PAYE on a bonus, taxed as an extra pay.
Net bonus in hand
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PAYE
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ACC levy
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KiwiSaver
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Your breakdown
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Why a bonus feels heavily taxed
A bonus, in Inland Revenue’s language, is an extra pay or lump-sum payment, and it is not taxed at some flat penalty rate, despite how it feels when the net amount lands. It is taxed at the marginal rate that applies once the bonus is stacked on top of your regular salary. Your salary has already used up the lower brackets, so the bonus is taxed in whatever band it lands in, often the 30 or 33 percent band, sometimes the top 39 percent. This calculator works out the PAYE on the bonus by taxing your salary-plus-bonus and subtracting the tax on your salary alone, which isolates exactly the extra tax the bonus triggers. It then takes off the ACC earners' levy and your chosen KiwiSaver rate to show what actually reaches your account.
What $8,000 looks like after PAYE
Take a salary of $75,000 with an $8,000 bonus and KiwiSaver running at 3 percent. The salary alone sits inside the 30 percent band, which runs from $53,500 to $78,100. The bonus straddles a threshold: the first $3,100 of it fills the rest of the 30 percent band up to $78,100, and the remaining $4,900 is taxed at 33 percent. That split is the heart of why the PAYE comes to $2,547 rather than a single round percentage.
You keep about 63 percent of the bonus. The stacked bar below shows where the other 37 percent goes, with PAYE the dominant slice and ACC and KiwiSaver much thinner. Note that KiwiSaver is not really lost; it lands in your own retirement account, and your employer adds their contribution on top.
The year-end square-up
Sometimes a payroll system withholds tax on a bonus as if that pay rate applied all year, which can pull off more than your true annual position requires. If that happens, you are not out of pocket permanently. Inland Revenue squares everything up after 31 March: it totals your income for the year, works out the correct tax, and refunds any over-withholding automatically for most salary earners. So if a bonus looks over-taxed in the month you receive it, the system self-corrects. The reverse is also true, an unusually large bonus can leave you slightly underpaid, so it is worth checking your end-of-year assessment rather than assuming it always lands in your favour.
This calculator assumes the bonus comes from your main employer, taxed on your primary tax code, which is the usual case. The arithmetic gets messier if a bonus is paid through a second employer on a secondary tax code, because secondary codes apply a flat rate based on your total expected income rather than stacking neatly on your salary. In practice most people receive bonuses from their main job, so the lump-sum method modelled here is the right one. One more point of judgement: a bonus only nudges you toward losing the Independent Earner Tax Credit if your total income is in the $44,000 to $48,000 band, where that credit abates at 13 cents per dollar. Below $44,000 a small bonus has no effect on it; above $48,000 the credit is already gone, so there is nothing extra to lose.
Commission, back pay and other extra pays
The same lump-sum method applies to more than just an annual bonus. Commission paid in a lump, a retrospective pay rise backdated several months, a long-service payment, or an honorarium are all extra pays in Inland Revenue’s eyes and are taxed on top of your salary in exactly the way this tool models. The one thing that changes the picture is timing: a payment that lands late in the tax year sits on top of more salary already earned, so it can fall into a higher band than the same amount paid early in the year. If you have any say over when a discretionary payment is made, that timing is the only real lever on the rate it attracts.
Does a bonus push my whole salary into a higher tax bracket?
No, and this is the most common worry about bonuses. New Zealand uses progressive brackets, so only the portion of income inside each band is taxed at that band’s rate. A bonus that tips you over $78,100 does not retax your entire salary at 33 percent; it only taxes the dollars above the threshold at the higher rate. Your existing pay keeps its original lower-rate treatment.
Should I sacrifice my bonus into KiwiSaver?
You can ask your employer to put more of a bonus into KiwiSaver, and for a high earner it can be tax-efficient because employer contributions are taxed through ESCT rather than at your full marginal rate. The trade-off is access: KiwiSaver money is generally locked until 65 or a first-home withdrawal. If you need the cash now, take the bonus; if you are comfortably saving for retirement and sitting in the 33 or 39 percent band, redirecting part of it is worth a conversation with payroll.