Quick Summary
When receiving paid parental leave (PPL) in NZ, the IRD will advise on the correct tax code. If you receive PPL and other payments from your employer simultaneously, ensure you use the appropriate tax codes for both streams of income to avoid underpaying or overpaying tax.
Details
Choosing the Right Tax Codes While on Paid Parental Leave in New Zealand
Correctly choosing your tax code is crucial when you are receiving paid parental leave (PPL) in NZ, especially if you have other sources of income at the same time. The IRD manages PPL payments directly, and they will apply tax based on information you provide.
Tax Codes for PPL Payments:
- The IRD will typically apply a standard tax code (often 'M' or 'M SL' if you have student loan) to your PPL payments, as this is considered your main source of income during your leave.
If Receiving Other Employer Payments:
- If you receive 'keeping in touch' payments, annual leave, or other payments from your employer while also receiving PPL, these will be considered a secondary income. You will need to use a secondary tax code (e.g., 'S', 'S SL') for these employer payments.
- Using the wrong tax code can lead to a tax bill at the end of the financial year or result in you overpaying tax throughout the year.
It's always best to consult the IRD's online tools or contact them directly if you are unsure about which tax codes to use for your specific circumstances.