Find out how to calculate PAYE for a lump sum payment. These instructions are not for ACC or MSD backdated lump sum payments.
Before you start
Do you have employees with CAE EDW NSW ND or tailored tax codes?
Special rules apply.
CAE or EDW tax codes
Do not use the employee's ordinary flat rate. Use the method below for lump sum payments from primary employment.
NSW, ND, or tailored tax codes
Use the rate you usually would for this employee to calculate the PAYE due on the lump sum payment. Do not use the method described below.
Calculate the grossed-up annual value of the employee's income
Add up the employee’s income payments for the 4 weeks ending on the date of the extra payment excluding the amount of any extra payment(s).
If the employee is paid more than once a month
Multiply this number by 13 to calculate the grossed-up annual value of their income.
If the employee is paid once a month
Multiply this number by 12 to calculate the grossed-up annual value of their income.
Add the secondary threshold amount for secondary tax code users only
If the employee does not use a secondary tax code
Ignore this step.
If the employee uses a secondary tax code
Add the low threshold amount for their secondary tax code to the grossed-up annual value of their income.
From 1 April 2023
| Secondary tax code | Low threshold amount |
|---|---|
| SB | $0 |
| S | $14,001 |
| SH | $48,001 |
| ST | $70,001 |
| SA | $180,001 |
Calculate the PAYE rate
Add the lump sum payment to the grossed-up annual value of the employee’s income (including their secondary tax code’s low threshold amount, if appropriate). Find the correct row on the table below. The PAYE rate for the lump sum payment is listed alongside.
Most lump sum payments are subject to the ACC earner’s levy. Redundancy payments, retiring allowances and employee share scheme (ESS) benefits are not, regardless of the income source. The ACC levy for 2024-25 tax year is only paid on the first $142,283 earned.
From 1 April 2024
| Total of lump sum payment and grossed-up annual value of employee's income (including the secondary tax code's low threshold amount, if appropriate) | PAYE rate (including 1.60% ACC levy) | PAYE rate for redundancy, retiring payments or ESS benefits (excluding 1.60% ACC levy) |
|---|---|---|
| $14,000 or less | 12.10% | 10.50% |
| from $14,001 to $48,000 | 19.10% | 17.50% |
| from $48,001 to $70,000 | 31.60% | 30.00% |
| from $70,001 to $142,283 | 34.60% | 33.00% |
| from $142,283 to $180,000 | 33.00% | 33.00% |
| more than $180,000 | 39.00% | 39.00% |
Up to 31 March 2024
| Total of lump sum payment and grossed-up annual value of employee's income (including the secondary tax code's low threshold amount, if appropriate) | PAYE rate (including 1.53% ACC levy) | PAYE rate for redundancy, retiring payments or ESS benefits (excluding 1.53% ACC levy) |
|---|---|---|
| $14,000 or less | 12.03% | 10.50% |
| from $14,001 to $48,000 | 19.03% | 17.50% |
| from $48,001 to $70,000 | 31.53% | 30.00% |
| from $70,001 to $139,384 | 34.53% | 33.00% |
| from $139,385 to $180,000 | 33.00% | 33.00% |
| more than $180,000 | 39.00% | 39.00% |
Low PAYE rate notification
If the lowest PAYE rate is applied to the lump sum payment, tick the relevant box on the Employment Information (EI) return.
What happens next
You may also need to deduct student loans or KiwiSaver from a lump sum payment.
Submitting payments separately or together also affects the account type you choose when making a payment to us.