Credits for taxes withheld or paid
Tax credits are available for the following:
- PAYE tax deducted by employers from employee wages.
- Instalments (provisional tax) paid by business taxpayers.
- Resident withholding tax (RWT) deductions on interest and dividends paid to residents. RWT rates of 10.5%, 17.5%, 30%, and 33% apply to interest derived by residents. The default rate for people who do not notify their bank of the correct RWT rate is 33% (or 17.5% for bank accounts opened prior to 31 March 2010). Interest payers are required to remind taxpayers of the RWT rate they are on at least once a year to ensure that it is consistent with their PIT rate.
- NRWT on interest, dividends, and royalties where the NRWT is not a final tax.
- WHT deducted from payments made to contractors.
See the Foreign tax relief and tax treaties section for a description of foreign tax credits.
To avoid double taxation of income derived by a corporation, the tax it pays on its income is imputed to the shareholder. Where a dividend is accompanied by an imputation credit, tax is payable on the gross dividend (dividend received plus imputation credits), with the imputation credits available to offset the tax. Imputation credits cannot be utilised by non-resident shareholders.
Personal tax credits
Individuals with annual income between NZD 24,000 and NZD 48,000 and who meet certain requirements are entitled to an 'independent earner' tax credit of NZD 520. For eligible individuals who earn over NZD 44,000, the annual entitlement decreases by 13 cents each additional dollar earned up to NZD 48,000, at which point the credit is fully abated.
Credit for charitable donations
An individual can claim a 33.3% tax credit for eligible charitable donations, up to their taxable income.
‘Working for Families’ tax credit
Individuals may also be eligible for ‘Working for Families’ tax credits, which provide an in-work payment for families with dependent children. These credits are aimed at low and middle income families. They are generally paid in fortnightly instalments with any under or overpayment being calculated annually. Amounts received are not taxable. The definition of family scheme income includes income from trusts, some fringe benefits, passive income of children such as interest, dividends, or rent over NZD 500 a year, and non-resident foreign-sourced income of spouses.