When you receive a redundancy payment, bonus, holiday pay advance, or any other lump sum, the IRD requires tax to be calculated using the annualised income method - not your standard pay period rate. This means your lump sum is almost always taxed at a higher rate than your regular pay. This calculator applies the current 2026/27 IRD lump sum PAYE rates to give you a precise breakdown of what you will actually receive.
Select your payment type, enter your annual salary and lump sum amount, and the calculator will step through the exact IRD methodology: determining your annualised income, adding the lump sum, selecting the correct rate bracket, and calculating your net payment after all deductions.
| Item | Amount |
|---|---|
| Gross Lump Sum | - |
| PAYE Tax Deducted | - |
| KiwiSaver Deducted | - |
| Student Loan Deducted | - |
| Net Amount Received | - |
| Effective Tax Rate on Lump Sum | - |
In New Zealand, lump sum payments such as bonuses, redundancy payments, holiday pay advances, and exit inducements are not taxed at your standard pay period rate. Instead, the IRD requires employers to use the annualised income method to determine the correct PAYE rate to apply to the lump sum. This is designed to tax you at the marginal rate you would reach if you earned that amount as regular income across the year.
The calculation follows these steps as prescribed by IRD:
The following rates apply to lump sum payments for the 2026/27 tax year. The rate including ACC earners' levy applies to most extra pays. The rate excluding ACC levy applies to redundancy and retirement payments, and to any payment where the total (annualised income plus lump sum) exceeds $156,641.
| Annualised Income + Lump Sum | Rate (incl. ACC levy) | Rate (excl. ACC levy) |
|---|---|---|
| $0 - $15,600 | 12.25% | 10.50% |
| $15,601 - $53,500 | 19.25% | 17.50% |
| $53,501 - $78,100 | 31.75% | 30.00% |
| $78,101 - $156,641 | 34.75% | 33.00% |
| $156,642 - $180,000 | 33.00% | 33.00% |
| $180,001 and over | 39.00% | 39.00% |
Redundancy and retirement payments are treated differently from regular extra pays in two important ways. First, the ACC earners' levy does not apply - so the lower "excluding ACC" rate is always used. Second, KiwiSaver deductions are not made from redundancy payments. This means a redundancy recipient always uses the right-hand column of the rate table above, regardless of their total income level.
Example: An employee earning $75,000 per year receives a $15,000 redundancy payment. Their annualised income ($75,000) plus the lump sum ($15,000) totals $90,000, which falls in the $78,101-$156,641 bracket. Because it is a redundancy payment, the rate excluding ACC applies: 33%. PAYE = $15,000 × 33% = $4,950. Net redundancy received = $10,050.
For bonuses and other extra pays, the ACC earners' levy is included in the rate unless the total exceeds the ACC maximum earnings threshold of $156,641. This means a bonus paid to someone earning less than $156,641 will use the higher "including ACC" rate column. A bonus that pushes the total above $156,641 switches to the lower rate for the excess portion.
Example: An employee earning $55,000 receives a $10,000 bonus. Total = $65,000, falling in the $53,501-$78,100 bracket. Because it is a bonus and the total is under $156,641, the rate including ACC applies: 31.75%. PAYE on bonus = $10,000 × 31.75% = $3,175. Net bonus received (before KiwiSaver and student loan) = $6,825.
KiwiSaver deductions are made from most lump sum payments at the same rate as the employee's normal pay. The notable exception is redundancy - no KiwiSaver is deducted from redundancy payments. Student loan deductions are also made from lump sums: for employees with a secondary job student loan tax code, 12% is deducted from every dollar of the lump sum; for main job codes, 12% applies to the amount over the annual repayment threshold of $24,128.
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