Independent earner tax credit (IETC) NZ: who gets $520

The independent earner tax credit (IETC) is a small credit with a lot of rules. In 2026/27 it is worth up to $520 a year, which is $10 a week, if your net income is between $24,000 and $70,000. Above $66,000 it shrinks by 13 cents for every extra dollar, and it is counted in whole months, so a single day on a benefit or on Working for Families can cost you a month.

What the IETC is

The IETC is a tax credit, not a payment. It reduces the income tax you owe for the year. It is aimed at people who earn their own living and do not get other government support such as Working for Families, a main benefit or NZ Super, which is where the "independent earner" name comes from.

You get it in one of two ways:

• Through your pay, if your employer uses tax code ME instead of M. The credit then comes off a little at each payday.
• At the end of the year, in your automatic income tax assessment or your IR3 return. If you were eligible but on code M, the credit turns up as part of a refund.

The credit can bring your income tax down to zero but not below it. The figures below are for the 2026/27 tax year (1 April 2026 to 31 March 2027) and are the same as in 2025/26.

Who qualifies, month by month

Eligibility is tested for each calendar month of the tax year. According to the IR3G guide, you can count a month if, for that whole month:

• you were a New Zealand tax resident;
• neither you nor your partner was entitled to Working for Families tax credits, or an overseas equivalent;
• you did not receive a main benefit, NZ Super, a veteran's pension or an overseas equivalent.

The strict part is the whole month. IRD's guide says that if you did not meet the criteria for even one day of a month, you get no IETC at all for that month. Someone who comes off a benefit on 3 June and starts work cannot count June; their first eligible month is July.

The Working for Families test covers your partner as well as you. If your partner is entitled to Working for Families for your children, you cannot count those months, even if the payments go to them.

The kind of income does not matter much. IRD lists salary or wages, ACC compensation, paid parental leave, investment income and self-employed income as income you can receive the credit on. A sole trader with $40,000 of profit in 2026/27 gets the same $520 as an employee on $40,000: tax of $5,908.00 drops to $5,388.00.

The $24,000 to $70,000 range and the abatement

The credit depends on your annual net income for the whole tax year:

• Under $24,000: nothing.
• $24,000 to $66,000: the full $520.
• $66,001 to $69,999: $520 less 13 cents for every dollar over $66,000. This reduction is the abatement.
• $70,000 or more: nothing. At exactly $70,000 the abatement has used up the whole $520.

Notice the cliff at the bottom: one dollar takes you from nothing to the full $520. At the top there is no cliff; the credit fades out over the last $4,000.

The abatement has a side effect worth knowing about. Between $66,000 and $70,000, each extra dollar is taxed at 30% and also costs 13 cents of credit. In 2026/27, going from $66,000 to $67,000 adds $430.00 to your tax after the credit, not $300. Our guide to effective and marginal tax rates explains why that matters.

Which income figure IRD uses

The test uses your net income: total income from all sources, less allowable deductions and any loss from the current year. On the IR3 return this is the "income after expenses" figure. Two things follow from that:

• All your income counts, not just your wages. A $64,000 salary plus $3,000 of interest is $67,000, which puts you in the abatement range.
• Losses brought forward from earlier years do not reduce it. They lower your taxable income, but the IETC test is applied before them.

Self-employed people use profit after business expenses, which is why the credit is worked out once the year is over and the profit is known.

Income from paid parental leave or ACC compensation is also income you can receive the credit on, so it counts towards your total. A parent on paid parental leave for part of the year, with no Working for Families entitlement in the household, can usually count those months like any other. If you are unsure whether a payment you received is a main benefit, check with the agency that paid it before relying on the credit.

Getting it through your pay: code ME

If you expect to qualify, tell your employer to use tax code ME (or ME SL with a student loan) on your IR330 form. The credit then comes off your PAYE each payday. In 2026/27, on a weekly wage of $1,000:

That is the $10 a week. Your employer works the credit out on each payday's pay as if it were a full year, so if a week's pay annualises into the abatement range, the credit for that week is smaller. At $1,300 a week, PAYE is $263.14 on M and $257.14 on ME, a $6.00 difference.

Code ME has limits. It is a main income code, so it goes on your main job only, and your employer cannot know whether your partner gets Working for Families or what else you earn. The year-end assessment corrects it either way:

• Eligible, but on code M. Hemi earns $50,000 in 2026/27 and qualifies all year, but his employer has him on M. His PAYE income tax is $7,657.52; his tax after the $520 credit is $7,138.00. His assessment shows a refund of $519.52.
• On code ME, but not eligible. If you claimed the credit through PAYE and then a partner became entitled to Working for Families, or your income passed $70,000, the credit for the months you did not qualify is taken back, and you may get a bill. The refund or bill guide covers what happens next.

Part-year eligibility

If you qualify for some months but not others, the credit is the full-year figure for your income, multiplied by your eligible months over 12. Your income for the whole year still sets the starting figure, including income from months you could not count.

Take the second row. On $68,000 the full-year credit is $520 less 13 cents on $2,000, which is $260.00. Nine months of that is $195.00. The months are whole calendar months, so a change partway through a month knocks out that month entirely.

The 2024/25 year: two periods split by days

The IETC rules changed on 31 July 2024. Before that date the full credit stopped at $44,000 and the credit ran out at $48,000. From that date the current $66,000 and $70,000 figures applied. Because the change came partway through the 2024/25 tax year, the year-end credit for 2024/25 is worked out in two parts, weighted by days:

• Period 1, 1 April to 30 July 2024 (121 days): $520 less 13 cents for each dollar over $44,000, and nothing if your income was over $48,000.
• Period 2, 31 July 2024 to 31 March 2025 (244 days): $520 less 13 cents for each dollar over $66,000, and nothing if your income was over $70,000.

The credit is period 1 times 121/365 plus period 2 times 244/365, then multiplied by your eligible months over 12. IRD's own example in Tax Information Bulletin Vol 36 No 7 is Elizabeth, on $45,000 for all 12 months. Period 1 is $390.00 (her income is $1,000 over $44,000), worth $129.29 after weighting; period 2 is the full $520, worth $347.62. Her credit is $476.90.

So someone on $62,400 in 2024/25 got $347.62, not nothing and not $520, because only the 244 days of the second period counted. If you are filing a late 2024/25 return, or checking an old assessment, this is the figure to look for. The tax calculator applies the split automatically when you choose 2024/25.

Questions people ask

How much is the independent earner tax credit?

Up to $520 a year, or $10 a week, in 2026/27. You get the full amount on net income of $24,000 to $66,000; it reduces by 13 cents a dollar above $66,000 and is nil at $70,000.

Can I get the IETC if my partner gets Working for Families?

Not for any month in which you or your partner were entitled to Working for Families tax credits, even for one day of that month.

I was eligible but on tax code M. Have I lost it?

No. The credit is worked out at the end of the year, so it comes back as part of your refund in your automatic assessment or IR3.

Do self-employed people get the IETC?

Yes, if they meet the same tests. It is based on net income after business expenses and is claimed through the IR3 return.

Why is my 2024/25 IETC an odd amount like $347.62?

The thresholds changed on 31 July 2024, so the 2024/25 credit is split into 121 days under the old rules and 244 days under the new ones.