Work out your tax code
Special tax codes (STC)
A special tax code is a tax rate worked out to suit your individual circumstances. A special tax code could help you pay the right amount of tax when you:
- have a second job or other income over and above your main job
- are a beneficiary or receiving ACC and working
- receive an overseas pension that is taxable in New Zealand
- have business losses from a previous year to carry forward and you want to offset them against your salary or wages
- have had a large tax refund or bill in the past and your current circumstances are the same.
If you decide that a special tax code is right for you, you will need to complete a Special tax code application (IR23BS) form. You don't have to wait till the start of a new tax year to apply.
Note
Income-tested benefits
A special tax code can't be used for an income-tested benefit. This is because an income-tested benefit is a net amount under the Social Security Act 1964 and can't be increased or decreased.
Special tax codes for student loan borrowers
From 1 April 2012, you won't be able to use a special tax code to change the amount of your student loan repayment deductions from your salary or wages. However, you may be able to use one of the following:
Student loan special deduction rates for secondary income
If the secondary tax code you choose for your circumstances is "SB SL" or "S SL" and your gross income from your main job is less than $367 per week, the 10% standard student loan deductions for your secondary income may be too high.
Student loan repayment deduction exemption for full-time students
If you are working and studying full-time, and think you'll earn under the annual repayment threshold of $19,084 for the 1 April 2012 to 31 March 2013 tax year, you can apply for a repayment deduction exemption so you won't need to have student loan repayment deductions from your salary or wages. A repayment deduction exemption means you won't have to use student loan tax codes.
Making extra repayments through your salary or wages
You can ask your employer to make extra student loan deductions from your salary or wage if you want to pay more.
Once we receive your application
We'll calculate the right tax rate based on your situation, which may be higher or lower than the rate that applies if you use a standard tax code. The rate will be specific to your situation and will mean you'll pay the right amount of tax.
If your special tax code is for your NZ Superannuation, we'll send your special tax code certificate directly to Work and Income. If your special tax code is for another job, we'll send the special tax code certificate to you, which you'll need to hand to your employer. The certificate tells your employer the rate of tax to deduct from your pay.
Note
This rate is based on your estimates and may not be the final amount you owe. We can only work out if you have paid enough on your actual income from your personal tax summary or Individual tax return (IR3) at the end of the tax year.
If your circumstances change
When you have a special tax code you'll need to tell us if your circumstances change as we may need to work out a new special tax code to suit your new situation.
Changes in your circumstances may include:
- a significant change in income
- a new source of income
- a period of unemployment during the year
- ceasing or beginning to be entitled to Working for Families Tax Credits (or overseas equivalent)
- starting or stopping receiving an income-tested benefit, NZ Superannuation or veterans' pension (or overseas equivalent)
- a change in residency for tax purposes.
Note
We've provided this decision tree to help you work out your tax code. We welcome your feedback on how useful you found it.
Date published: 31 Jan 2012
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