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Work out your tax code

how does tax code work

Special tax codes (STC)

A special tax code is a tax rate worked out to suit your individual circumstances. It could help you pay the right amount of tax when you:

  • have a second job or other income over and above your main job
  • are a beneficiary, receiving Veteran's Weekly Income Compensation (VWIC) or ACC and working
  • receive an overseas pension that is taxable in New Zealand
  • have business losses from a previous year to carry forward and you want to offset them against your salary or wages
  • have had a large tax refund or bill in the past and your current circumstances are the same.

If you decide that a special tax code is right for you, you will need to complete a Special tax code application (IR23BS) form. You don't have to wait till the start of a new tax year to apply.

Income-tested benefits

A special tax code can't be used for an income-tested benefit. This is because an income-tested benefit is a net amount under the Social Security Act 1964 and can't be increased or decreased.

If you're a student loan borrower

You can no longer use a special tax code to change the amount of your student loan repayment deductions from your salary or wages. However, you may be able to use one of the following:

If you're studying full-time and working, and think you'll earn under the annual repayment threshold. you can apply for a repayment deduction exemption so you won't need to use a "SL" repayment code or have student loan repayment deductions from your salary or wages.

Making extra repayments through your salary or wages

You can ask your employer to make

extra student loan deductions from your salary or wage if you want to pay more.

Once we receive your application

We'll calculate the right tax rate based on your situation, which may be higher or lower than the rate that applies if you use a standard tax code. The rate will be specific to your situation and will mean you'll pay the right amount of tax.

If your special tax code is for your New Zealand Super, we'll send your special tax code certificate directly to Work and Income. If your special tax code is for another job, we'll send the special tax code certificate to you, which you'll need to hand to your employer. The certificate tells your employer the rate of tax to deduct from your pay.

This rate is based on your estimates and may not be the final amount you owe. We can only work out if you have paid enough on your actual income from your Personal tax summary or Individual income tax return (IR3) at the end of the tax year.

If your circumstances change

When you have a special tax code you'll need to tell us if your circumstances change as we may need to work out a new special tax code to suit your new situation.

  • a significant change in income
  • a new source of income
  • a period of unemployment during the year
  • you or your partner ceasing or beginning to be entitled to Working for Families Tax Credits (or overseas equivalent)
  • you or your partner starting or stopping receiving an income-tested benefit, New Zealand Superannuation, Veteran's Weekly Income Compensation (VWIC) or Veteran's Pension (or overseas equivalent)
  • a change in residency for tax purposes.

Category: Taxes

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