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While New Zealand doesn’t actually have an official retirement age, for many people 65 years old is the target.
It’s the age when most superannuation plans begin to pay out your savings, including Government funded NZ Superannuation (Super).
New Zealand Superannuation is a fortnightly payment for people aged 65 and over. To qualify, you must have lived in New Zealand for at least 10 years since you turned 20. Five of those years must be since you turned 50. Time spent overseas in certain countries, including Australia and for certain reasons may be counted.
Details about who can get superannuation are on the Government’s Work and Income website.
If you’re working while receiving NZ Superannuation, you may be entitled to a tax refund.
You can still get your New Zealand Superannuation while you’re working or getting other income. This may affect the amount of income tax you have to pay on your combined income and can sometimes entitle you to a tax refund.
Here are some real life cases where retirees in NZ have been entitled to a Tax Refund in this situation (names have been changed):
- Mary Fraser is 70 and she receives the super as well as full time income from a pre-school. Her combined annual income is $55k and because she’s paying secondary tax, at the end of the financial year she receives a refund of $4,758.29. She has received large refunds in prior years also.
- Lorraine Grey is 79 and has been receiving the super as her only income for the last 3 years. 4 years ago when Lorraine was also working and receiving her super she was paying secondary tax on it. Since ceasing her employment she has not updated her tax code so is paying tax at a higher rate. For the last 3 years she has received tax refunds of over $900.
- Ian Johnson is 69 and last year he finished up at his job part way through the year while also receiving the super. As his tax paid while in employment was based on what he had earned in previous years it was higher than what he should have paid so he ended up with a $1,900 refund at the end of the financial year. Ian’s tax codes were correct and he did everything he should have but due to the timing of his employment ceasing the overpaying of tax was inevitable.
There are many other cases where earning Superannuation and working in the same financial year can mean you’re entitled to a refund. We suggest getting in touch with IRD or your tax agent for more information.
Using the right tax code while on NZ Superannuation
Your main source of income
If you receive NZ Super and income from another source (excluding interest or investment income), you need to ensure that you are using the right tax code.
Using the right tax code while on NZ Superannuation
If your NZ Super is not your main source of income or you have a secondary source of income, you need to use a secondary tax code.
As a general guideline for tax codes:
- if New Zealand Superannuation is the client’s highest or only source of income, the ‘M’ tax code should be used
- if New Zealand Superannuation is not the client’s main source of income, a secondary or ‘S’ tax code should be used or
- clients with a Student Loan must use a tax code with the Student Loan (SL) repayment code or
- a special tax code can also be used when the client has other income
Note clients need to apply to Inland Revenue for a special tax code. The client will need to provide proof of their special tax code for example, a letter from Inland Revenue, in order for this to be added to their New Zealand Superannuation record.
Tax and Tax Refunds can get a bit tricky sometimes – chatting to your tax agent or IRD directly can help clear up what you’re paying and what you’re entitled to as a refund.
lyalld - 4 months ago
Great tips thanks, it definitely pays to check these things. The tax year before I retired I found that claiming NZ Super put me into a higher tax bracket, so was in the opposite position to the situations described above. Fortunately IRD alerted me to this during the year and I needed to work with MSD to change my NZ Super tax code to a different secondary tax bracket. That resulted in a $70 refund instead of a hefty extra tax payment. At the point of finishing up at work I received a small redundancy payment. As this would have been interpreted by IRD as my primary income, I elected to ask IRD for a special tax code to cover just this tax year to minimise the end of year adjustments.