Has Your Tax Code Kept Up With Your Income?

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It’s easy to assume that the amount of tax coming out of your income will simply take care of itself. But if your circumstances change, your tax code may need to change too.

This can be particularly relevant if you’re receiving NZ Super while also earning income from another source. Perhaps you’ve taken on some part-time work, started receiving a pension, changed jobs or begun earning income from investments or another taxable source. Having more than one source of taxable income can affect which tax code should be used.

Your tax code tells your employer or other income payer how much tax to deduct. If the wrong code is being used, you could end up having too much tax deducted during the year or not enough, potentially leaving you with a bill later.

This doesn’t mean you need to become an expert in New Zealand’s tax system. Inland Revenue has a tax-code tool and an IR330 declaration that can help you work out which code applies to your circumstances. If you’re receiving NZ Super, you can update your tax code through the Ministry of Social Development.

It’s worth checking whenever your income situation changes. Starting or finishing a job, changing your expected income or gaining another source of taxable income can all be reasons to review your tax code. IRD advises that you need to tell your employer or payer if your tax code changes.

You don’t necessarily need to wait until the end of the tax year to discover there’s a problem. Take a look at your recent payslips or payment information and check that the tax code being used matches your current circumstances. If you’re unsure, your employer, Work and Income, or Inland Revenue can help you understand what you need to do.

A tax code check may sound like a small piece of financial housekeeping, but it can prevent an unpleasant surprise later. Whenever your income changes, it’s worth checking whether your tax settings need to change with it.