Paid parental leave and tax in NZ: 2026/27 rates explained

Paid parental leave is taxable, "just like a salary or wage", but it carries no ACC earners' levy. From 1 July 2026 to 30 June 2027 the most you can get is $811.05 a week before tax (the minimum is $239.50), for up to 26 weeks. Inland Revenue pays it into your bank account every fortnight after deducting tax under the code you give it. At the maximum rate on the M code, a fortnight of $1,622.10 has $241.86 tax taken off.

How much paid parental leave is in 2026/27

Paid parental leave rates change on 1 July each year, not on 1 April like tax rates. The current figures, from IRD's entitlement page (updated 1 July 2026):

IRD presents the minimum as the minimum payment for self-employed people. If you are an employee, you get the higher of your ordinary weekly pay and your average weekly income, capped at the maximum. If you are self-employed, it is based on your income over the previous 6 or 12 months.

You can be paid for up to 26 weeks (6 months). The payment period is usually the first 26 weeks after your child is born or comes into your care. Payments stop early if you go back to work or stop being the primary carer. At the maximum rate, 26 weeks is $21,087.30 before tax. For anyone earning more than about $811 a week, that is well below normal pay: paid parental leave is not 100% of your salary.

How Inland Revenue pays it

Your employer does not pay paid parental leave. Inland Revenue does: "We'll pay the money into your bank account every fortnight." Each payment is two weeks of your weekly rate, so at the 2026/27 maximum each fortnightly payment is $1,622.10 before tax, and at the minimum it is $479.00.

Before the money reaches you, IRD deducts:

• income tax (PAYE), worked out from the tax code you give it;
• student loan repayments, if you have a loan and use an SL code;
• child support, if you pay it;
• KiwiSaver, but only if you have asked for it.

What IRD does not deduct is the ACC earners' levy (see below). That is why your paid parental leave deductions will not match what you would see on a payslip for the same amount of wages.

You can see each payment and its deductions in myIR. If a payment looks wrong, check the tax code IRD holds for you first, because that code sets the PAYE.

Choosing the right tax code

IRD's tax codes page for paid parental leave says the payments "are taxable just like a salary or wage", and the PAYE depends on the code you give it.

• Paid parental leave is your only or main income: use a main code: M, or ME if you qualify for the independent earner tax credit, with SL added if you have a student loan (M SL, ME SL).
• You also get an employer top-up or have another job: one of those incomes needs a secondary code (SB, S, SH, ST or SA). Pick the secondary code from your total expected income for the year.

Using M on both your paid parental leave and your top-up is a common mistake. Each payer then gives you the low tax brackets, too little tax comes off overall, and you can face a bill after the tax year ends on 31 March 2027. The tax codes guide and secondary tax guide explain how to choose, and the secondary tax calculator shows what each code takes.

ME is worth $10 a week ($20 a fortnight) for eligible people with annual income between $24,000 and $66,000, reducing to nothing at $70,000. If you or your partner are entitled to Working for Families, you cannot use ME.

Why there is no ACC levy on paid parental leave

IRD's paid parental leave pages do not mention the levy, so the law is the place to look. Section 11(1)(aa) of the Accident Compensation Act 2001 says earnings as an employee do not include "any parental leave payments paid under Part 7A of the Parental Leave and Employment Protection Act 1987". No earners' levy is payable on them.

In 2026/27 the levy on wages is 1.75%. On a maximum fortnightly payment of $1,622.10, PAYE on the same amount of salary would include $28.38 of levy. On paid parental leave that $28.38 is not deducted.

An employer top-up is different. It is ordinary salary or wages, so the levy applies to it, and it is taxed through your employer's payroll under the secondary code you give them.

Worked example: one fortnight at the maximum rate

Mere earned well over $811.05 a week before her baby was born, so she receives the maximum. She has no other income during her leave and uses the M code. She has asked IRD to deduct KiwiSaver at 3.5%. These figures are for a fortnight paid between 1 July 2026 and 30 June 2027, with 2026/27 tax rates.

Without KiwiSaver, she would receive $1,380.24 a fortnight on M, or $1,296.96 on M SL. If she qualified for ME, the income tax would be $221.86, $20 less.

