How is tax calculated on a bonus in NZ?

Bonuses and other extra emoluments are taxed using the 'annualisation method'. Add the bonus to the employee's expected annual income, work out the marginal tax rate that would apply to that combined amount, and apply that rate to the bonus. For example, a $5,000 bonus paid to someone earning $70,000 (already in the 30% bracket) is taxed at 30% if the bonus keeps them in that bracket, or partly at 30% and partly at 33% if it pushes them into the next bracket.

What counts as an extra emolument?

Extra emoluments include performance bonuses, productivity payments, retrospective pay rises (back-pay), gratuities, ex gratia payments, payments in lieu of notice, redundancy compensation (over the $11,000 exemption), and one-off lump sums. Sales commission can be either ordinary salary or extra emolument depending on whether it's a regular part of pay (ordinary) or an irregular bonus (extra emolument). Annual leave taken is NOT an extra emolument.

Is KiwiSaver and ACC deducted on bonuses?

Yes. Bonuses and commissions are part of gross earnings, so KiwiSaver employee contributions, employer contributions, ESCT, and ACC earners' levy all apply. Student loan deductions also apply (12% over the threshold). The 'extra emolument' classification only affects the income tax rate, not the other deductions. The bonus IS subject to standard KiwiSaver employer contribution rules unless the employee is on a contributions holiday.

Why is my bonus taxed at a different rate to my salary?

PAYE is normally calculated as if you'll earn that pay rate for 52 weeks. A bonus added to a normal pay period would push your 'annualised' weekly income way above your real annual income, over-taxing the bonus. The extra emolument method fixes this by treating the bonus separately and applying the correct marginal rate based on actual expected annual income. The result is closer to your true tax liability and reduces the year-end square-up.

NZ Bonus & Commission Tax Calculator 2026/27

One-off payments like performance bonuses, sales commissions, back-pay, and ex gratia amounts are taxed using NZ's extra emolument method, not normal PAYE tables. This calculator annualises the bonus across your expected income to find the correct marginal rate, applies it correctly across multiple tax brackets if needed, and shows the full breakdown including KiwiSaver, ACC and student loan deductions on the bonus.

Updated April 2026 Uses 2026/27 income tax brackets (10.5%/17.5%/30%/33%/39%) + 1.75% ACC.

The extra emolument method

NZ's PAYE system normally calculates tax as if every pay period continues for the rest of the year. A $10,000 bonus paid on top of a regular fortnightly pay would over-tax massively if it went through normal PAYE tables. The extra emolument method fixes this by:

Adding the bonus to the employee's expected annual income
Calculating tax on the combined amount using progressive brackets
Subtracting the tax on the regular salary alone
The difference IS the tax on the bonus

When it crosses brackets

If the bonus pushes the employee from one bracket into another, the calculation correctly splits the bonus between the rates. For example, a $20,000 bonus to someone on $70,000:

$8,100 of the bonus stays in the 30% bracket ($70k → $78,100)
$11,900 of the bonus moves into the 33% bracket ($78,100 → $90,000)
Total bonus tax: $8,100 × 30% + $11,900 × 33% = $2,430 + $3,927 = $6,357 (effective rate 31.8%)

Other deductions still apply

The extra emolument method only affects income tax. KiwiSaver, ACC, ESCT, and student loan deductions all apply to the bonus as if it were ordinary salary. The bonus increases your gross earnings for the period, which increases your KiwiSaver employee/employer contributions and ACC levy that period.

Special cases

Redundancy: The first $11,000 of redundancy is tax-exempt; the excess is taxed as extra emolument. Use the dedicated Lump Sum & Redundancy Tax Calculator.
Back-pay over multiple years: Can be allocated to the years it would have been earned (reduces tax if employee was in lower brackets in past years).
Director's fees paid as bonus: Treated as schedular payment, not extra emolument. Use the Schedular Payments Calculator.
Bonuses to non-residents: Subject to NRWT (non-resident withholding tax) at different rates.

NZ Bonus & Commission Tax Calculator 2026/27

Bonus details

Employee details

Bonus Tax Result

The extra emolument method

When it crosses brackets

Other deductions still apply

Special cases

Sources

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