In New Zealand, a marginal tax rate system is used to tax an individual’s income, i.e. the tax rate increases as one’s income increases. As at today, the marginal tax rates are as follows:
| Taxable income bracket | Applicable tax rate |
| $0 to $14,000 | 10.5% |
| $14,001 to $48,000 | 17.5% |
| $48,001 to $70,000 | 30% |
| $70,001 to $180,000 | 33% |
| > $180,000 | 39% |
The first three thresholds have not changed since 1 October 2010, while the current top tax rate of 39% has applied from the 2021 / 2022.
With the rate of wage inflation being a hot topic at the moment, and a general election due later this year, we adjusted the marginal tax rates for inflation since October 2010 to see what they would look like – particularly given this is an election promise that might be made. The marginal tax thresholds would look something along the lines of:
| Taxable income bracket | Applicable tax rate |
| $0 to $21,000 | 10.5% |
| $21,001 to $72,000 | 17.5% |
| $72,001 to $105,000 | 30% |
| $105,001 to $270,000 | 33% |
| > $270,000 | 39% |
With the average salary in New Zealand being around $62,000. Under the current marginal tax rates, this results in $11,620 of income tax payable. However, applying the adjusted rates above, $9,380 would be payable – a difference of over $2,000. For someone on a $100,000 salary, the difference in annual tax payable between the thresholds is almost $4,400 a year.
How much less tax would you be paying?
