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%, 33%, and 39% 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 1 April 2010). The default rate for people who do not supply their tax file number to the interest payer is 45%. 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.
- RWT 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.
The imputation system was designed to eliminate double taxation on company profits. Under the imputation system, a company effectively attaches imputation credits (representing tax paid at the company level) to cash and non-cash dividends and taxable bonus issues distributed to shareholders. The shareholders then use those imputation credits to reduce their own tax liability in respect of the company’s dividends. The shareholder includes both the dividends and the imputation credits as assessable income, with a credit being allowed against the shareholder’s income tax liability for an amount equal to the attached imputation credits. 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 means the amount, based on a person’s net income and adjusted as provided by section MB 1 of the Income Tax Act 2007, on which an entitlement and tax credit under the family scheme is based.