Starting 1 April 2025, New Zealand will implement significant changes to its progressive income tax system, which taxes higher income levels at increased rates.

These adjustments aim to simplify the tax structure and provide relief to low- and middle-income earners while maintaining the progressive approach for higher-income brackets.

Here is what you need to know about the current and upcoming tax rates, and how they might impact you.

Current Tax Rates (Until 31 March 2025)

Currently, income tax rates are as follows:

• $0 – $14,000: 10.5%
• $14,001 – $15,600: 12.82%
• $15,601 – $48,000: 17.5%
• $48,001 – $53,500: 21.64%
• $53,501 – $70,000: 30%
• $70,001 – $78,100: 30.99%
• $78,101 – $180,000: 33%
• $180,001 and over: 39%

These rates apply only to the income within each bracket.

The cumulative tax calculations, which help estimate the total tax liability within each bracket, are as follows:

• $0 – $14,000: 10.5% ($1,470)
• $14,001 – $15,600: 10.74% ($1,675)
• $15,601 – $48,000: 15.30% ($7,345)
• $48,001 – $53,500: 15.95% ($8,535)
• $53,501 – $70,000: 19.26% ($13,485)
• $70,001 – $78,100: 20.48% ($15,994)
• $78,101 – $180,000: 27.57% ($49,621)
• $180,001 and over: 39% (per extra dollar)

E.g. if you earn between $70,001 and $78,100, put 21% of net revenue into your tax bank savings account for income tax.

To cover GST, add the 15% on invoices paid to the bank tax savings account.

Upcoming Tax Rates (Effective 1 April 2025)

• $0 – $15,600: 10.5%
• $15,601 – $53,500: 17.5%
• $53,501 – $78,100: 30%
• $78,101 – $180,000: 33%
• $180,001 and over: 39%

Similar to the current system, these rates apply only to income within each bracket.

The cumulative tax calculations for the new rates are as follows:

• $0 – $15,600: 10.5% ($1,638)
• $15,601 – $53,500: 15.46% ($8,270)
• $53,501 – $78,100: 20.04% ($15,650)
• $78,101 – $180,000: 27.38% ($49,277)
• $180,001 and over: 39% (per extra dollar)

Implications and Considerations

These changes reflect the government’s efforts to adapt the tax system to economic conditions and fiscal policy goals.

By raising income thresholds for lower tax brackets, more income will be taxed at reduced rates, potentially easing the financial burden on low- and middle-income earners.

For higher-income earners, the retention of the 39% rate for income over $180,000 ensures the progressive structure remains intact, requiring those with greater financial capacity to contribute proportionally more.

Additionally, the streamlined tax brackets effective from April 2025 may have implications for businesses and individuals, including:

• Adjustments to withholding tax calculations.
• Updates to payroll systems.
• Impact on financial forecasting and provisional tax planning.

Practical Tips for Tax Management

To ensure you’re prepared for these changes, consider setting up a separate bank tax account to allocate tax and GST payments each month.

This approach helps you stay on top of tax obligations and avoid surprises when payments are due.

Remember, taxable income is calculated as revenue minus expenses, not just the total of sales invoices.

A More Streamlined Future

The upcoming adjustments to New Zealand’s income tax system represent a significant step towards a more streamlined and progressive structure.

Whether you’re a low- or high-income earner, these changes are designed to balance simplicity with fairness, ensuring the tax system continues to support economic growth and fiscal responsibility.

Need Help Navigating the Changes?

At David Hooper Chartered Accountants, we specialise in helping businesses and individuals adapt to tax changes with ease.

From business advice to trust and rental accounts, we ensure you're equipped to thrive under the new tax regime.

Contact us today at [email protected] or phone us on 09 421 1635.