CHOOSING THE RIGHT
TAX CODE
Here are some guidelines to help you choose the right one.
If you have a main job
For income from your main (or only) job, use M unless one of the following
codes applies:
- ML if your income is less than $9,880 and you work more than 20 hours per
week
- ME if your income is between $24,000 and $48,000 and you:
- and/or your partner aren't entitled to receive Working for Families
Tax Credits
- don't receive an income-tested benefit, NZ Super, a veteran's pension,
or a foreign equivalent of any of the above
- M SL or ME SL if you have a student loan and earn over the repayment
threshold ($19,084).
If your main income is from an income-tested benefit, you'll be taxed using
the M code. Any other salary and wage income you earn should be taxed using a
secondary tax code.
If you have more than one job
If you receive income from a second job, use S unless one of the following
codes applies:
- SH if your total annual income is over $48,000
- ST if your total annual income is over $70,000.
Note
From 1 April 2010 there's a new SB (secondary bottom) tax code for people
whose total income for the tax year is $14,000 or less.
Combining tax codes
If you have a student loan and your income from your main job is over the
repayment threshold ($19,084), you need to add SL to the secondary code that
applies to you, eg, S becomes S SL, SH becomes SH SL and ST becomes ST SL.
If your income is under the threshold, there's no legal requirement to have
student loan payments deducted from your wages. However, if you have income from
a second or third source and the combined total is over the repayment threshold
you're required to start paying back your student loan.
If you use the S SL tax code for your second job you may end up paying back
too much towards your student loan, but if you only use the S tax code you may
end up with a student loan bill at the end of the year. In this situation we
strongly recommend you apply for a special repayment deduction rate, which we'll
work out to best suit your individual circumstances.
To apply for a special repayment deduction you'll need to complete a Special
tax code/student loan special repayment rate application - 2011 (IR23BS). You
can download a copy from "Forms and guides". on www.ird.govt.nz.
This form can be filled in online. Once you've completed it, print it out and
post it to the address given. Or you can order a copy by calling IRD at 0800 257 773.
Other tax codes include:
- WT for schedular payments
- CAE for casual agricultural employees
- EDW for election day workers
- STC for the special tax code.
STUDENT
LOANS- VOLUNTARY PAYMENTS.
The government has introduced a 10% student loan voluntary repayment
bonus for voluntary repayments that total $500 or more in a tax year (1
April to 31 March).
You don't need to make a voluntary repayment in a lump sum. You could
make voluntary weekly repayments of $10 throughout a tax year instead of a
one-off payment of $500, and still be eligible for the repayment bonus.
You don't need to apply for the voluntary repayment bonus, but you do
need to have met all your student loan obligations. These are making your
repayments by the due date, using the correct tax code, and filing your
income tax returns (if you're required to) to be eligible
When you're eligible for the voluntary repayment bonus
You're eligible for a voluntary repayment bonus if:
- you're up-to-date with your repayments and filing your income tax
returns (if you're required to)
- your loan balance with Inland Revenue is $550 or more at the
beginning of the tax year (1 April), and
- your voluntary repayments for the tax year total $500 or more.
When you’ll receive your Bonus
When you receive your voluntary repayment bonus depends on your
circumstances.
| If you... |
then you'll receive your voluntary
repayment bonus... |
| haven’t repaid your loan in full and don’t need to file an
IR 3 income tax return |
by the end of October in the following tax year |
| haven’t repaid your loan in full and are required to file an
IR 3 income tax return |
within 12 weeks of your return being filed |
| are an overseas-based borrower |
by the end of October in the following tax year |
| repaid your loan in full by 30 June 2010 |
by the end of October 2010 |
| repaid your loan in full after 30 June 2010 |
within 4 months of your final repayment |
ASSOCIATED
PERSONS
Associated persons are:
- companies controlled by the same persons
- companies and individuals with a 25% or greater interest in the
company
- partnerships, partners and associates of partners
- relatives by blood, marriage, or adoption to the second degree
(including people in a de facto relationship)
- trustees of a trust and a beneficiary of a trust, except if:
- the trustee is a charitable or non-profit body with wholly or
principally charitable, benevolent, philanthropic or cultural
purposes and the supply is made in carrying out these purposes, or
- the beneficiary is a charitable or non-profit body with wholly
or principally charitable, benevolent, philanthropic or cultural
purposes and the supply enables them to carry out these purposes
- trustees and the settlor of a trust
- trustees of two trusts that have a common settlor, except if:
- either trustee is a charitable or non-profit body with wholly
or principally charitable, benevolent, philanthropic, or cultural
purposes and;
- the supply is made in, or enables, the carrying out of the
charitable, benevolent, philanthropic, or cultural purpose
- two persons who are each associated with a third person.
SUPPLIES TO
ASSOCIATED PERSONS
Special rules apply if you make certain supplies to associated
persons.
Supply to Registered Associated Persons
If you supply goods or services to an associated person who can claim
a GST credit for the purchase, you account for GST on the amount received.
Example
Jones and Jones, a GST-registered partnership sells a piano to
Dawn, a sister of one of the partners. Dawn is registered for GST and
can claim a GST credit on the purchase.
The open (current) market value of the piano is $2,000 but the sale is
for $1,500. The partnership accounts for GST of $166.66 ($1,500 / 9).
Supply to Unregistered Associated Persons
If you supply goods or services to an associated person who cannot
claim a deduction, you must determine the open (current) market value of the
supply and account for the greater of the market value, or the amount you
charged, in your return.
Example
If Dawn (see previous example) was not registered for GST,
the partnership would account for GST of $222.22. This is the $2,000
market value divided by nine.
Include transactions with associated persons in the return for the
taxable period in which you made the supply. However, if you receive payment
or issue an invoice before the last date for filing that return, the date of
payment or invoice determines which taxable period the supply falls in,
depending on your accounting basis.
Example
A partnership has a two-month taxable period. The return for the
period ended 30 April is due on the last working day of May.
The partnership supplies goods with an open (current) market value of
$135 to a non-registered brother of one of the partners on 24 April and
receives payment of $100 on 16 June. The partnership will account for
$15 GST (on the market value of $135) in the return for the taxable
period ended 30 April, as this is the period in which the supply was
made.
If the partnership had issued an invoice or received payment during May
(before the April return was due to be filed), the $15 GST would be
included in the return for the taxable period ended 30 June. This is
because the invoice or payment would fall in the June period.
