Paying Tax Do I have to have an IRD number? Who can I give my IRD number to? How much tax do I pay? How do I pay tax? How do I know how much tax I’m paying? I am self-employed how can I pay my tax? What is KiwiSaver? What benefits do I get from KiwiSaver? How do I opt out of KiwiSaver? What are the different schemes under KiwiSaver? When can I use my KiwiSaver money? Can I get a tax credit when I donate to charities? Can I get a tax credit if I have dependent children?
When you earn money, you have to pay a part of it to the government as tax. Tax is managed by the Inland Revenue Department (IRD). The government uses taxes to pay for things like roads and education. Usually, your employer takes tax out of your pay before you even get it in your hands – this is called Pay As You Earn (PAYE) tax. In some situations, for example, if you’re a contractor rather than an employee, you will have to pay tax to IRD yourself.
It’s not compulsory to have an IRD number, but you should if you’ve started working. If you don’t, then you may end up paying more tax on money that you earn. You can apply for an IRD number on the IRD website.
Your IRD number is a type of identification. This means you shouldn’t give it out to people who don’t have a good reason for needing to know it. You should only give your IRD number to:
If someone else asks for your IRD number and you’re not sure why they would need it, you can contact the Inland Revenue Department for advice.
If you’re under 14, or 15- 17 and is still at school, then you don’t have to pay tax on income less than $2,340 per year if the income is not normally taxed. This would include performing work for a neighbour, friend or if you’re self-employed. E.g. if you were paid to mow the neighbour’s lawn. If you earn more than $2,340 in a year, you will need to pay tax. This doesn’t include any allowance from your parents or gifts.
If you’re working at a job that’s normally taxed, how much tax you pay depends on how much you earn. Tax is calculated as a percentage of the total amount that you get paid, so if your employer has agreed to pay you $100 for some work, and your tax rate is 10.5%, then $10.50 will be taken out to go to taxes and you’ll end up with $89.50. The tax rate increases as you earn more money.
If you’re an employee or you’re on a benefit, tax will automatically get deducted under the PAYE scheme. It’s a good idea to make sure you’re using the right tax code, by checking the tax code on your next payslip or by contacting IRD. Tax codes change depending on how many jobs you have, how much you’re earning and whether you have a student loan.
If you’re not sure how much you’re earning or how much tax you’re paying, you can create a ‘my IR’ login to get summaries. For more details, you can request a Personal Tax Summary either online by logging on to IRD Online Services or by calling IRD on 0800 257 778. This will tell you how much you’ve earned, how much tax you’ve paid, and whether you’ve paid too much or too little tax.
If you earn money as a contractor or through self-employment, or other ways that don’t take out PAYE, you will need to file an IR3 return. You send this information to the IRD, and they will tell you how much tax you need to pay on what you’ve earned over the year.
You can file an IR3 online.
KiwiSaver was set up by the government as a way to help people save money. You can choose whether you want to contribute to your KiwiSaver or not, and if you do whether you want to contribute 3%, 4% or 8% of your income into your KiwiSaver. You can also choose the type of investment you want your Kiwisaver to make, and how risky you’d like the investment to be.
When you start a new job, your employer should give you information about KiwiSaver and find out whether you want to be a part of it or not. You can find out more about KiwiSaver and whether it’s a good idea for you on the KiwiSaver website. If you’re under 18, your legal guardian must give consent for you to join KiwiSaver.
The advantage of KiwiSaver is that if you’re making payments to your KiwiSaver account, your employer and the government will too. If you’re signed up to KiwiSaver, your employer has to pay an amount equal to 3% of your income into the account, in addition to the amount that they pay directly to KiwiSaver from your earnings. You also get a yearly credit from the government. You might also be able to get extra help when you’re buying your first house. KiwiSaver also helps you invest your contributed money.
Most employees are automatically enrolled into the KiwiSaver scheme. You can opt out between day 14 – day 56 of starting your new employment. You can opt out by completing this online opt-out request.
If you started employment more than 56 days ago, and it’s less than 3 months since your first contribution, you’ll be required to provide a reason for your late opt out and your request may not be approved. If your request is received more than 3 months after your first contribution, you can’t opt out and your request will be treated as an application for a contributions holiday.
KiwiSaver is a scheme where your savings through Kiwisaver are invested, but as with most investments, there are risks, the more you want to gain usually the higher the risk. This means that with some investments, you could end up with lesser money than you initially had.
The fund types range from cash (low risk) to aggressive (high risk). Remember to read the schemes carefully before choosing which one you’d like your kiwisaver to invest in.
The biggest disadvantage of a KiwiSaver account is that you usually can’t access any of the money in it until you’re at least 65.This scheme is to make sure you’ll have some money put away by the time you retire. This means you can’t use any of the KiwiSaver contributions for your normal spending. But there are some exceptions, you might be able to take money out of your Kiwisaver account if you’re:
If you donate money to registered charities, you might be able to get a tax credit to pay you back some of what you have donated. If you have a receipt for what you’ve donated from a registered charity, you can claim back 33.33% of what you gave to the charity. Not all donations can receive a tax credit, if you would like a tax credit, you should check with the organisation you’re donating money to first before donating. To get this tax credit, you have to fill out a tax credit claim form called an IR526.
If you have dependent children, you might also be able to get a working for families tax credit. You can find out more about applying for these on the Working for Families website. If you’re applying for these tax credits, you’ll need to get IRD numbers for all your children as well as yourself.