Your payslip runs through five separate deductions before it becomes take-home pay. Here's what each one does, using the 2026/27 rates.
If you've ever looked at your payslip and wondered why your $75,000 salary doesn't translate to $75,000 in your bank account, you're not alone. In New Zealand, PAYE (Pay As You Earn) tax is deducted automatically by your employer, along with a handful of other levies and contributions that most people have heard of but few could actually explain. Here's what's really happening to your pay, one deduction at a time.
New Zealand uses a progressive tax system, which means you don't pay one flat rate on your whole income. Instead, each dollar you earn falls into a bracket, and only the dollars within that bracket are taxed at that bracket's rate. For the 2026/27 tax year, the brackets are:
| Income band | Tax rate |
|---|---|
| $0 – $15,600 | 10.5% |
| $15,600 – $53,500 | 17.5% |
| $53,500 – $78,100 | 30% |
| $78,100 – $180,000 | 33% |
| Over $180,000 | 39% |
This is why a pay rise rarely feels as big as the headline number suggests — only the portion of your new income that crosses into a higher bracket is taxed at that higher rate. Someone earning $80,000 doesn't pay 33% on all of it; they pay 10.5% on the first $15,600, 17.5% on the next chunk, 30% on the next, and 33% only on the sliver above $78,100.
Alongside income tax, every employee pays the ACC (Accident Compensation Corporation) earner's levy, which funds New Zealand's no-fault accident compensation scheme. For 2026/27 this is 1.75% of your income, up to a maximum earnings threshold of $156,641 — income above that isn't levied further.
If you're enrolled in KiwiSaver, your employee contribution (commonly 3%, though you can elect 4%, 6%, 8% or 10%) is deducted from your pay before you see it. Separately, your employer must contribute at least 3.5% of your salary into your KiwiSaver account from 1 April 2026 — this is on top of your pay, not deducted from it, so it doesn't reduce your take-home pay but is easy to overlook when comparing job offers.
If you have a student loan, repayments are automatically deducted once your income crosses the repayment threshold of $24,128 a year. Above that threshold, 12% of every dollar you earn goes toward your loan balance, on top of your income tax and ACC levy.
The IETC is a tax credit — effectively money back — worth up to $520 a year for people earning between $24,000 and $70,000, provided you're not also receiving Working for Families or a main benefit. It's full value up to $66,000, then abates (reduces) by 13 cents for every dollar earned above that, phasing out entirely at $70,000. Many eligible people never claim it simply because they don't know it exists.
A salary quoted as "$75,000 annual" isn't the same as "$1,442 a week" once you divide by 52 — payroll calculations use precise annualised figures, and the compounding effect of tax brackets means small changes in pay frequency assumptions can shift your expected take-home by real money. This is one of the most common sources of payroll disputes.
Put together, your take-home pay is your gross income minus income tax, minus the ACC levy, minus your KiwiSaver contribution (if enrolled), minus student loan repayments (if applicable), plus any IETC you're entitled to. Because several of these have thresholds and abatement ranges, the only reliable way to know your actual number is to run it through a calculator that applies the current brackets correctly — rather than approximating with a flat percentage.
If you're also weighing up how much of your pay to direct into KiwiSaver, our KiwiSaver contribution guide walks through how the employee rate, employer minimum and government contribution interact.