 30% to $93,720, 33% to $216,000 and 39% above that (thresholds in force from 1 April 2025). So a 3.5% gross contribution lands in the account net of ESCT. The one exception: employer and employee can agree to treat some or all of the contribution as salary or wages and tax it under the PAYE rules instead.
Every deduction, dated and receipted
Ledra Pay's New Zealand coverage runs governed gross-to-net — PAYE with the earners' levy, per-employee KiwiSaver states through the 2026 and 2028 rate steps, ESCT bands, student loan codes and child support caps — with an auditable receipt behind every figure, so the 1 April rate changes are a data update, not a re-implementation.
See NZ coverage →Government sources
- Inland Revenue — Tax rates for individuals (the 10.5%–39% bands in force from 1 April 2025; secondary tax codes SB/S/SH/ST/SA).
- Inland Revenue — About tax codes (the IR330 flowchart; "non-declaration rate of 45%").
- Inland Revenue — Earning salary and wages (tax plus the ACC earners' levy, "known as PAYE").
- Inland Revenue — Deductions from income (PAYE deducted per the employee's declared tax code; ESCT on employer KiwiSaver contributions).
- Inland Revenue — ACC earners' levy rates (2026–27: $1.75 per $100 up to $156,641, max $2,741.22; 2027–28: $1.83 per $100 up to $160,244, max $2,932.47; GST-inclusive).
- Inland Revenue — Automatically enrol employees into KiwiSaver (ages 18–65; KS3/KS2/KS10 pack within 7 days; IR346K before the first payday).
- Inland Revenue — Employees who want to opt out of KiwiSaver (day 14–56 window; KS10; late opt-outs; refund handling).
- Inland Revenue — KiwiSaver deductions from employee pay (rates 3.5/4/6/8/10%; default 3.5%; rate changes once per 3 months; temporary rate reduction to 3%).
- Inland Revenue — Employer contributions to KiwiSaver schemes and complying funds (3.5% of gross salary or wages; aged 16+ and under 65; ESCT unless treated as salary under PAYE rules).
- Inland Revenue — KiwiSaver changes (3.5% from 1 April 2026 and 4% from 1 April 2028; temporary rate reduction 3–12 months; 16–17 year olds; government contribution 25c/$1, max $260.72, $180,000 cap, from 1 July 2025).
- Inland Revenue Tax Policy — Budget 2025 tax announcements (the KiwiSaver package as announced).
- Inland Revenue Tax Policy — Budget Bill passes (Taxation (Budget Measures) Bill passed the House 23 May 2025).
- Inland Revenue — Get ready for new ESCT and FBT changes (ESCT thresholds from 1 April 2025: $18,720 / $64,200 / $93,720 / $216,000).
- Inland Revenue — Employer superannuation contribution tax (ESCT) (rate depends on earnings and length of service; PAYE-treatment alternative).
- Inland Revenue — Repaying my student loan when I earn salary or wages (12% over the threshold; $24,128 annual; $464 / $928 / $1,856 / $2,010.66 pay-period thresholds; SL codes).
- Inland Revenue Tax Policy — Cabinet paper: Student Loan Scheme Repayment Threshold (March 2025) (freeze at $24,128 "for the foreseeable future").
- Inland Revenue — Deductions from salary and wages (child support deduction notices; the 40% protected net earnings cap; other deductions made in full).
- Inland Revenue — Payday filing (employment information within 2 working days electronic / 10 paper; electronic compulsory at $50,000 PAYE+ESCT; payment by the 20th of the following month, large employers twice monthly).
Note: IRD's public pages do not publish a ranked deduction priority order for insufficient-pay cases — the hedged reading above reflects only what the cited pages state. Employer-side ACC levies (the Work levy invoiced by ACC) are outside payslip deductions and outside this article's scope.
Related
PAYE and payday filing, KiwiSaver, the Holidays Act, minimum wage and wage records — the hub.
Four weeks' annual leave, the two pay calculations, public holidays and sick leave.
The current rates, who gets them, and the rules on deductions from wages.