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Inland Revenue

Tax Policy

Two rates for the payroll donation tax credit


(24 – New Zealand Law Society)

The payroll-giving tax credit should have the following two rates:

  • 33⅓% for employees earning less than the threshold for the top marginal income tax (currently $70,000); and
  • 39% for employees earning greater than the threshold for the top marginal income tax rate.

The New Zealand Law Society is concerned that the proposed flat tax credit rate of 33⅓% will discourage employees in the 39% marginal income tax bracket from making charitable donations. The Society considers that if the rationale behind the payroll-giving scheme is to create the foundation for a stronger culture of giving in New Zealand, higher income earners should be given a full deduction through a 39% PAYE tax credit to encourage them to make donations.


The single rate of 33⅓% was adopted to ensure consistency with the tax benefit delivered under the current donation tax credit system and is considered to be more equitable because all employees receive the same tax benefit regardless of their marginal tax rate.


That the submission be declined.