NEW TAX RATES IN NZ

New tax rates in NZ have reshaped the top end of the personal and trustee tax landscape over the past few years, and it’s easy to lose track of exactly what’s changed and what hasn’t. Whether you’re an individual earning above $180,000, a trustee, or weighing up your business structure, the settings below outline where things currently stand.

Key Points – 30 Second Read

• A 39% personal tax rate has applied since 1 April 2021 on income over $180,000. It’s an individual threshold – not a household one – and it only applies to the portion of income above $180,000.
• The trustee tax rate rose from 33% to 39% from 1 April 2024, aligning it with the top personal rate.
• The personal tax brackets below the 39% threshold were adjusted from 31 July 2024 and remain unchanged for the current tax year.
• Company tax stays at 28% — the gap between the company, trust, and top personal rates is where tax planning around structures matters most.

The Impact of the New Tax Rates

New tax rates in NZ: what do they mean for you? Less dollars in your pocket, basically — at least at the top end. A 39% personal tax rate has applied since 1 April 2021 on personal income exceeding $180,000 per year, and the trustee tax rate was increased from 33% to 39% from 1 April 2024.

• This applies to individuals only, e.g. an individual receiving a salary of $200,000 pays an additional $1,200 tax each year on the $20,000 above the threshold (a jump from the 33% rate to 39%, i.e. an extra 6 cents in the dollar on that portion).
• It does not apply to combined household income — e.g. if you and a partner each earn $100,000, neither of you pays any more tax as a result of this rate. There’s no aggregation of spousal or partner income in New Zealand’s personal tax system.
• It’s applied progressively, i.e. it is not a blanket rate on all your income. Income under $180,000 is charged at lesser rates that scale up from 10.5% to 33%, so only the income above $180,000 is taxed at 39% — the rest is still taxed at the lower brackets it always was.
• Company tax (28%) and the top personal/trustee rate (39%) remain different, which is where most of the tax planning interest around structures sits.

A Worked Example

Say you’re an individual earning $220,000 in salary. You don’t pay 39% on the whole amount — only on the $40,000 that sits above the $180,000 threshold. The rest is taxed progressively through the lower brackets, the same as anyone else’s income up to that point. It’s a common misunderstanding that crossing a threshold means your entire income jumps to the higher rate; in a progressive system, it never does.

Why Trustees Felt the Hit

Before 1 April 2024, trustees paid a flat 33% on trust income, which was actually lower than the top personal rate of 39%. This arguably created an incentive to route income through a trust rather than earn it personally. Aligning the trustee rate with the top personal rate closed that gap. Trusts that were set up partly around that historical rate differential may be worth revisiting, particularly if the original reasoning for the structure no longer holds.

Current Personal Tax Brackets

The personal income tax brackets were adjusted from 31 July 2024 and remain the current settings:

• 10.5% up to NZ$15,600
• 17.5% on NZ$15,601 to NZ$53,500
• 30% on NZ$53,501 to NZ$78,100
• 33% on NZ$78,101 to NZ$180,000
• 39% on NZ$180,001+

These are the current thresholds for the tax year — no further change to personal rates has been legislated at this stage. If you’re an employee, these brackets are what your PAYE deductions are based on; if you’re self-employed or receive income that isn’t taxed at source, they’re what your provisional and terminal tax calculations rest on.

The Importance of Structures

These settings emphasise how important it is to have the right business and/or investment structures in place. There’s ongoing tax planning interest in the gap between the trust tax rate (39%), the company tax rate (28%), and the top personal tax rate (39%) — the right structure depends entirely on your own circumstances and plans.

A few situations where this gap tends to matter in practice:

• Retained earnings: A company only pays 28% on profits it retains, versus the 39% a trust or high-earning individual would pay on the same income — though tax is ultimately payable when profits are distributed as dividends, subject to imputation credits.
• Timing of distributions: Trustees have some flexibility over when and to whom trust income is distributed, which can matter where beneficiaries are on lower personal tax rates than the trustee rate.
• Reviewing older structures: A structure set up years ago around a different rate environment (e.g. when the trustee rate was 33%, below the top personal rate) may no longer serve the purpose it was designed for. (See this article if you are wondering about  your investment property and structure)

None of this is a one-size-fits-all answer — the best structure depends on your income levels, how income is earned, and your longer-term plans for the funds involved.

Please Review My Tax Position

If you would like a review of your tax position and structure, please contact us or call us on 09 973 0706, line 2. Worried about crypto tax? We can help you with that too.