Date: 19/05/2026
Author: Luca Tariciotti
Secondary tax isn’t a penalty rate; it’s simply the normal PAYE system applying your correct top tax bracket to your second job so you don’t end up with a massive tax bill at the end of the year. With the cost of living pushing many Kiwis to pick-up side hustles, weekend shifts, or freelance work, understanding how your extra income is taxed ensures every dollar you earn actually moves you forward.
Let’s break down how secondary tax codes work in New Zealand, clear up the biggest misconceptions, and help you figure out exactly what code to give your employer.
The Biggest Myth About Secondary Tax in NZ
If you talk to anyone in the lunchroom about getting a second job, you’ll inevitably hear someone say: “Don’t bother, the secondary tax will take half your wages.” This is the single biggest misconception about secondary tax in New Zealand.
Secondary tax is not a penalty. The Inland Revenue Department (IRD) does not punish you for working two jobs. New Zealand operates on a progressive tax system, which means your income is taxed in layers (brackets). As your overall income increases, only the dollars that fall into the higher brackets are taxed at a higher percentage.
When you get a second job, your primary employer has already used up your lower tax brackets (like the 10.5% and 17.5% layers). Therefore, your secondary employer needs to tax your second income at your “marginal” tax rate—the highest rate that applies to your total combined annual income. If they didn’t do this, you would underpay tax all year and receive a giant, painful bill from the IRD come April.
2026 NZ Income Tax Brackets Refresher
To understand secondary codes, you first need to understand the standard tax brackets for the 2025/2026 tax year:
- 10.5% on income up to $15,600
- 17.5% on income from $15,601 to $53,500
- 30% on income from $53,501 to $78,100
- 33% on income from $78,101 to $180,000
- 39% on income over $180,000
Your main job (using an M or ME tax code) automatically accounts for these progressive layers. Your second job needs a specific code to pick up right where your main job leaves off.
How to Find Your Secondary Tax Code
Your secondary tax code is based entirely on your estimated total annual income from all sources. Here are the standard secondary tax codes for New Zealand employees:
- SB: Use if your total expected income is $15,600 or less. (Taxed at 10.5%).
- S: Use if your total expected income is between $15,601 and $53,500. (Taxed at 17.5%).
- SH: Use if your total expected income is between $53,501 and $78,100. (Taxed at 30%).
- ST: Use if your total expected income is between $78,101 and $180,000. (Taxed at 33%).
- SA: Use if your total expected income is over $180,000. (Taxed at 39%).
(Note: If you have a New Zealand Student Loan, you simply add “SL” to your code, such as S SL or SH SL. This tells your employer to deduct the mandatory 12% student loan repayment from your secondary income).
Check our New Zealand Secondary Tax Calculator and Student Loan Repayment Calculator NZ.
Real NZ Dollar Examples
Let’s look at how this plays out in the real world with some NZD examples.
Example 1: The Part-Time Hustle Mark works part-time at a local supermarket, earning $35,000 a year. He decides to pick up a second part-time job at a hardware store, which will pay him roughly $10,000 a year.
- Main Job: $35,000 (Uses code M)
- Second Job: $10,000
- Total Expected Income: $45,000 Because his total income ($45,000) falls into the $15,601 to $53,500 bracket, Mark will give the hardware store the S tax code. His hardware store earnings will be taxed at a flat 17.5%.
Example 2: Pushing into a Higher Bracket Jane is a graphic designer earning $70,000 a year at her primary agency. She decides to work weekends managing social media for a local cafe, which pays her $15,000 a year.
- Main Job: $70,000 (Uses code M)
- Second Job: $15,000
- Total Expected Income: $85,000 Because her total combined income ($85,000) pushes past the $78,100 threshold, she falls into the 33% tax bracket. Jane must use the ST tax code for her cafe job. Every dollar she earns at the cafe will be taxed at 33%.
Special Tax Codes: STC and CAE
Sometimes, the standard secondary codes don’t perfectly fit your situation. That’s where special codes come in.
