At the end of the tax year we are frequently asked why an employee has a tax bill ( never a refund !!) to pay.  Naturally they find this very frustrating and would rather pay more tax each pay period than be landed with a tax bill.

Under New Zealand’s current tax system we operate on the more we earn the greater the percentage of tax payable.  If we had a flat tax system then we would never have a square up at the end of each tax year as every dollar earned would be at the same tax rate.

Each pay period is taxed on the basis that what you earn in that pay period is the same for every pay period.  As we know our pay can vary from time to time with overtime, commission and bonus payments etc.   Also, depending on how the dates fall, some employees can have 27  fortnightly or 53 weekly pay periods during the year. All these factors can affect the amount of tax you have paid.

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