Company tax at the flat 28% rate.
Company tax (28%)
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After-tax profit
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Your breakdown
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A flat rate, no thresholds
New Zealand keeps company tax refreshingly simple. There is one rate, 28 percent, and it applies to every dollar of a company’s net taxable profit. There is no tax-free band, no rising scale, and no small-company discount: a company that makes $20,000 and one that makes $20 million both pay 28 percent on their profit. This calculator does exactly that single multiplication and shows the after-tax profit left to either reinvest or distribute. The deceptively easy part is the rate; the genuinely hard part, which sits upstream of this tool, is working out the net profit figure in the first place after deductible expenses, depreciation, and adjustments.
Note the rate is 28 percent, two points below the 30 percent personal bracket and well below the 33 and 39 percent top personal rates. That gap is deliberate and shapes a lot of tax planning, because profit left inside a company is taxed more lightly than the same income drawn as a high salary, at least until it is paid out.
Tax on $150,000 of profit
Take a company that has netted $150,000 of profit before tax for the year. The calculation is one line, but the result frames everything the owners can do next.
The company owes $42,000 and keeps $108,000. The split rectangle below shows that roughly 72 percent of profit survives tax. That surviving $108,000 can be reinvested in the business with no further tax until it is distributed, or paid out to shareholders as a dividend, which is where imputation comes in.
Imputation, so you are not taxed twice
Here is the part that makes the New Zealand system fair rather than punishing. When the company pays a dividend out of that after-tax profit, it can attach imputation credits, which represent the 28 percent tax the company already paid. The shareholder declares the gross dividend and the attached credit, then uses the credit against their own tax bill. A shareholder on the 33 percent marginal rate only has to top up the 5 percent gap between 28 and 33 percent; a shareholder on the 39 percent rate tops up more. Best of all, a shareholder whose own rate is below 28 percent, say a retiree on 17.5 percent, can have the excess credit refunded. The profit is taxed once, at the recipient’s true rate, not twice. This tool stops at the company line, but the after-tax figure it shows is precisely the pool that carries those imputation credits into shareholders' hands.
There is a structural wrinkle worth flagging. Because the company rate is 28 percent but the top personal rate is 39 percent, there is an 11 point gap that the imputation system eventually claws back when profit is distributed to a high-rate shareholder. Inland Revenue is alert to arrangements that park income permanently in a company purely to enjoy the lower rate, so the 28 percent is best thought of as a tax on profit you are reinvesting, not a way to convert a 39 percent income into a 28 percent one for good. The moment the money comes out as salary or dividends, your real marginal rate reasserts itself.
Paying it: provisional tax
Company tax is not paid in one lump at year-end. Once a company’s residual income tax for a year exceeds $5,000, Inland Revenue moves it onto provisional tax, paid in instalments through the following year, typically three times under the standard method. On $42,000 of tax, our example company is firmly in provisional territory, so it would pay the next year’s expected tax in roughly three chunks. The practical discipline is the same as for any business: set money aside as profit accrues rather than scrambling at each provisional date. Underpaying can attract use-of-money interest, so a company growing its profit quickly should review its provisional estimates rather than blindly paying last year’s figure.
Do I pay company tax and personal tax on the same money?
Not in full, thanks to imputation. The company pays 28 percent first, and when it distributes the profit as an imputed dividend, the credit for that 28 percent flows to you. You only ever pay the difference between 28 percent and your personal rate, or receive a refund if your rate is lower. The classic double-tax trap that catches some overseas systems does not apply to fully imputed dividends from a New Zealand company.
Should I leave profit in the company or pay myself a salary?
It depends on your marginal rate and your cash needs. Profit retained in the company is taxed at 28 percent, lower than the 33 or 39 percent top personal rates, so leaving money in to reinvest can defer tax. But a salary is deductible to the company and can use your lower personal brackets up to about $53,500. Many owner-operators take a modest salary to soak up the low brackets, then leave surplus profit in the company. This is genuinely a case to model with an accountant, because the right mix turns on your full picture, not just the company line.