Tax Code M and ME
Tax code M applies to your highest-earning job when you have no student loan and are not claiming the independent earner tax credit. Tax code ME is the same code with that credit attached, worth $520 a year on a total income of $24,000 to $70,000. Neither is a flat rate: PAYE runs through the progressive bands, from 10.5% up to 39%, plus the 1.75% ACC earners' levy.
What does tax code M mean in New Zealand?
Tax code M is the code for your main, highest-earning source of income, used when you have no student loan and are not claiming the independent earner tax credit. Every rate quoted for it is really two rates added together. The income tax component comes from whichever band the next dollar of your income falls into, and the ACC earners' levy of 1.75% sits on top of all of them, on earnings up to $156,641 a year. At the two bands most New Zealand salaries sit in, the arithmetic looks like this:
Those are marginal rates. What the next dollar costs, not what your whole salary costs. Because the lower bands are taxed at the lower rates first, someone earning $78,100 on M pays an effective PAYE rate of 21.8%, not 31.75%. Above $156,641 the levy stops entirely, which makes the combined rate fall before it rises again. The full combined PAYE rate table sets that out band by band.
What does tax code ME mean in New Zealand?
Tax code ME is M with the independent earner tax credit attached, and it goes on your highest-earning job when your total income from all sources is $24,000 to $70,000 and you receive none of Inland Revenue's excluded payments. ME has no rate of its own. It uses the same progressive scale as M, then subtracts a flat $520 a year after the bands have been applied.
The credit does not change your marginal rate, only your effective one. On $52,000 of income, PAYE on M is $8,918.00 for the year, an effective 17.15%. The same income on ME pays $8,398.00, an effective 16.15%. The gap is exactly 1% of your gross, which is what $520 divided by $52,000 comes to.
How do M, ME, M SL and ME SL sit against each other?
| Code | Who it is for | Rate |
|---|---|---|
| Mthis page | Main income, no student loan | Progressive |
| MEthis page | Main income, claiming the independent earner tax credit | Progressive − $520 |
| M SL | Main income with a student loan | Progressive + 12% |
| ME SL | Main income, IETC and a student loan | Progressive − $520 + 12% |
Every New Zealand tax code, in one table: all tax codes and rates.
Who is on tax code M rather than ME?
Both codes go on your highest-earning source of income, and the credit decides which of the two. That is a fact about your whole year, not about this employer. Not the job you have held longest, and not the one with the most hours. The one paying the most across the year. If you have a second job, a taxable pension or ACC weekly compensation, compare them and give the main-income code to the largest. Every job after it takes a secondary tax.
The code is ME when your total income from all sources is $24,000 to $70,000 and none of the five exclusions below applies. Outside that range, or with any one of the exclusions, the code is M. Add every job together, plus any taxable pension, ACC weekly compensation or other taxable income, before you read it off.
| What you receive, or your status | Effect on your tax code |
|---|---|
| Working for Families (or an overseas equivalent) | The credit is not available. Working for Families and the credit are alternatives, not a pair. |
| An income-tested main benefit | The credit is not available for any part of the year you receive the benefit. |
| NZ Superannuation | The credit is not available, whatever your income is. |
| A Veteran's Pension | The credit is not available, whatever your income is. |
| Not a New Zealand tax resident | Residence is one of the conditions for the credit, so the code stays M. |
Everything else about your circumstances. Hourly or salaried, permanent or fixed-term, full-time or twelve hours a week, makes no difference to which of the two codes is correct.
How much is tax code ME worth at each income?
ME is worth $520 a year, or about $10.00 a week, while your total income is $24,000 to $66,000, because above $66,000 the credit abates at 13 cents in the dollar and reaches nil at $70,000. The two PAYE columns below are the whole year, income tax plus the ACC earners' levy.
| Total income | Credit for the year | A week | PAYE on M | PAYE on ME |
|---|---|---|---|---|
| $20,000 | $0.00 | $0.00 | $2,758.00 | $2,758.00 |
| $24,000 | $520.00 | $10.00 | $3,528.00 | $3,008.00 |
| $40,000 | $520.00 | $10.00 | $6,608.00 | $6,088.00 |
| $52,000 | $520.00 | $10.00 | $8,918.00 | $8,398.00 |
| $66,000 | $520.00 | $10.00 | $13,175.50 | $12,655.50 |
| $68,000 | $260.00 | $5.00 | $13,810.50 | $13,550.50 |
| $70,000 | $0.00 | $0.00 | $14,445.50 | $14,445.50 |
The credit is nil at both ends of the table. Below $24,000 it has not started, and at $70,000 it has fully abated, so the two PAYE columns meet again. The independent earner tax credit works any income through the same curve.
