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Income Tax Act 2007

General collection rules - Employment-related taxes - Adjustments for certain PAYE income payments

RD 17: Payment of extra pay with other PAYE income payments

You could also call this:

“How employers calculate tax on extra pay alongside regular earnings”

When you get extra pay from your employer, they need to figure out how much tax to take off. They do this by adding up your extra pay and your regular pay for the last 4 weeks. They then use this total to work out the tax rate.

The tax rate depends on how much money you earn in total. There are different rates for different amounts of money. For example, if your total is $14,000 or less, they use one rate. If it’s between $14,000 and $48,000, they use another rate, and so on.

Sometimes, you might tell your employer to use a different tax code for your extra pay. If you do this, they use a special formula to work out the tax rate.

This rule doesn’t apply to some workers, like non-resident seasonal workers or people who haven’t told their employer which tax code to use.

Remember, your employer is just following the rules to make sure they take off the right amount of tax from your extra pay.

This text is automatically generated. It might be out of date or be missing some parts. Find out more about how we do this.

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1519976.

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Part R General collection rules
Employment-related taxes: Adjustments for certain PAYE income payments

RD 17Payment of extra pay with other PAYE income payments

  1. This section applies when a person pays an amount of extra pay to an employee who also receives a PAYE income payment from the person, regardless of whether the extra pay is paid with or separately from a PAYE income payment. The amount of tax for the extra pay is based on the sum of—

  2. the amount of the extra pay; and
    1. the annualised value of all PAYE income payments made to the employee in the period that starts 4 weeks before the date of the payment of the extra pay and ends on the date of that payment.

      1. For the purposes of calculating the amount that is the annualised value referred to in subsection (1)(b), the amount of the extra pay referred to in subsection (1)(a) and of extra pays paid to the employee in the period referred to in subsection (1)(b) is excluded.

      2. This section does not apply to—

      3. a non-resident seasonal worker—
        1. who has notified their employer of their tax code, for which see section RD 10(2C):
          1. to whom schedule 5, part B, clause 3 of the Tax Administration Act 1994 applies:
          2. an employee who has a non-notified tax code referred to in schedule 2, part A, clause 3.

            1. For the sum of the amounts referred to in subsection (1) listed in the following paragraphs, the amount of tax for the extra pay that must be withheld is the amount determined using the basic amounts of tax for PAYE income payments set out in the relevant row of schedule 2, part B, table 1 (Basic tax rates for PAYE income payments):

            2. if the sum of the amounts is $14,000 or less, the amount determined by applying row 2:
              1. if the sum of the amounts is more than $14,000 but not more than $48,000, the amount determined by applying row 3:
                1. if the sum of the amounts is more than $48,000 but not more than $70,000, the amount determined by applying row 4:
                  1. if the sum of the amounts is more than $70,000 but not more than $180,000, the amount determined by applying row 5:
                    1. if the sum of the amounts is more than $180,000, the amount determined by applying row 6.

                      1. Despite subsection (2), if the person pays an amount of extra pay to an employee in relation to which the employee has notified the person that a secondary code under schedule 5, part A, clause 4, rows 3 to 6B of the Tax Administration Act 1994 applies, the rate under schedule 2, part B, table 1 applying to the extra pay is determined using the formula—

                        extra pay + annualised amount + low threshold amount.

                        Where:

                        • In the formula,—

                        • extra pay is the amount of the employee's extra pay:
                          1. annualised amount is the amount given by subsections (1)(b) and (1B):
                            1. low threshold amount is, as applicable,—
                              1. for secondary code SB, $0:
                                1. for secondary code S, $14,001:
                                  1. for secondary code SH, $48,001:
                                    1. for secondary code ST, $70,001:
                                      1. for secondary code SA, $180,001.

                                      Compare
                                      Notes
                                      • Section RD 17(1) heading: substituted (with effect on 1 April 2008), on , by section 104(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
                                      • Section RD 17(1): substituted (with effect on 1 April 2008), on , by section 104(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
                                      • Section RD 17(1B) heading: inserted (with effect on 1 April 2008), on , by section 104(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
                                      • Section RD 17(1B): inserted (with effect on 1 April 2008), on , by section 104(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
                                      • Section RD 17(1B): amended (with effect on 1 April 2008), on , by section 256(1) (and see section 256(2) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
                                      • Section RD 17(1C) heading: inserted, on , by section 206(1) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
                                      • Section RD 17(1C): replaced, on , by section 206(2) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
                                      • Section RD 17(2) heading: substituted, on (applying for the 2010–11 and later income years), by section 104(2) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
                                      • Section RD 17(2): replaced, on , by section 6(1) (and see section 3 for application) of the Taxation (Income Tax Rate and Other Amendments) Act 2020 (2020 No 65).
                                      • Section RD 17(3) heading: substituted, on (applying for the 2010–11 and later income years), by section 104(2) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
                                      • Section RD 17(3): substituted, on (applying for the 2010–11 and later income years), by section 104(2) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
                                      • Section RD 17(3): amended, on , by section 6(2) (and see section 3 for application) of the Taxation (Income Tax Rate and Other Amendments) Act 2020 (2020 No 65).
                                      • Section RD 17(3): amended, on , by section 206(3) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
                                      • Section RD 17(4) heading: added, on (applying for the 2010–11 and later income years), by section 104(2) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
                                      • Section RD 17(4): added, on (applying for the 2010–11 and later income years), by section 104(2) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
                                      • Section RD 17(4)(c)(iv): amended, on , by section 6(3) (and see section 3 for application) of the Taxation (Income Tax Rate and Other Amendments) Act 2020 (2020 No 65).
                                      • Section RD 17(4)(c)(v): inserted, on , by section 6(4) (and see section 3 for application) of the Taxation (Income Tax Rate and Other Amendments) Act 2020 (2020 No 65).
                                      • Section RD 17 list of defined terms non-resident seasonal worker: inserted, on , by section 206(4) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
                                      • Section RD 17 list of defined terms notify: inserted, on , by section 74 of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
                                      • Section RD 17 list of defined terms tax code: inserted, on , by section 206(4) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).