Navigating the Myth of Extra Taxes for a Second Job in New Zealand
When it comes to taking on additional employment in New Zealand, the topic of secondary tax often looms with a sense of dread. There’s a prevailing myth that you’ll be hit with higher taxes for having a second job – but let’s clear up the confusion.
Understanding Secondary Tax
- Myth Busting: The notion of paying extra tax on secondary income is fundamentally a myth. Despite widespread belief, secondary tax rates do not mean you will pay more tax overall.
- How It Works: When you take on a second job, tax is deducted at a rate that accounts for your combined income from both jobs. This may appear higher initially, but it aligns with your correct tax bracket to avoid underpaying tax throughout the year.
End of Year Tax Assessment
- Reconciliation: At the end of the financial year, Inland Revenue performs an assessment. If you’ve overpaid your taxes because of the secondary tax rate, you will likely be entitled to a refund.
- Tax Codes Reality: Secondary tax only applies to the secondary source of PAYE salaried income. It does not mean an increase in the tax amount you owe at the end of the financial year.
In summary, if you’re considering a second job in New Zealand, do not let tax fears hold you back. You will only pay the tax owed based on your total income. Should overpayment occur, you can anticipate a refund once your taxes are reconciled. Stepping into a second role should be financially strategic, not daunting. If you have further concerns, consulting with a tax expert might provide you additional peace of mind.
Here is a calculator to help you understand how the tax system works with a second job
Current tax rate from IRD
| Income Range | Tax Rate |
|---|
New Zealand Tax Calculator
Total Income: 0.00 NZD
Primary Tax: 0.00 NZD ()
Primary Net Income: 0.00 NZD
Secondary Tax: 0.00 NZD ()
Secondary Net Income: 0.00 NZD
Total Net Income: 0.00 NZD
Consider a scenario wherein your primary occupation yields an income of $30,000, and you earn an additional $30,000 from a secondary job. Upon incorporating these figures into the aforementioned form, one will observe that the tax levied on the primary income amounts to $4,270, while the tax on the secondary income totals $6,750. At first glance, it may appear as though the secondary job incurs a higher tax, but this would be a misconstrued interpretation.
To further elucidate this point, envision a situation where your primary job provides an income of $60,000. Incorporating this into the ‘Primary Job Income’ section from the form above will result in an identical net income and corresponding tax amount. Now, compare this with the scenario of earning $30,000 from each job.
Do you perceive a difference? Indeed, there is none. The tax structure is designed to be equitable, ensuring that your net income, irrespective of its sources, is taxed uniformly.