At the minimum rate, a fortnight is $479.00. Income tax on M is $50.28, and no student loan comes off because $479 is under the $928 fortnightly threshold, so $428.72 is paid without KiwiSaver.

The tax figures follow IRD's 2026/27 payroll formula with the levy left out, worked out with this site's engine. Your myIR payment record is the final word. To compare with an ordinary wage of the same amount, use the weekly and fortnightly pay calculator.

KiwiSaver while you are on leave

KiwiSaver deductions from paid parental leave are optional. Nothing comes off unless you ask. You can opt in when you apply, or later in myIR, and you can stop at any time.

The reason to opt in is the matching contribution. IRD's KiwiSaver and paid parental leave page (updated 1 April 2026) says: "if you choose to have KiwiSaver deductions from your paid parental leave payments, we'll also make employer contributions of 3.5%." In the example above, that is $56.77 a fortnight on top of Mere's own $56.77. Over a full 26 weeks at the maximum, that is 13 fortnightly contributions she would not get if she stayed opted out.

Your employer does not pay KiwiSaver on paid parental leave. The rules for the employer side, from IRD's 2026/27 payroll specification (s4.5.4):

• If your employer is still paying you salary or wages during your leave, such as a top-up, it keeps deducting KiwiSaver and paying compulsory employer contributions (minimum 3.5% in 2026/27) on that pay.
• On unpaid leave, contributions normally stop. An employer can choose to keep contributing.

For more on rates and choices, see choosing a KiwiSaver rate.

Employer top-ups and keeping-in-touch hours

Top-ups. Employers have no obligation to top up paid parental leave, but some do. A top-up is salary, taxed under the secondary code you give your employer. On a top-up of $500 a fortnight in 2026/27:

Each PAYE figure includes $8.75 of ACC levy. With a student loan, S SL takes a further $60.00 (12% of every dollar on a secondary code).

Keeping-in-touch hours. IRD says "you can do paid work for your employer for up to 64 hours while you're on paid parental leave", by agreement with your employer. That pay comes from your employer, not IRD. Go over 64 hours and you are treated as back at work, and paid parental leave received after that is an overpayment. Keeping-in-touch hours worked after your payment period ends count as a return to work. Keep a running total of the hours you work.

Over the full 26 weeks, and mistakes to avoid

Mere's 26 weeks are 13 fortnightly payments. If all 13 are at the 1 July 2026 to 30 June 2027 maximum and taxed at 2026/27 rates on the M code, with KiwiSaver at 3.5%:

The ACC levy she does not pay over those 26 weeks would have been $368.94 on the same amount of wages.

Common mistakes:

• Using last year's maximum. $788.66 applied to 1 July 2025 to 30 June 2026. From 1 July 2026 it is $811.05.
• Assuming it is tax free. It is taxed like wages; IRD deducts PAYE before it pays you.
• Expecting your employer to pay it. IRD pays it, fortnightly, straight to your bank account.
• Two M codes. With a top-up or second job, one income must be on a secondary code.
• Thinking any work ends your payments. Up to 64 keeping-in-touch hours are allowed by agreement.

Your paid parental leave counts toward your income for the tax year like any other PAYE income. After 31 March 2027, IRD's year-end assessment checks whether the right total tax was paid across all your income, so a wrong code shows up then, usually as a bill if too little was deducted. See year-end refunds and bills.

Questions people ask

Is paid parental leave taxed in NZ?

Yes. Inland Revenue says it is taxable just like a salary or wage. IRD deducts PAYE under the tax code you give it before paying you each fortnight.

What is the maximum paid parental leave in 2026/27?

$811.05 a week before tax for 1 July 2026 to 30 June 2027, up from $788.66. The minimum is $239.50 a week. Payments last up to 26 weeks.

Does ACC levy come off paid parental leave?

No. Section 11(1)(aa) of the Accident Compensation Act 2001 excludes parental leave payments from earnings for the levy. An employer top-up is ordinary pay, so the levy does apply to that.

Does IRD pay KiwiSaver on paid parental leave?

Only if you opt in to KiwiSaver deductions from your payments. Then IRD also makes employer contributions of 3.5%. Your employer does not pay KiwiSaver on paid parental leave.

What tax code should I use with an employer top-up?

Use a main code (M, ME, or with SL) for your main income and a secondary code for the other. Using M on both can leave you with a tax bill after 31 March.