1. Tailored Tax Code (STC) If you think your secondary tax code will result in you overpaying tax during the year (for example, if your second job only pushes your total income slightly into the next tax bracket, rather than fully), you can apply for a Tailored Tax Code directly through the IRD. Formerly known as a Special Tax Code (STC), this allows the IRD to calculate a custom percentage for your secondary employer to deduct, ensuring your PAYE is perfectly balanced.
2. Casual Agricultural Worker (CAE) If you are doing casual, seasonal agricultural work (like fruit picking, shearing, or shed-handling) for up to 3 months, you use the CAE tax code. This taxes your earnings at a flat rate of 17.5%, plus ACC levies.
Contractor vs Employee NZ: How It Affects Your Second Job
Often, picking up a second stream of income isn’t about finding a second employer—it’s about freelancing or starting a small business. You might be weighing the debate of contractor vs employee NZ and asking yourself: should I go contracting NZ for my side hustle?
If you choose to be an employee, everything is handled for you via the PAYE system and the secondary codes we just discussed. Your employer deducts your tax, ACC, and KiwiSaver before the money hits your bank account.
If you choose to be a contractor, the rules change:
- Tax Codes: You won’t use S, SH, or ST codes. Instead, you’ll generally use the WT (Withholding Tax) tax code for Schedular Payments. The tax rate deducted depends on your specific industry (often ranging from 10% to 20%), but this is only a pre-payment.
- Your Responsibilities: As a contractor, you are running your own business. You are responsible for paying your own ACC levies, setting aside money for your student loan, and managing your own KiwiSaver contributions.
- Expenses: The major benefit of contracting is that you can claim business expenses (like home office costs, software, or travel) against your contracting income, which lowers your overall taxable income.
Whether you should go contracting in NZ depends heavily on how comfortable you are with accounting, managing your own cash flow, and setting aside money for the IRD at the end of the financial year.
What Happens If You Get Your Code Wrong?
If you accidentally give your secondary employer the wrong tax code, one of two things will happen:
- You Overpay: If you give a code that taxes you at 33% (ST), but your total income actually keeps you in the 17.5% bracket, you will overpay tax every payday. The good news? The IRD automatically calculates this at the end of the tax year (March 31) and will issue you a tax refund between May and July.
- You Underpay: If you give a code that taxes you at 17.5% (S), but your total income pushes you into the 30% bracket, you will underpay tax. At the end of the tax year, the IRD will calculate the shortfall and send you a bill that you are legally required to pay.
Always estimate your total income cautiously. It is far better to slightly overpay and get a nice refund in the winter than to underpay and scramble to find cash to pay the taxman.
Frequently Asked Questions
1. Do I get taxed more heavily just because I have a second job? No. You are taxed on your total income. Earning $60,000 from one job results in the exact same amount of total tax as earning $40,000 from your main job and $20,000 from a second job. The secondary tax code just ensures the correct rate is applied to your top-up income.
2. How do I change my secondary tax code if my income drops? If your primary salary drops or you reduce your hours, your total estimated income might fall into a lower bracket. Simply fill out a new Tax Code Declaration (IR330) form, hand it to your secondary employer, and they will update your code in their payroll system.
3. Do I need a secondary tax code if I’m a sole trader/contractor? If you are invoicing clients directly as a sole trader (not receiving schedular payments), you do not use secondary tax codes like SH or ST. You receive the full gross amount from your clients and must calculate, declare, and pay your own income tax at the end of the year via an IR3 tax return.
4. What code do I use if both my jobs pay exactly the same amount? You can only have one “main” job. Choose whichever job you have held the longest, or whichever is most stable, and assign that the M code. Give the other job the appropriate secondary code based on your combined total income.
Disclaimer: This is general information, not personalised financial advice. For advice specific to your situation, we recommend speaking with a registered tax agent or accountant, and always checking the latest updates on the Inland Revenue Department (IRD) and Sorted.org.nz websites.
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