What does tax code M leave in your account?
- Gross
- $70,000.00
- PAYE tax
- − $13,220.50
- ACC levy
- − $1,225.00
- KiwiSaver
- − $2,450.00
- Take-home
- $53,104.50
You keep 75.9% of your gross pay.
PAYE here is income tax plus the 1.75% ACC earners' levy, calculated the way a pay run does it. Annualise the period, apply the bands, then truncate. KiwiSaver is shown at the 3.5% default; change your rate and the figure moves with it.
What does tax code ME leave in your account?
- Gross
- $70,000.00
- PAYE tax
- − $13,220.50
- ACC levy
- − $1,225.00
- KiwiSaver
- − $2,450.00
- Take-home
- $53,104.50
You keep 75.9% of your gross pay.
The same calculation with the independent earner tax credit already deducted. Enter an income above $70,000 and the credit disappears, which is exactly what payroll does. KiwiSaver is shown at the 3.5% default.
What does $1,250.00 a week on M leave you?
- 1.Gross pay for the week$65,000 a year$1,250.00
- 2.PAYE: income tax plus the ACC earners' levy− $247.26
- 3.KiwiSaver at 3.5%− $43.75
- Into your account$958.99
What does $1,000.00 a week on ME leave you?
- 1.Gross pay for the week$52,000 a year$1,000.00
- 2.PAYE: income tax plus the ACC earners' levyThe $520 credit is already inside this figure. It comes off your PAYE, not your gross− $161.50
- 3.KiwiSaver at 3.5%− $35.00
- Into your account$803.50
On $52,000 a year the credit is whole, so PAYE is $161.50 a week against $171.50 on M. That difference of $10.00 a week is the $520 credit spread across 52 paydays.
What does $5,600.00 a month on ME leave you?
- 1.Gross pay for the month$67,200 a year$5,600.00
- 2.PAYE: income tax plus the ACC earners' levyThe credit has partly abated at this income, so less than $520 is inside the figure− $1,099.36
- 3.KiwiSaver at 3.5%− $196.00
- Into your account$4,304.64
This one annualises to $67,200, which is above the $66,000 abatement threshold. The credit is worth $364.00 rather than $520, so PAYE of $1,099.36 is only $30.34 a month below the $1,129.70 the same pay would attract on M. All three examples assume the 3.5% KiwiSaver rate and no student loan.
M is the wrong code for you if…
- You have a student loan being repaid. The code is M SL. Leaving the suffix off does not cancel the debt, it just means nothing is collected until Inland Revenue notices.
- Your total income is $24,000 to $70,000 with no Working for Families, main benefit, NZ Super or Veteran's Pension. You are giving up $10.00 a week of cash flow by not using ME.
- This is not your highest-earning job. It needs a secondary tax chosen on your total income, SB, S, SH, ST or SA.
- You invoice for the work rather than being on payroll. Schedular payments use WT, where you elect your own withholding rate.
- No standard code withholds anything close to correct. Very uneven income across the year is what the special tax code (STC) exists for. Inland Revenue sets a rate for your situation.
ME is the wrong code for you if…
- You receive Working for Families, an income-tested main benefit, NZ Superannuation or a Veteran's Pension. Any one of them rules out the credit outright, whatever your income. The code is M.
- Your total income is under $24,000 or $70,000 and over. The credit is nil at both ends. A pay rise that lifts you past $70,000 mid-year makes ME wrong from that point on.
- You have a student loan being repaid. The code is ME SL, not ME. Leaving the suffix off does not cancel the debt.
- You are not a New Zealand tax resident. Residence is one of the conditions for the credit, so the code is M.
Why did you get a tax refund after a year on M?
Because PAYE annualises every pay period, and an uneven year systematically over-withholds. Each payday, payroll multiplies your gross for that period out to a full year, taxes that figure, then divides back down. A week in which you earned more than usual is therefore taxed as though you would earn at that rate for all 52 weeks. Across a year of identical paydays this is exact. Across an uneven one it is not.
