What is a PAYE square-up in New Zealand?

A PAYE square-up is the year-end reconciliation where IRD compares the total PAYE (plus ACC earners' levy) deducted from your wages through the year with your actual tax liability based on your total annual income. If too much was deducted (because PAYE assumes you will earn at that rate all year and you didn't), you get a refund. If too little was deducted (multiple jobs, bonuses not fully taxed, secondary code mismatch), you owe a bill. IRD automatically does this square-up for most employees after 31 March each year and issues an auto-calculation notice.

What is residual income tax (RIT)?

Residual income tax is the tax you owe at year end after subtracting PAYE withheld, WT on schedular payments, RWT on interest, and other tax credits. If your RIT is over $5,000, you become a provisional taxpayer for the following year and must pay provisional tax in instalments (typically three per year on 28 August, 15 January, and 7 May). If RIT is under $5,000, you simply pay the balance by 7 February (or 7 April if you use a tax agent).

When do I have to file an IR3 return?

You must file an IR3 if you have any income that wasn't fully taxed at source. This includes: self-employed or contractor income, rental income, overseas income, capital gains subject to the bright-line test, dividends from overseas shares, or business income. Most wage earners with only PAYE income don't need to file an IR3 and receive an automatic assessment instead. If you're not sure, you can check your myIR account or use IRD's filing requirement tool.

Is there a write-off threshold for small tax bills?

Yes. Under the end-of-year square-up, tax bills of $200 or less (and refunds of similar small amounts) are automatically written off for employees with only PAYE income. This is designed to reduce administration on small rounding differences. If your bill is $201 or more, you must pay by 7 February (or 7 April if using a tax agent). Refunds of $1 or more are paid back to your nominated bank account.

Why might my PAYE be under-withheld?

Common reasons: (1) Two or more jobs where the secondary tax code bracket is lower than your actual combined marginal rate. (2) A bonus or commission that annualised higher than your regular pay. (3) Receiving Working for Families payments and ME code at the same time (you cannot get both). (4) Switching jobs mid-year and each employer treating their portion as though it were your full annual income (under-withholding at the lower brackets twice). (5) Receiving taxable investment income (interest, dividends) where RWT is at a lower rate than your marginal rate.

NZ PAYE Square-Up Calculator

Every March 31, IRD reconciles your year's PAYE against your actual tax liability. If your PAYE was too high (because your employer assumed you would earn at that rate all year and you didn't), you get a refund. If your PAYE was too low (multiple jobs, bonuses, mismatched secondary codes), you owe money. This calculator walks through the year-end reconciliation, identifies residual income tax (RIT), and flags whether you'll need to file an IR3 or become a provisional taxpayer.

Updated April 2026 2026/27 tax brackets, ACC levy at 1.75%, $156,641 cap.

Annual income

Total salary/wage income for the tax year (all jobs combined)

Sum of gross earnings from every employer for the full tax year (1 April to 31 March). Other taxable income (interest, dividends, rent, self-employed income, etc.)

Gross amount before tax. Include interest (before RWT), dividends (gross, including imputation credits), rental income, schedular payments, or net business income.

Tax already withheld

Total PAYE deducted from wages (includes ACC levy)

Sum of PAYE shown on all payslips for the year, or from your income summary in myIR. Other tax credits (RWT on interest, WT on schedular payments, imputation credits)

Tax code & status

Were you eligible for IETC (ME or ME SL code, income $24k-$70k, no WfF/benefit/Super)?

Student loan?

Student loan repayments already deducted (M SL / ME SL / S SL etc.)

How the square-up works

PAYE is calculated by your employer assuming you will earn at your current pay rate for a full 52-week year. This gives a good approximation when you work full-year at one employer. But the system breaks down in these cases:

Partial-year work: If you worked only 6 months of the year, you may have been taxed in a higher bracket than your actual total annual income requires.
Multiple jobs: Each employer only sees the income they pay you. The secondary tax code approximates your combined bracket but isn't exact, especially if your total income crosses into a higher bracket.
One-off bonuses: A large bonus can push PAYE into a higher bracket for that pay period, over-withholding if your annual income stays below that bracket.
Investment income: Interest has RWT deducted at your chosen rate, which may not match your marginal rate. Dividends carry imputation credits that adjust the tax.

Residual Income Tax (RIT) and provisional tax

Your RIT is the balance of tax owed after all withholdings and credits. The key thresholds:

RIT ≤ $200: Written off automatically for most wage earners (no action needed).
$200 < RIT ≤ $5,000: Pay the balance by 7 February (or 7 April via tax agent).
RIT > $5,000: You become a provisional taxpayer for next year. Pay your RIT by 7 Feb/7 April, plus three instalments of next year's provisional tax.

Do I need to file an IR3?

You must file an IR3 if you have any income that wasn't fully taxed at source:

Self-employment / sole trader income
Rental property income (or loss)
Overseas income (offshore dividends, foreign pensions, FIF)
Bright-line property sale proceeds
Shareholder salary from a close company
Income from a partnership
Schedular payments (WT deducted)

If you have only PAYE wage income (even from multiple jobs), you don't need to file. IRD will auto-calculate your square-up and notify you.

Sources

This tool provides an estimate only. IRD's auto-calculation will use actual payroll data submitted via payday filing. Small timing differences and rounding may produce minor variations.

Related calculators

Calculate.co.nz is partnered with Interest.co.nz for New Zealand's highest quality calculators and financial analysis.

All calculators and tools are provided for educational and indicative purposes only and do not constitute financial advice.

Calculate.co.nz is proudly part of the Realtor.co.nz group, New Zealand's leading property transaction literacy platform, helping Kiwis understand the home buying and selling process from start to finish. Whether you're a first home buyer navigating your first property purchase, an investor evaluating your next acquisition, or a homeowner planning to sell, Realtor.co.nz provides clear, independent, and trustworthy guidance on every step of the New Zealand property transaction journey.

Calculate.co.nz is also partnered with Health Based Building and Premium Homes to promote informed choices that lead to better long-term outcomes for Kiwi households.

All content on this website, including calculators, tools, source code, and design, is protected under the Copyright Act 1994 (New Zealand). No part of this site may be reproduced, copied, distributed, stored, or used in any form without prior written permission from the owner.