How it's calculated
The calculator works out what you keep in a year in two ways, for the 2026–27 tax year (1 April 2026 to 31 March 2027), and compares them.
As a permanent employee
Your salary goes through the same PAYE rules as the PAYE calculator: income tax, the ACC earners' levy and your own KiwiSaver contribution come out of each pay. If you're in KiwiSaver, your employer also contributes at least 3.5% of your pay, less ESCT. That contribution is shown as a separate benefit line, and the comparison counts both KiwiSaver amounts as yours.Inland Revenue
As a contractor (sole trader)
- Revenue is your hourly rate, excluding GST, × hours a week × weeks billed. Business expenses come off to give your profit.
- Income tax is charged on the profit at the individual rates, from 10.5% up to 39% on income over $180,000. The independent earner tax credit (up to $520 a year) counts self-employment income, so it applies to a profit between $24,000 and $70,000 if you're eligible.Inland Revenue
- ACC levies are invoiced by ACC on your CoverPlus account, not deducted from your payments. The rate depends on your work, so enter your own total rate per $100 from your invoice; it starts at $0. For 2026–27 the levies apply to liable earnings of at least $50,501 and at most $156,641.Inland Revenue
- No employer KiwiSaver. Nobody contributes on your behalf, and no ACC earners' levy, KiwiSaver or student loan is taken from schedular payments: they are your responsibility.Inland Revenue
Contractor take-home = profit − income tax after the IETC − ACC levy. The breakeven hourly rate is the lowest rate, to the cent, at which that equals what the permanent job leaves you, found by narrowing the range of rates step by step.
Schedular tax and the year-end square-up
If your work is a schedular activity (tax code WT), your client deducts tax from each payment at the rate on your IR330C:Inland Revenue
| Your situation | Rate deducted |
|---|---|
| No IR330C, or no name or IRD number on it | 45% |
| IR330C without a chosen rate | The standard rate for the activity, for example 20% for labour-hire contractors |
| A rate you choose (resident) | At least 10% |
| A rate you choose (non-resident or temporary visa) | At least 15% |
The tax comes off the GST-exclusive amount and any GST is added back. In Inland Revenue's example, a GST-registered contractor bills $500 plus $75 GST at a 20% activity rate: $100 is deducted and $475 is paid.Inland Revenue
Schedular tax is a prepayment, so the calculator shows it as cash flow: the year's income tax less the tax already withheld is what's left to pay with your return (or refunded). If that residual income tax is more than $5,000, you pay provisional tax the next year; under the standard option it is the previous year's amount plus 5%.Inland Revenue
If your revenue is over $60,000 in 12 months you must register for GST. The rate you enter excludes GST, which you charge on top and pass on to Inland Revenue.
Worked example
| Line | Contractor | Permanent |
|---|---|---|
| Revenue / gross salary | $138,000.00 | $100,000.00 |
| Business expenses | -$5,000.00 | $0.00 |
| Income tax (after IETC) | -$33,767.50 | -$22,876.88 |
| ACC levy / earners' levy | $0.00 | -$1,749.80 |
| Your KiwiSaver contribution | $0.00 | -$3,499.86 |
| Take-home | $99,232.50 | $71,873.36 |
| Plus your KiwiSaver contribution | $0.00 | $3,499.86 |
| Plus employer KiwiSaver after ESCT (33%) | $0.00 | $2,350.14 |
| Total you keep | $99,232.50 | $77,723.36 |
At $75 an hour for 40 hours a week and 46 weeks, revenue is $138,000. After $5,000 of expenses, income tax is $33,767.50, leaving $99,233. The $100,000 job leaves $71,873 of take-home pay, or $77,723 counting both KiwiSaver contributions, so the breakeven rate is $57.56 an hour.
With 20% withheld as a labour-hire contractor, $27,600.00 is paid during the year and $6,167.50 is left to pay with the return. Adding an ACC levy of $1.50 per $100 costs $1,995.00 and lifts the breakeven rate to $58.81.
At a lower income, $30 an hour for 30 hours × 44 weeks with $2,000 of expenses, the profit is below the ACC minimum, so a $1.50 levy is charged on the minimum: $757.52. Matching a $50,000 job outside KiwiSaver takes $39.29 an hour.
Assumptions and limitations
- Sole trader only. Trading through a company (company tax and shareholder salary) isn't modelled; see the NZ company tax calculator.
- ACC uses the rate you enter, on profit raised to the minimum and capped at the maximum. Any exceptions ACC applies to the minimum are not modelled, so check your invoice. No part of the levy is deducted from taxable profit.
- Not included: student loan repayments, losses carried forward, the KiwiSaver government contribution, and the paid leave, sick leave and public holidays a permanent job includes. Allow for unpaid time in weeks billed.
- The permanent job uses tax code ME when you're eligible for the IETC (M otherwise) and no student loan.
To see what the same salary costs an employer, use the NZ employer cost calculator. For tax bracket by bracket, use the NZ income tax calculator, and for GST on your invoices the NZ GST calculator.