Anyone who receives money in New Zealand, including companies, contractors and the self-employed, must pay income tax. Taxable income may come from a variety of sources, including salaries, wages, profit, interest payments, and dividends.
You must pay 10.5% in tax if you receive up to $14,000 a year. Income ranging from $14,000 to $48,000 is taxed 17.5%. It’s 30% between $48,000 and $70,000 and it’s 33 per cent over $70,000.
That is, the more you make, the more tax on the extra bits you’ll pay. That is why they classify our tax rates as marginal tax rates.
The first $14,000 you receive is taxed at 10.5%, and the next bit is taxed at 17.5 %, etc. Even the $70,000 you earn is taxed at 33%. That means one who earns $75,000 pays $15,670 a year.
Under the Working for Families law, the tax credit allocation for each dollar received above $42,700 is decreased by 25 percent. This claw-back will mean that, at certain stages, there is a minimal real gain in having a pay raise.
A couple with two children earning $40,000 each year would end up with $1305 in hand combined each week plus $97 in Working for Families, or a total of $1402.