Tax credits

• What is a tax credit?
• Independent earner tax credit (IETC)
• Tax credit for income under $9,880
• Tax credit for children
• How to claim a tax credit and get a refund

What is a tax credit?

A tax credit is a reduction in the amount of tax you need to pay. There are three types of tax credits:

• independent earner tax credit (IETC)
• tax credit for income under $9,880
• tax credit for children.

If you're eligible for one of these tax credits, you may get a tax refund. These tax credits can be claimed either through the PAYE system during the year or by filing an IR3 individual income return or personal tax summary (PTS) at the end of the year.

Independent earner tax credit (IETC)

The IETC is a tax credit for individuals who are New Zealand tax residents, and whose annual income is between $24,000 and $48,000 in a tax year (1 April to 31 March). To receive the IETC the following must apply:

• you or your partner are not entitled to working for families tax credits
• you or your partner don’t receive an overseas equivalent of working for families tax credits
• you are not receiving an income tested benefit, NZ Super, Veterans Pension or an overseas equivalent.

Entitlement to IETC is determined monthly so if you don’t meet the criteria for any part of a month, then you won’t qualify to receive the IETC for that entire month.

From 1 April 2009 if your annual income is between $24,000 and $44,000 inclusive you’ll receive a tax credit of $520 - or $10 per week. If you’re eligible, but earn over $44,000, your annual entitlement to the IETC decreases by 13 cents for every additional dollar earned.

Tax credit for income under $9,880

If your taxable income is under $9,880 you can claim this tax credit for every week that you were in paid work for 20 hours or more:

• earning salary or wages
• as a shareholder-employee
• as a working partner in a partnership, or
• in self-employment.

If you would have done 20 or more hours of paid work a week but instead received a community wage for sickness or accident compensation payments, you can still claim this tax credit.

Exception: You can't claim this tax credit if you or your partner were entitled to working for families tax credits during the year.

If you left school during the year you can claim either the tax credit for income under $9,880 or the tax credit for children, whichever is larger. You can't claim both.

Tax credit for children

You can claim this tax credit if...	and...	as long as...
you were under 19 years old	you attended school anytime between 1 April and 31 March	you earned income other than interest, dividends or taxable Māori authority distributions (for example, you earned salary or wages).

How to claim a tax credit and get a refund

If you're eligible for a tax credit and haven't already received it during the year by using the appropriate tax code, you'll either need to file an IR3 return or receive a PTS to find out if you'll get a refund. See "Find out more" below.

If you file an IR3 return

Your IR3 return includes a tax credit section which will help you to calculate your tax credit. See "Find out more" below for information about who needs to file an IR3 return.

Personal tax summary (PTS)

If you don't need to file an IR3 return, use our Personal tax summary calculator under "Work it out" to find out if you'll get a refund and how much it will be.

If you're eligible for a refund, you can Request a personal tax summary under "Get it done online" to make sure your tax credits are added to your PTS. If you've already received a PTS call us on 0800 227 774 and ask for your tax credits to be added onto your PTS. If you're eligible for both the tax credit for children and the tax credit for income under $9,880, we'll calculate which one is better for your situation and add it to your PTS.

Find out more

• Personal tax summaries (PTS)
• Individual income tax returns (IR3)
• Donations, childcare and housekeeper tax credits

Next steps

• Filing your IR3 individual income return (if you need to)

 

 

Date published: 24 Aug 2009

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