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For individuals & families

Tax responsibilities for people receiving taxable income

You may receive taxable income through employment, a business, rent, a benefit or superannuation, or other income that is taxed at source (before you receive it).

How to pay the correct amount of tax

When you receive income from your job or other taxable income, you need to:

Note

If you don't complete an IR330, your employer will deduct tax at the no-notification rate of 45 cents in the dollar plus ACC levy, which is a much higher tax rate.

To work out how much tax will be deducted from your employment earnings, use our PAYE/KiwiSaver deductions calculator. Note that this calculator does not take account of any other income you may receive, for example from interest.

If you are in employment for part of the year only, you could be entitled to a tax refund. You can check whether you are entitled to a refund by using our Personal tax summary calculator.

If you're receiving income from rent or business

When you receive rental or business income, you must:

  • keep records
  • send your completed Individual tax return (IR3) to us after each financial year.

Find out more about taxes you must pay and expenses/deductions you may claim when you're running a business

Independent earner tax credit (IETC)

From 1 April 2009 eligible tax payers earning between $24,000 and $48,000 were entitled to the IETC which will lower the amount of tax to pay.

Find out more about the IETC

When you have a student loan

If you're working for salary or wages, you must use a tax code that includes the "SL" repayment code. Your student loan repayments are based on the tax code you're using. You may have to make other repayments for any other income you receive.

Find out more about repayments you have to make

If you're going overseas for 6 months or more you'll have different repayment obligations, based on your loan balance.

Find out more about repayments you have to make if you're overseas

Extra income such as tips

Tips paid by a customer directly to an employee

A customer can pay tips directly to an employee in one of several ways.  A customer might:

  • hand cash directly to an employee
  • put money into a pool for employees, such as a tip jar
  • ask the business for change (eg from EFTPOS) and give that to an employee or put it into a pool for employees.

In these cases, the tip is the income of the employee.

Tips paid by a customer through a business

A customer might pay tips through a business such as:

  • voluntarily adding an amount to their paper-based bill before they pay it
  • asking for an amount to be added to their total bill when they pay by EFTPOS or credit card.

If the business passes these amounts onto their employee(s), the tip is still the income of the employee.

If the business does not pass these amounts onto their employee(s), the amount is income of the business. The business must account for income tax and GST (if applicable) on the amount as they would with their other income. 

Amounts added to a customer's bill by a business

A business might add an amount to a customer's bill.  This could be by adding:

  • a service charge to the bill, for example, 15% of the cost of a meal
  • a surcharge, such as a public holiday surcharge, to the customer's bill.

In these cases the amount is income of the business.  The business must account for income tax and GST (if applicable) on the amount as they would with their other income. 

Employees: paying tax on tips

If you receive tips totalling:

  • up to $200 during a tax year, you must request a personal tax summary (PTS) for that year and include your tips as cash income that has not had tax deducted
  • $200 or more during a tax year, you must file an Individual tax return (IR3) and include your tips as cash income that has not had tax deducted.

Find out more

 


Date published: 18 Oct 2012

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