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How Much Tax Should You Pay On Your Summer Job?

Categories   News & Updates

A summer job can be the perfect solution for those of us looking to make a few extra bucks during the warmer months. And while a new cash flow is always great, it can be confusing to work out how much tax you should be paying, depending on your situation.

If you’re considering a summer job and wondering how much tax will be deducted, this article will look some of the types of workers who typically take on a summer job, and help clarify how much tax you’ll pay.

Students

With summers largely free from school, thousands of New Zealand students opt to take on a summer job every year. Working in the summer break is a great chance to pick up new skills, or gain experience in your chosen field — with the obvious bonus of extra money. But before you commit to working all summer, you’ll want to know how much tax you’ll pay on your summer earnings.

Before you start your job, you’ll need to fill out a tax code declaration form, known as an IR330. This form tells the IRD your tax code so they’ll tax you at the correct rate. As a student, you’ll likely be either taxed at a rate of 10.5% (for total income up to $14,000) or 17.5% (for total income over $14,000 and up to $48,000). But if you’re unsure of your tax code, don’t stress! The IRD has a simple tax code decision tree to help you pick the correct tax code.

Even if you think you’ve selected the right tax code, many New Zealand students are over-taxed due to tax code mistakes, or the IRD believing they are earning more than they really are — which is often the case with summer jobs. The good news is that if you were over-taxed, you’re entitled to get that cash back in a tax return, which we can help you with.

Seasonal workers

New Zealand needs a big seasonal workforce to help out with tasks such as orchard and vineyard harvests, and it can be a great way to earn cash for both New Zealanders and workers from abroad. As a seasonal worker you’ll need to pay tax on your earnings, though your tax code will differ depending on your status.

If you’re working in New Zealand as a recognised seasonal worker under the Department of Labour Recognised Seasonal Employers scheme your tax code will likely be NSW. This means your income will be taxed at a flat rate. This code is for recognized seasonal workers who are non-resident for New Zealand tax purposes, though you do pay New Zealand tax on your New Zealand income.

For a New Zealand resident working as a seasonal worker, you’ll need to find your tax code on the IRD site. Here you’ll be able to find your code after you answer questions about whether your seasonal work is your primary or secondary source of income, whether you have a student loan and how much you expect to earn.

The good news is that for both New Zealand residents and overseas workers, you may be eligible for a tax refund. This can happen for lots of different reasons, including working under the wrong tax code, students working over summer but being taxed at a full-time rate, or workers who started working part way through the year accidentally being taxed for the full year. 

Full-time workers looking for extra cash flow

With the cost of living skyrocketing, more and more of us are taking on a second job to help make ends meet or to boost savings. And, if you have more than one source of income you’ll need a secondary tax code.

Luckily for us, the IRD has made it easy to figure out your secondary tax code with their online tool. Here you simply tell the tool whether or not you have a student loan, and which bracket your total annual income from all sources falls into. You can also find out your code from the table below:

Annual Income            Secondary Tax Code (with student loan)       Secondary tax rate

$14,000 or less                                         SB       (SB SL)                                                          10.5%

between $14,001 and $48,000           S          (S SL)                                                             17.5%

between $48,001 and $70,000           SH       (SH SL)                                                         30%

over $70,000                                              ST       (ST SL)                                                           33%

While you may have heard that you’ll end up paying a big chunk of your income in secondary tax, this is not necessarily the case due to New Zealand residents being taxed on a progressive scale. This means that unless your combined income takes you into a higher tax bracket, you’ll pay the same rate.