Independent Earner Tax Credit (IETC) in New Zealand, 2026–27

How much is the IETC in 2026–27?

The IETC is worth $520 a year at most, which works out to $10 a week, $20 a fortnight or $43.33 a month. Income is your total income before tax for the year from 1 April to 31 March, not including losses brought forward from earlier years. These thresholds have applied since 31 July 2024 and are unchanged for 2026–27 (1 April 2026 to 31 March 2027).

Who can get the IETC

You must be a New Zealand tax resident with income in the range. Inland Revenue counts salary and wages, Student Allowance, Veterans' weekly compensation, ACC compensation, paid parental leave, investment income, self-employment, and business income, including business run through a trust. So someone on parental leave or ACC for part of the year can still qualify.

You cannot get the IETC for any month in which you or your partner are entitled to and receive Working for Families, or you receive an income-tested benefit, NZ Super, a Veteran's Pension, or an overseas equivalent of any of these.

• The partner test applies only to Working for Families. If your partner receives NZ Super but there is no Working for Families, you can still qualify on your own income.
• The credit is individual. Two partners each earning in the range can each claim the full amount.
• Non-residents cannot claim it, even on New Zealand wages.

The whole-month rule

Inland Revenue works the IETC out on whole months. If you receive Working for Families, a benefit or NZ Super at any point in a month, you get no IETC for that entire month. Someone who received Working for Families for three months of the year can only claim for the other nine months.

Example: Sam receives a benefit from April to June, 3 months, then starts a $50,000-a-year job in June. Sam is eligible for the IETC only for July to March, 9 of the 12 months. Inland Revenue's guidance for people moving off a benefit is to give the new employer an IR330 with code M when starting the job in the month the benefit stopped. Then give a second IR330 with ME after the last pay in that month, so the credit starts the month after the benefit ends.

How to claim the IETC: ME code, assessment or IR3

The way you claim depends on your income type. Salary and wage earners get it each payday; other income gets it after 31 March.

• Employees earning at least $24,000 from the main job with total income $24,000–$70,000: give your employer an IR330 with ME, or ME SL if you have a student loan.
• Main job pays under $24,000 but total income is in range: Inland Revenue says either take the credit at the end of the year or apply for a tailored tax code.
• Schedular payments or investment income (taxed before you are paid): the end-of-year income tax assessment includes the IETC automatically if you qualify.
• Self-employed income (not taxed before you are paid): claim on your Individual tax return (IR3) and state the number of months you were eligible.

What ME does to your pay

On $900 a week ($46,800 a year) in 2026–27, code M deducts $152.25 in tax and levy and ME deducts $142.25. That is $10.00 more in your pay every week. Payroll annualises each pay, so ME gives the full credit to anyone whose annualised pay is in the full-credit band, even if they only work part of the year.

Over a full year at $50,000, the credit lifts take-home pay (after income tax and the 1.75% ACC levy) from $41,467 to $41,987. If you were entitled but used M, nothing is lost: the assessment after 31 March pays the credit as part of your refund.

The abatement zone: a 44.75% marginal rate

Between $66,000 and $70,000, each extra dollar costs 30% income tax, 1.75% ACC levy and 13 cents of lost IETC. That is an effective marginal rate of 44.75% on that $4,000 slice. Above $70,000 the rate drops back to 31.75% until $78,100.

It is not a trap that leaves you worse off overall: earning more always increases take-home pay. But it matters for salary negotiations and overtime decisions in that band. If a pay rise takes you past $70,000, switch from ME to M straight away. Otherwise ME keeps applying up to $10 a week of credit you are not entitled to, which becomes a bill on your assessment.

Common IETC mistakes

Most IETC problems show up as an unexpected bill after 31 March.

• Keeping ME after starting Working for Families. Payments start, but the payroll code does not change by itself.
• Using ME on a second job. ME belongs on the main income only; second jobs use a secondary code.
• Forgetting other income. A main job of $60,000 plus $12,000 of rental or contract income takes total income past $70,000, so no IETC is due even though the wage alone qualifies.
• Starting a new job mid-month. Because the credit works in whole months, a job change can cause small over- or under-payments. Inland Revenue suggests a tailored tax code if this keeps happening.
• Relying on old figures. Before 31 July 2024 the credit stopped at $48,000. People earning between $48,000 and $70,000 may not have received the full credit for the 2024–25 year because the thresholds rose part way through it.