You negotiated a $5,000 pay rise — congratulations. But before you start spending it, here’s the uncomfortable question: how much of that $5,000 actually lands in your bank account?

In New Zealand, the answer is somewhere between 55 and 77 cents in the dollar. This guide shows you exactly where the rest goes, with worked examples.

55–77¢ typically kept from each extra dollar

$3,412.50 kept from a $5,000 raise at $70k

44.75% effective marginal deductions in the IETC zone

In New Zealand you keep roughly 55–77 cents of every extra dollar from a pay rise. Only the part of the raise that falls inside each tax bracket is taxed at that bracket’s rate.

A $5,000 raise from $70,000 to $75,000 leaves you about $3,413 better off per year after PAYE and ACC — 68 cents in the dollar. The worst zone is $66,000–$70,000, where the Independent Earner Tax Credit abates and you keep only about 55 cents in the dollar.

A new tax bracket never applies to your entire salary. The real answer depends on the brackets crossed, ACC, student loan, KiwiSaver and any tax-credit abatement.

The one idea that explains everything: marginal vs effective tax

New Zealand taxes income in slices (brackets). Your pay rise is taxed at your marginal rate — the rate applying to your top slice of income only — not your average rate. Your effective rate (total tax divided by total income) is always lower.

Marginal rate The rate applied to the next dollar you earn. This is the starting point for estimating what you keep from a raise.

Effective rate Total income tax divided by total income. It blends all the lower bands you have already passed through.

Example: if you earn $70,000, your next dollar sits in the 30% PAYE band. That does not mean your entire $70,000 is taxed at 30%.

How is a pay rise taxed in NZ? The five slices

1. PAYE income tax. The 2026/27 brackets are 10.5% to $15,600; 17.5% to $53,500; 30% to $78,100; 33% to $180,000; and 39% above $180,000.[1] See the full brackets guide.
2. ACC earners’ levy. 1.75% of earnings, capped at $156,641 of liable earnings (maximum $2,741.22 a year).[3]

• Student loan. 12% of every dollar above $24,128 a year, but only if you have a loan.[4]
• KiwiSaver. Your chosen rate (default 3.5%); it is not a tax, but your own savings.
• Independent Earner Tax Credit abatement. This affects the $66,000–$70,000 zone and is explained below.[2]

10.5% $0–$15,600

17.5% $15,601–$53,500

30% $53,501–$78,100

33% $78,101–$180,000

39% $180,001+

What do you actually keep from a pay rise?

The table isolates what changes when salary rises. Unless a row says otherwise, the figures include PAYE and ACC only.

Pay rise	Extra PAYE	Extra ACC	Other	You keep / year	Keep
$50,000 → $55,000 $5,000 raise	$1,062.50	$87.50	–	$3,850.00	77%
$70,000 → $75,000 $5,000 raise	$1,500.00	$87.50	–	$3,412.50	68%
$90,000 → $95,000 $5,000 raise	$1,650.00	$87.50	–	$3,262.50	65%
$66,000 → $70,000 $4,000 raise	$1,200.00	$70.00	$520 IETC lost	$2,210.00	55%
$175,000 → $185,000 $10,000 raise	$3,600.00	$0 ACC capped	–	$6,400.00	64%
$55,000 → $60,000 with student loan	$1,500.00	$87.50	$600 loan	$2,812.50	56%
$70,000 → $75,000 with 3.5% KiwiSaver	$1,500.00	$87.50	$175 KiwiSaver	$3,237.50	65%

Worked example: a $5,000 raise from $70,000 to $75,000

PAYE at $70,000

10.5% on first $15,600	$1,638.00
17.5% on next $37,900	$6,632.50
30% on remaining $16,500	$4,950.00
Total PAYE at $70,000	$13,220.50

What changes at $75,000?

PAYE at $75,000 is $14,720.50. The difference is $1,500 — exactly 30% of the $5,000 raise, because the whole raise sits in the 30% bracket.

Extra PAYE	$1,500.00
ACC: $1,225 → $1,312.50	+$87.50
Total extra deductions	$1,587.50
Take-home gain	$3,412.50 / year

$284.38 per month

$131.25 per fortnight

31.75% marginal deductions

The marginal “tax” on the raise is 31.75%: 30% PAYE plus the 1.75% ACC earners’ levy.

The $66,000–$70,000 trap: where a raise is effectively taxed at 44.75%

The Independent Earner Tax Credit (IETC) is worth a full $520 a year for eligible incomes from $24,000 to $66,000. It then abates at 13 cents per dollar over $66,000, reaching zero at $70,000.[2]

30% PAYE + 13% lost IETC + 1.75% ACC = 44.75%

That means each extra dollar in this band faces an effective marginal deduction rate of 44.75%.

Worked example: $66,000 to $70,000

Gross raise	$4,000.00
Extra PAYE	−$1,200.00
IETC lost	−$520.00
Extra ACC	−$70.00
You keep	$2,210.00 (55%)

Tax-code tip: make sure you’re on the ME tax code to receive IETC during the year.

Student loans take another 12 cents in the dollar

Repayments are 12% of every dollar earned above $24,128.[4] A $5,000 raise for a borrower means $600 more in loan repayments.

