How extra pay is taxed
Bonuses, back pay, redundancy payments and other lump sums are extra pay. Your employer works out the rate like this:
- Take your gross pay for the last four weeks and multiply it by 13.
- Add the extra pay to get an annual figure.
- Tax the whole extra pay at the rate for the bracket that figure falls in, plus the ACC earners’ levy.
| Annual figure | Extra pay rate, including ACC levy |
|---|---|
| $0 to $15,600 | 12.25% |
| $15,601 to $53,500 | 19.25% |
| $53,501 to $78,100 | 31.75% |
| $78,101 to $180,000 | 34.75% |
| Over $180,000 | 40.75% |
The whole bonus is taxed at one rate, even if only part of it crosses into a higher bracket. That is why a bonus can look over-taxed. Any overpayment comes back in your end-of-year assessment.
Back pay
Back pay for a past period is extra pay too, taxed the same way, unless it is for pay owed in the current pay period, which is taxed as normal pay.
Holiday pay
Annual holiday pay taken as leave is taxed as normal pay for the period. Holiday pay paid out when you leave a job, or paid as a lump sum, is extra pay. Holiday pay included in every payslip (8% pay-as-you-go for casual work) is part of your normal gross pay.
Source: Inland Revenue, tax rates for individuals. Rates checked 10 November 2026.