How the IRD year-end square-up works
PAYE is deducted from each pay using tables that assume your pay is steady all year. Real life is messier — you change jobs, work part of a year, get a pay rise, earn variable hours, or have a second job taxed at a flat secondary rate. By 31 March (the end of the NZ tax year) your actual income may sit in different tax bands than the pay-period tables assumed.
After year end, IRD recalculates the correct tax on your total income and compares it with what was withheld. The difference is your refund or bill. For most people this happens automatically through the income tax assessment, with no return to file.
Why people get a refund
Common reasons more PAYE was withheld than needed:
- You worked only part of the year (started a job mid-year, took unpaid leave, or left the workforce) — the tables withheld as if you earned a full year at that rate.
- A second job was taxed on a secondary code (S, SH, ST) that was higher than your overall marginal rate.
- Your income varied — big months were over-taxed relative to your annual average.
- You made donations to approved charities and can claim the 33⅓% donation tax credit.
Why people get a bill instead
- A second job or extra income was taxed at a code lower than your true marginal rate.
- You earned bank interest or dividends where insufficient tax was deducted at source.
- You had untaxed income — overseas earnings, contracting, or rental profit.
- You were on the wrong primary tax code for part of the year.
When refunds are paid
IRD generally issues automatic assessments between late May and July after the tax year ends on 31 March. If you are due a refund and your bank account is on file, it is usually paid within a few weeks of the assessment. If you have a bill under $200 it is often written off; larger bills are usually due by 7 February the following year.