On a raise from $55,000 to $60,000, the employee keeps only $2,812.50 (56%) after $1,500 extra PAYE, $87.50 extra ACC and $600 more student-loan repayment. The upside is that the raise clears the loan faster. See how long it could take to pay off a student loan in NZ.

KiwiSaver shrinks your pay packet, but it is not tax

A 3.5% contribution takes $175 of a $5,000 raise — but it goes into your retirement savings, and your employer matches it. Frame it as a pay rise to your future self.

In your bank account On a $70,000 to $75,000 raise, PAYE and ACC leave $3,412.50. A 3.5% KiwiSaver contribution reduces current take-home by another $175. $3,237.50 Current-year cash gain after PAYE, ACC and 3.5% KiwiSaver.

In your KiwiSaver The $175 is not lost to tax. It is redirected into long-term savings, alongside the employer contribution. $175 Employee contribution from this $5,000 raise.

Why do some big earners keep a bigger share of a raise?

ACC stops at $156,641 of liable earnings, so raises above that face no extra ACC.[3]

$175,000 → $185,000

On this $10,000 raise, extra PAYE is $3,600 because the raise crosses from the 33% band into the 39% band. Extra ACC is $0 because both salaries are already above the cap.

You keep $6,400, or 64% of the raise.

Can a bonus or lump-sum raise look worse than it really is?

Yes. One-off bonuses can be over-taxed in the pay period because payroll annualises the payment. Inland Revenue squares it up at your end-of-year assessment and refunds any over-deduction.

See how bonuses and commission are taxed in NZ.

What if the extra income is from a second job?

Secondary income is taxed at the rate for the band your total income lands in — the same maths, but with a different tax code: SB, S, SH, ST or SA.

Use the second-job tax guide to choose the rate that best reflects your combined income.

Can a pay rise ever leave you worse off?

No — not because of PAYE alone. New Zealand’s progressive system means only the dollars above each threshold are taxed at the higher rate, so a raise cannot reduce your take-home pay on PAYE alone.

Important exception: families receiving Working for Families face abatement as income rises. Combined with 30% tax, a 12% student loan and 1.75% ACC, the effective marginal rate can rise above 70% in that zone.

Read the guide to Working for Families tax credits in NZ.

Bracket creep quietly shrinks every raise

If your raise only matches inflation but thresholds do not move, more of your income drifts into higher brackets. This is fiscal drag: your nominal salary rises, but a larger share may be taxed at a higher marginal rate.

See the deeper guide to fiscal drag and bracket creep in NZ.

How can you calculate exactly what you will keep?

Extra take-home = raise − (raise × marginal PAYE rate) − (raise × 1.75% ACC, if under the cap) − (raise × 12% student loan, if applicable) − (raise × KiwiSaver rate) − (IETC abatement, 13% in the $66k–$70k band)

Use this in five checks

1. Identify where your current salary and new salary sit in the PAYE bands.
2. Split a raise that crosses a threshold, because each slice gets a different rate.
3. Add ACC only on earnings below the $156,641 liable-earnings cap.
4. Add student-loan deductions and KiwiSaver at your own settings.
5. Check IETC abatement if any of the raise falls between $66,000 and $70,000.

Skip the maths

Run both salaries through the NZ PAYE Calculator and compare the annual, monthly, fortnightly or weekly take-home figures.

Five ways to keep more of your raise

1. Check your tax code. Use ME, not M, if you qualify for the IETC; add SL only if you have a loan. Review the NZ tax-code guide.
2. Confirm your employer’s KiwiSaver match is actually being paid. It is part of the value of your overall remuneration.
3. Claim the donation tax credit. You can receive 33.33% back on eligible charitable donations. See the donation tax-credit guide.
4. Check your prescribed investor rate (PIR). Investment income through portfolio investment entity funds is capped at 28%. Read about KiwiSaver tax and PIR.
5. See what $100k really looks like after tax before negotiating toward it. Use the $100k salary in New Zealand breakdown.

Key takeaways

• You keep 55–77 cents of every $1 of a pay rise in NZ.
• Only the part of the raise inside each bracket is taxed at that bracket’s rate — a higher bracket never taxes your whole salary.
• The $66k–$70k band is the worst: 44.75% effective marginal rate due to IETC abatement.
• Student loans add 12%; KiwiSaver reduces take-home but it is your savings.
• Above $156,641, no extra ACC is due on a raise.

Frequently asked questions

Sources

1. Inland Revenue — Tax rates for individuals.
   ird.govt.nz: tax rates for individuals
2. Inland Revenue — Independent earner tax credit (IETC).
   ird.govt.nz: Independent Earner Tax Credit
3. ACC — Calculating your levies. Source for the 1.75% earners’ levy and $156,641 liable-earnings cap.
   acc.co.nz: calculate your levies
4. Inland Revenue — Repaying my student loan when I earn salary or wages. Source for the 12% repayment rate and $24,128 threshold.
   ird.govt.nz: salary and wage student-loan repayments

Last updated October 2026.
General information only, not personalised tax advice.