New Zealand Labour Party

Ending Secondary Tax

Labour will:

  • Abolish secondary tax as it denies many New Zealanders access to wages they need to make ends meet.

Around 75,000 New Zealanders work in multiple jobs according to Statistics New Zealand. Due to limitations with the current tax system, employees need to pay tax at a different rate on one of their income sources. Tax on one income source is charged in the normal way while tax on the other source is charged at a flat rate. This means many employees pay a higher rate of income tax during the year than they needed to. For example, a worker making $50,000 a year through two $25,000 jobs would face a tax bill of $10,893 - $2,873 more than necessary.

Whilst employees can claim this overpayment back as a refund at the end of the tax year, many workers would prefer the income during the year. The overpayment was estimated to be around $750m in 2016. Labour is committed to abolishing secondary tax so that these workers have the ability to make ends meet.

To avoid people getting a large tax bill at the end of the year we will ensure that they are taxed at the appropriate rate through the year. This will be possible through the IRD Business Transformation/computer system upgrade process.

We will direct IRD to make it a priority to deliver this change rather than dragging their feet as National have done. We will finalise a timetable for this once in office, in consultation with IRD.

In the meantime, Labour will also make the refund process for secondary taxation workers automatic – meaning that they would no longer need to apply for a refund for that year.