How You Can Reduce Your Tax Bill
NZ Resident Individual Tax Rates
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10.5% on income up to $14,000
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17.5% on income from $14,001 to $48,000
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30% on income from $48,001 to $70,000
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33% on income from $70,001 to $180,000
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39% on income over $180,000
Calculation for $70,000
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First $14,000 × 10.5% = $1,470
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Next $34,000 (14,001–48,000) × 17.5% = $5,950
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Next $22,000 (48,001–70,000) × 30% = $6,600
Total income tax = $14,020
Effective Tax Rate
- $14,020 ÷ $70,000 = 20.0%
| $120,000 | 0.28 | $33,600 |
| $70,000 | 0.2 | $14,000 |
| $50,000 | 0.28 | $14,000 |
| $28,000 | ||
| Saving of | $5,600 |
1. Sole Trader / Partnership
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Method: You draw money directly from the business bank account for personal use.
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Accounting treatment: Treated as drawings, not wages.
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Tax impact: You pay income tax on the total business profit, not on what you actually withdraw. ACC levies also apply.
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Tip: Keep a separate business account and record all drawings properly.
2. Company (Limited Liability)
You have two main options:
a) Salary / Wages
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You put yourself on the company payroll, like any employee.
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The company deducts PAYE, KiwiSaver, and ACC.
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The salary is deductible to the company and taxable to you personally.
b) Shareholder Drawings / Dividends
- Most owners use a mix: a regular salary for living expenses, plus dividends for profit distribution.
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Paid out of after-tax company profits.
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Requires filing imputation credits (if available) to reduce double taxation.
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Dividends are not deductible to the company, but they may carry imputation credits to offset your personal tax.
Most owners use a mix: a regular salary for living expenses, plus dividends for profit distribution.
3. Trust
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You may be a beneficiary.
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The trust can distribute income to you (recorded as beneficiary income).
- Tax is paid at either the trustee rate (39%) or your personal rate depending on distribution.
4. Key Considerations
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Cash flow: Ensure you leave enough for tax obligations, GST, and expenses.
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Tax planning: Work with an accountant to balance salary vs. dividends for best tax efficiency.
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Compliance: Always document drawings, salaries, or distributions correctly (board resolutions for dividends, trustee resolutions for trusts, etc.).
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ACC & KiwiSaver: Salaries attract both; dividends don’t.
Practical Example (NZ Company Owner):
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Pay yourself a $70,000 annual salary through PAYE (company expense).
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At year-end, if profit remains, declare a $20,000 dividend (attach imputation credits if possible).
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You get steady income and tax efficiency.