The Independent Earner Tax Credit (IETC) is a tax credit worth up to $520 per year for middle-income earners in New Zealand who do not receive Working for Families or a benefit. It is claimed through your tax code (ME) or through your annual tax return.
The IETC is worth up to $520/year for individuals earning $24,000–$44,000. It abates from $44,000 and disappears at $48,000. Use tax code ME (or ME SL with a student loan) so your employer reduces PAYE to deliver it through your pay. You do not receive Working for Families, New Zealand Superannuation, or a main benefit. If you missed it, claim it on your IR3.
What Is the IETC?
The IETC is a tax credit introduced to reduce the tax burden on middle-income earners who do not benefit from family tax credits (WFF) or government transfers. It provides up to $10/week ($520/year) directly in your take-home pay.
2025–26 IETC Rates and Phase-Out
| Annual income | IETC per year | Notes |
|---|---|---|
| Under $24,000 | $0 | Not eligible (too low) |
| $24,000–$44,000 | $520 | Full credit |
| $44,001–$47,999 | Abates | $520 minus 13 cents per dollar above $44,000 |
| $48,000+ | $0 | Fully abated |
The abatement between $44,000 and $48,000:
- For every $1 over $44,000, the credit reduces by $0.13
- At $48,000: $520 − (4,000 × $0.13) = $520 − $520 = $0
Eligibility
You can claim the IETC if you:
- Earn between $24,000 and $48,000 from all sources
- Are a NZ tax resident
- Do not receive Working for Families tax credits
- Do not receive NZ Superannuation or Veteran’s Pension
- Do not receive a main benefit (Jobseeker, Sole Parent Support, etc.)
- Have only one source of income (single employer) — if you have multiple jobs or income sources, wait until year-end to claim via IR3
How to Claim IETC
Through Your Tax Code (Easiest)
Use tax code ME (or ME SL if you have a student loan). Your employer reduces the PAYE withheld from your wages by the IETC amount, delivering it directly in your pay each week.
Example: On $35,000 income, using ME instead of M reduces your PAYE by $10/week — you receive $10 more in take-home pay each week without needing to do anything at year end.
Only use ME if:
- This is your only job (otherwise your total income may exceed $48,000 when combined)
- You are confident you qualify (income in range, no WFF, no benefit)
- You have only one income source
Through Your IR3 (Year End)
If you did not use ME during the year (or have multiple income sources), claim the IETC on your IR3. Add the IETC in the tax credits section. IRD will calculate the amount based on your actual annual income.
This is the safer option if your income fluctuates or you have multiple income sources.
Common Mistakes
Using ME with multiple jobs: If you use ME for your main job and have secondary income, your combined income may exceed $48,000 — making you ineligible. If ME is applied all year, you receive IETC you don’t qualify for and must repay it.
Receiving WFF and using ME: If you receive Working for Families, you are not eligible for IETC. Using ME while on WFF results in an overpayment that IRD will bill back.
Not claiming it at all: Many eligible earners miss the IETC. If you filed an IR3 without claiming it and were eligible, you can file an amended return.
Frequently Asked Questions
I earn $40,000 and work one job. Should I use M or ME?
Use ME (or ME SL if you have a student loan). You are eligible for the full $520 IETC and using ME delivers this through your weekly pay rather than waiting for year-end.
My income varies — sometimes above $48,000, sometimes not. What should I do?
Use tax code M and claim the IETC through your IR3 at year end based on your actual annual income. If your income ended up in the $24,000–$48,000 range, you receive the IETC as part of your refund.
I am self-employed and earn $36,000 net. Can I get the IETC?
Yes. Self-employed earners in the eligible income range who do not receive WFF can claim the IETC on their IR3. It is included in the tax credits section.