A concrete case: 10 weeks of work at $1,000.00 a week and nothing else for the year. Each of those weeks is taxed as if the year were $52,000, so $1,715.00 of PAYE comes out. The tax actually due on $10,000 of annual income is $1,225.00. Inland Revenue refunds the difference. About $490.00, once the year closes. Nothing went wrong. M did exactly what it is designed to do, and the square-up is what corrects it.
What happens to M and ME at the end-of-year square-up?
Inland Revenue adds up what you actually earned, works out the tax genuinely due, and compares it with what your employers withheld, after 31 March. For a steady salary on M the two match almost exactly. That is the whole point of the code. The gaps come from the way PAYE handles a pay period, and from the way ME forecasts a credit.
Three things break the ME forecast. Your income ends the year above $70,000 and the credit was never due, so the full $520 is asked back. Your income lands between $66,000 and $70,000 and part of it abates, so part is asked back. Or a Working for Families payment starts partway through the year, and the credit stops from that point.
The reverse happens too. Stay on M all year while eligible and you have simply lent Inland Revenue $520 interest-free. It comes back in the assessment after 31 March rather than at $10.00 a week, because the credit itself is not lost by using the wrong code. Only its timing is. That is the one real difference between M and ME for an eligible earner, and it is a cash-flow difference rather than a tax one. The same mechanism runs the other way if you were on M at two jobs at once, except then the letter after 31 March asks you for money instead.
What else do people ask about M and ME?
What percentage is tax code M?
It does not have one. M applies the progressive scale. 10.5% on the first $15,600, then 17.5%, 30%, 33% and 39% on the slices above each threshold. Plus the 1.75% ACC earners' levy. Your effective rate is always well below your top band.
What is the difference between tax code M and ME?
The PAYE calculation is identical. ME subtracts the $520 credit before your deduction is worked out, which is about $10.00 a week. On M an eligible earner still receives the same $520. Just as a lump sum after 31 March instead of through their payslip.
Should I be on M or ME?
ME if your total income is between $24,000 and $70,000 and you do not receive Working for Families, a main benefit, NZ Super or a Veteran's Pension. On M you can still get the $520 credit. Just as a lump at year end rather than $10.00 a week.
How much is tax code ME worth?
$520 a year, about $10.00 a week, on total income of $24,000 to $66,000. Above $66,000 it abates at 13 cents in the dollar and reaches nil at $70,000. the independent earner tax credit.
Can I use tax code M on two jobs?
No. M belongs to one job only. Using it twice means each employer gives you the low bands as though the other job did not exist, so you are under-taxed all year and get a bill after 31 March. Every job after your main one needs a secondary tax.
Can I use ME if I get Working for Families?
No. Working for Families rules the credit out, so your code stays Mor M SL. The same applies to an income-tested main benefit, NZ Superannuation, a Veteran's Pension, and to anyone who is not a New Zealand tax resident.
What happens if I use ME and I am not eligible?
Payroll withholds $520 a year less than it should, and Inland Revenue asks for the difference after 31 March. Nothing happens in the meantime, and no penalty applies while you are on payroll, but the money is not yours to keep. changing your tax code stops the shortfall growing.
Is M the same as M SL?
Almost. M SL is M with the student loan suffix, which adds a separate 12% deduction on earnings above $24,128 a year. The PAYE calculation is identical. More on the SL suffix.
Is there an ME SL tax code?
Yes. ME SL is ME with the student loan suffix. It subtracts the $520 credit and deducts 12% of earnings above $24,128 a year. There is no code written MESL without the space. The SL suffix explained.
Written by Nathan Kerr, payroll writer and editor2026–27 rates. Last reviewed 25 August 2026.
Where these figures come from
- IRD. What tax code should I use
- IRD. Tax rates for individuals
- IRD. ACC earners' levy rates
- IRD. Independent earner tax credit
2026–27 tax year (1 April 2026 – 31 March 2027). Last verified 25 August 2026.
Which calculators help you check M and ME?
- the independent earner tax creditEligibility rules, the abatement curve, and your credit on any income
- the student loan suffixWhat M SL and ME SL add on top
- secondary taxThe code your second job takes instead
- New Zealand tax bracketsThe bands M and ME run your income through
- New Zealand PAYE tax ratesIncome tax and the ACC levy as one combined rate
- changing your tax codeMoving from M to ME, and when it takes effect
- New Zealand tax codesEvery code and rate in one table