Independent Earner Tax Credit (IETC)


The IETC or Independent Earn Tax Credit is a credit entitlement for people who earn between the current threshold of $24,000.00 and $48,000.00 per year. This PAYE will automatically detect if your salary is in the range to be eligable for the IETC and apply it. It will also inform you of the IETC amount that has been applied.

If your income is within this entitlement window you can expect to receive a credit of up to $520 per year which is lowered as the income gets closer to $48,000.00

The IETC is split into two groups.

  1. If theincome is between $24,000.00 and $44,000.00 If this is true then the full credit of $520.00 is applied.
  2. If the income is between $44,001.00 and $48,000.00 If this is true the $520.00 is lowered by $0.13 for every whole dollar earned above $44,000.00.

EXAMPLE ONE:

Let’s look at an example of an employee who has a gross salary of $100,000.00 NZD per year. This salary was chosen as it is easier to see the relative percentages of the deductions for each facet of the calculation in the workings process.

  1. This salary is greater than the IETC window so is not eligible for any credit.

EXAMPLE TWO:

Let’s look at an example of an employee who has a gross salary of $28,000.00 NZD per year

  1. As this salary is between $24,000.00 and $44,000.00 the full $520.00 IETC credit is given.

EXAMPLE THREE:

Let’s look at an example of an employee who has a gross salary of $43,000.00 NZD per year

  1. As this salary is between $24,000.00 and $44,000.00 the full $520.00 IETC credit is given.

EXAMPLE FOUR

Let’s look at an example of an employee who has a gross salary of $45,000.00 NZD per year

  1. As this salary is not between $24,000.00 and $44,000.00 the credit is lowered $0.13 per $1.00 earned above $44,000.00
    ($45,000.00 - $44,000.00 = $1,000.00
    $1,000.00 * $0.13 = $130.00
    $520.00 - $130.00 = $390.00)
    This person receives an IETC credit of $390.00

EXAMPLE FIVE

Let’s look at an example of an employee who has a gross salary of $47,500.00 NZD per year

  1. As this salary is not between $24,000.00 and $44,000.00 the credit is lowered $0.13 per $1.00 earned above $44,000.00
    ($47,500.00 - $44,000.00 = $3,500.00
    $3,500.00 * $0.13 = $455.00
    $520.00 - $455.00 = $65.00)
    This person receives an IETC credit of $65.00