NZ Lump Sum Tax Calculator

How lump sum payments are taxed in New Zealand

A lump sum payment — a bonus, back pay, cashed-in leave, a retiring allowance or a redundancy payment — is treated by IRD as “extra pay”. There is no special lump sum tax rate. Instead, your employer annualises your normal income, adds the lump sum on top, and taxes the whole lump sum at the PAYE rate for the bracket that total reaches. This calculator applies that exact IRD method to your bonus or payment and shows what you actually keep.

Lump sum PAYE rate table 2026/27

Add your annual salary and the lump sum together, then read off the rate. Bonuses and back pay include the 1.75% ACC earner’s levy; redundancy and retirement payments do not.

*ACC levy stops at $156,641 of total income, so the part of a large lump sum above the cap is taxed at 39% without the extra ACC.

Bonuses and back pay

A bonus is taxed at your marginal rate based on your salary plus the bonus, with the ACC levy added. KiwiSaver also comes out of a bonus at your chosen rate, and a student loan repayment of 12% applies if your tax code ends in SL. Because the whole bonus is taxed at your top rate, the deduction can look high — but if too much is taken, IRD refunds the difference in your end-of-year assessment.

Redundancy and retirement payments

Genuine redundancy and retirement payments are still taxed as extra pay, but two things change: the ACC earner’s levy is not charged, and KiwiSaver is not deducted. That’s why the calculator drops those rows when you choose “Redundancy / retirement”, giving you the lower effective rate shown in the table above.

Why your bonus can feel overtaxed

Under the extra-pay method, the entire lump sum is taxed at the rate for your combined income — your highest bracket — rather than being spread across the lower brackets. That makes the upfront PAYE deduction feel heavy compared with your normal pay. It usually evens out at the end of the tax year, when IRD reconciles your total income and tax.

How to calculate PAYE on a lump sum payment

To calculate PAYE for a lump sum payment, IRD asks employers to annualise the employee’s income and add the lump sum payment, then apply the flat rate for that tax bracket to the whole payment. This calculator runs the same method: it annualises your salary, adds the bonus or redundancy payment, finds the PAYE rate, and shows the PAYE tax, ACC earners’ levy and any student loan repayments deducted from the payment.

The same tool works as a redundancy tax calculator: for a redundancy payment the flat rate excludes ACC, while a bonus includes it. Whether you’re paid weekly, fortnightly or for a one-off pay period, the lump sum is taxed on its grossed-up annualised income, not your single payday — and cashed-in holiday pay or back pay are taxed the same way. Your employer must deduct PAYE on lump sum payments and report them to IRD, so the net figure shown here is what should land in your account.

Lump sum tax in short

To sum up: a lump sum payment is taxed as extra pay, so the calculator annualises your salary, adds the payment, and applies the PAYE rate for that tax bracket — plus ACC, KiwiSaver and student loan on a bonus, or just the flat rate on a redundancy payment. Enter your figures above to calculate the PAYE on your lump sum payment and see the net payment you keep.

Frequently asked questions