Plain language law

New Zealand law explained for everyone

Income Tax Act 2007

Tax credits and other credits - Tax credits for payments, deductions, and family payments

LB 1: Tax credits for PAYE income payments

You could also call this:

“Getting money back for taxes your employer took from your pay”

You can get a tax credit when your employer takes money out of your pay for taxes. This is called withholding tax. Each tax year, your employer tells the government how much tax they took from your pay.

The amount of tax your employer took from your pay is the same as your tax credit. However, there’s a special rule if your employer is a close company (a company with few shareholders) and you or your partner are connected to the company. In this case, your tax credit can’t be more than the amount of tax your employer actually paid to the government.

If the government doesn’t get the information about how much tax was taken from your pay, or if the information is wrong, you won’t get the tax credit. But don’t worry - if the information is fixed later, you’ll get your tax credit back as if nothing went wrong.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1517915.

Topics:
Money and consumer rights > Taxes
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LA 10: Meaning of tax credit, or

“ Tax credits are amounts that reduce the tax you owe ”

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LB 1B: Treatment of tax credits of certain companies with shareholders who are employees, or

“How companies can share tax credits with shareholders who are also employees”

Part L Tax credits and other credits
Tax credits for payments, deductions, and family payments

LB 1Tax credits for PAYE income payments

  1. This section applies in a tax year when an employer provides the Commissioner with employment income information that shows an amount of tax withheld from a PAYE income payment of a person who is an employee.

  2. The person has a tax credit for the tax year equal to the amount of tax shown as withheld.

  3. Despite subsection (2), the amount of the tax credit must be no more than the amount of tax paid to the Commissioner if—

  4. the employer is a close company; and
    1. the employer and the person are associated persons, or the employer and the spouse, civil union partner, or de facto partner of the person are associated persons; and
      1. the employer withheld the amount of tax for the PAYE income payment shown in their employment income information.

        1. The person's credit is extinguished if the Commissioner does not receive employment income information for the relevant amount of tax, or when the relevant particulars of the schedule are incorrect. However, the credit is restored to the person if the relevant matter is corrected and, for the purposes of this section, it is as if the error had not been made.

        Notes
        • Section LB 1: substituted (with effect on 1 April 2008), on , by section 312 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
        • Section LB 1(1): amended, on , by section 153(1) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
        • Section LB 1(3)(c): amended, on , by section 153(2) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
        • Section LB 1(4): amended, on , by section 153(3) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
        • Section LB 1 list of defined terms employer monthly schedule: repealed, on , by section 153(4)(b) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
        • Section LB 1 list of defined terms employment income information: inserted, on , by section 153(4)(a) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).