Changes in your circumstances that may affect your entitlement to the independent earner tax credit
Important
To make sure you don't receive the independent earner tax credit (IETC) if you're not entitled to it, you'll need to ensure you update your employer with the correct tax code.
Changes in your circumstances, including the amount and sources of your income, may affect your entitlement to the IETC.
Your IETC entitlement is calculated on the basis of whole months, so if any of the situations below apply to you for part of a month, your IETC entitlement stops for that whole month.
Receiving a benefit
You'll no longer be eligible for IETC if you start receiving an income-tested benefit, including:
- domestic purposes
- emergency
- independent youth
- invalids'
- sickness
- unemployment
- widow's, or
- an overseas equivalent of the above.
Your entitlement to IETC will also stop if you start receiving a Veteran's Pension, or New Zealand Superannuation.
If you start to receive an overseas equivalent of any of the above, you'll also no longer be entitled to IETC.
Important
If you start receiving a benefit, you will need to change your tax code. To work out the correct code to use at any time please use our work out your tax code decision tree.
Your residence for tax purposes
You won't be eligible for the IETC if you are not a resident of New Zealand for tax purposes. Find out more information about tax residency.
Receiving working for families tax credits
You'll no longer be eligible for the IETC if you or your spouse, civil union partner, or de facto partner become eligible for a working for families tax credit or start receiving an overseas equivalent.
Changes to your income
Your entitlement to the IETC may change if your income level changes.
| If your annual income ... | then ... |
|---|---|
| rises to between $44,000 and $48,000 | your entitlement will start to decrease by 13 cents for every dollar earned above $44,000. |
| rises above $48,000 | you'll no longer be eligible for IETC. |
| drops to below $24,000 | you'll no longer be eligible for IETC. |
The IETC is based on your annual income (see example below) so if you have a pay change during the year, it may mean that you either receive too much IETC, or shouldn't have received any at all. In these cases you may end up with a bill at the end of the year. Please see Why you may have a tax bill if you get the independent earner tax credit for more information.
Example
Lesley is earning $44,000 for the first half of the year and gets a pay rise to $51,000. She is still entitled to IETC even though her current income is above the IETC limit. That is, in the:
- first half of the year she will have earned $22,000, and
- second half she will have earned $25,500
making a total income for the year of $47,500. This means she is still within the IETC income band for the current year. She will, however, have to change her tax code at the beginning of the next tax year as she will earn over the limits for that year.
Claiming IETC
| If you're entitled to the IETC and you ... | then use tax code ... |
|---|---|
| don't have a student loan | ME. |
| do have a student loan | ME SL. |
Date published: 06 Mar 2009
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