When immigrants consider moving to New Zealand, one of the key aspects they need to understand is the country’s tax system. New Zealand is known for its relatively straightforward tax system, but like many countries, it imposes taxes on income earned within its borders. For immigrants who may start their journey with a minimum wage job, it is important to understand how much of their income will be taxed and how the system works. This knowledge can help them plan their finances more effectively as they adjust to life in New Zealand.
In New Zealand, taxes are primarily levied on a progressive scale, meaning the more you earn, the higher percentage of your income will be taxed. But what about those who are earning the minimum wage, which is the starting point for many newcomers? In this article, we will break down how taxes are applied to minimum wage earners, the various components of the tax system, and how immigrants can ensure they are meeting their tax obligations.
The Minimum Wage in New Zealand
As of 2025, New Zealand’s minimum wage is set at $22.70 per hour for adult workers. This rate is one of the highest in the world, reflecting the country’s commitment to providing fair pay for workers. For immigrants, especially those who are just starting their careers in New Zealand, earning the minimum wage is common, particularly in industries like hospitality, retail, and agriculture.
While the minimum wage is designed to ensure that workers can afford basic living expenses, it is important to understand that taxes will be deducted from this wage. The amount of tax an immigrant will pay depends on their total income, the specific tax rates applied, and whether they are entitled to any tax credits or deductions.
New Zealand’s Income Tax System
New Zealand uses a progressive tax system, which means that the more a person earns, the higher their tax rate. For example, a worker earning $25,000 will pay a different tax rate than someone earning $50,000. In addition to income tax, there are other deductions that workers need to be aware of, such as the ACC (Accident Compensation Corporation) levy, which covers work-related injuries and accidents.
The tax system is relatively simple compared to other countries. New Zealand does not have separate state or regional taxes; instead, all taxes are collected by the Inland Revenue Department (IRD). This centralized system makes it easier for immigrants to understand their tax obligations.
Progressive Tax Rates for 2025
For the 2025 tax year, New Zealand’s income tax rates are as follows:
Up to $14,000: 10.5% tax
$14,001 to $48,000: 17.5% tax
$48,001 to $70,000: 30% tax
$70,001 to $180,000: 33% tax
Over $180,000: 39% tax
For immigrants working at the minimum wage, their income will likely fall within the first two brackets, meaning they will pay taxes at the 10.5% and 17.5% rates, depending on their earnings. Understanding these tax brackets is important because it helps workers know exactly how much of their income will be taxed.
Tax Calculation on a Minimum Wage Income
Let’s take a closer look at how much tax an immigrant earning the minimum wage in New Zealand would pay. For an employee working 40 hours per week at the minimum wage rate of $22.70 per hour, their weekly earnings would be:
$22.70 x 40 hours = $908 per week
$908 x 52 weeks = $47,216 per year
This annual income places the worker in the second tax bracket (17.5%) because it exceeds the $14,000 threshold but is below the $48,000 threshold. Now, let’s break down how much tax would be withheld.
Calculating Tax on Annual Income of $47,216
For the first $14,000 of income:
Tax = $14,000 x 10.5% = $1,470
For the remaining $33,216 of income ($47,216 – $14,000):
Tax = $33,216 x 17.5% = $5,812.80
Total Tax Paid
So, the total tax paid for an annual income of $47,216 would be:
$1,470 + $5,812.80 = $7,282.80
This means that an immigrant earning the minimum wage in New Zealand would pay approximately $7,282.80 in taxes over the course of the year.
Other Deductions from Minimum Wage
In addition to income tax, there are other deductions that immigrants need to account for when calculating their take-home pay. The ACC levy is one of these, and it is designed to fund New Zealand’s accident compensation system. This levy is deducted from all earnings, including minimum wage salaries.
The ACC levy for most workers in New Zealand is around 1.39% of their income. For an annual income of $47,216, this would amount to:
$47,216 x 1.39% = $656.10
So, in addition to income tax, an immigrant working on minimum wage would also pay around $656.10 for ACC coverage.
Take-Home Pay
To calculate the immigrant’s take-home pay, we subtract both the income tax and the ACC levy from their total annual income.
Total tax paid: $7,282.80
ACC levy: $656.10
Total deductions: $7,282.80 + $656.10 = $7,938.90
Therefore, the immigrant’s take-home pay after tax and ACC deductions would be:
$47,216 – $7,938.90 = $39,277.10
This means that after tax and ACC deductions, the immigrant working at minimum wage in New Zealand would take home approximately $39,277.10 per year.
Tax Credits and Refunds
One of the aspects that makes the New Zealand tax system appealing is the possibility of tax credits and refunds. While minimum wage workers may not be eligible for significant tax credits, there are some options that could reduce the tax burden. For example, the Independent Earner Tax Credit (IETC) may apply to individuals who earn between $24,000 and $48,000, and who are not receiving other government benefits. The IETC can provide a small reduction in tax liability for those eligible.
Immigrants should also be aware that if they are overtaxed during the year, they can file a tax return at the end of the tax year to receive a refund. This is particularly common if a worker has multiple jobs or if their employer has over-withheld tax.
How to File Taxes as an Immigrant
For most immigrants working in New Zealand, filing taxes is a relatively simple process. If an immigrant is employed, the tax is generally automatically deducted from their pay by their employer through a system called Pay As You Earn (PAYE). However, if the worker has other sources of income or has not had the correct amount of tax deducted, they may need to file a tax return with the Inland Revenue Department (IRD).
The IRD is the government agency responsible for collecting taxes in New Zealand. Immigrants can register for an IRD number, which is necessary for filing taxes and receiving refunds. It is important to keep records of all income, deductions, and any other financial activities throughout the year to ensure accurate tax filings.
Conclusion
In New Zealand, immigrants working at minimum wage will be subject to income tax, ACC levies, and potentially other deductions. The progressive tax system means that the more a worker earns, the higher the tax rate. However, minimum wage workers still contribute to the tax system in a fair and reasonable way, ensuring they can access the benefits of New Zealand’s public services, such as healthcare and accident compensation. By understanding the tax system and how deductions work, immigrants can better plan their finances and ensure they comply with their tax obligations in New Zealand.
