Independent Earner Tax Credit (IETC) Guide — NZ $520 Tax Credit
the Independent Earner Tax Credit (IETC) in New Zealand — the tax credit of up to $520 per year for the individual taxpayers with the income between $24,000 and $48,000. The guide covers the eligibility criteria, the abatement, and how to claim the IETC through the tax code or the annual tax return.
IETC Eligibility and Amount
The Independent Earner Tax Credit (IETC) provides up to $520 per year ($10 per week) for the individual taxpayers who: (a) have the annual income between $24,000 and $48,000, (b) do not receive the main welfare benefits (the Jobseeker Support, the Sole Parent Support, the Supported Living Payment), (c) do not receive the NZ Super, the Veterans Pension, or the Student Allowance, and (d) are not the full-time students receiving the Student Allowance. The maximum IETC of $520 applies between $24,000 and $44,000 of the income, and the credit abates at 13% of the income above $44,000, reaching zero at $48,000.
Claiming the IETC
The IETC can be claimed through the ME tax code (the "M" code with the "E" for the IETC) in the PAYE system. The employers then deduct the reduced tax amount each pay period. Alternatively, the taxpayer can claim the IETC through the annual tax return (the "Personal Tax Summary" or the "PTS") by filing the IR3 or the IR3 return. The IRD will automatically calculate the IETC entitlement for the eligible taxpayers based on the income information reported through the PAYE system and the other sources.