New Final Pay - Extra Pay or Lump Sum
Final Pays from 01 April 2025 - Extra pay tax
As part of the Tax Updates from 01 April 2025 - the calculation for an Extra Pay (EP) or Lump Sum payment made in a Final pay will use the last two paid pays to determine the percentage that the payment will be taxed at.
Any extra payments that were made in the last two paid pays are excluded from the annualised income.
Last two paid pays only refers to normal pays, one off pays are excluded from the annualised income.
Any Pay Elements identified in iPayroll with the Allowance Type - Extra Pay (Liable for ACC Earner Levy) or Extra Pay / WT (No ACC Earner Levy) will be taxed using the extra pay calculations.
Extra payments made outside of a final pay will continue to be calculated with the last 4 weeks.
For more information here Tax Rates for Individuals 01 April 2025
For more information here IRD Lump sum payments End of Employment
This example the person is paid weekly and their hours can vary. They have worked the last two pays. In their final pay of 21 April, they will receive an extra payment of $1,000.
Pay Date | Total Gross Taxable pay (excluding extra payment) |
21 April Final Pay | $800.00 |
14 April | $650.00 |
07 April | $550.00 |
Annualised Calculation:
Paid 14 April and 07 April - Add $650 plus $550 = $1200 which represents two weeks, multiply this by 26 = $31,200 plus extra payment of $1,000 = Grossed up amount $32,200
Between $15.601 to $53,500 range so Tax Rate for the EP (extra payment) is 17.5% plus ACC levy of 1.67% = 19.17%
This example the person is paid weekly, their hours can vary and they have not worked for one of the weeks. In their final pay of 26 May, they will receive an extra payment of $2,000.
Pay Date | Total Gross Taxable pay (excluding extra payment) |
26 May Final Pay | $550.00 |
19 May | 0 |
12 May | $500.00 |
05 May | $600.00 |
Annualised Calculation:
Paid 12 May and 05 May - Add $500 plus $600 = $1100 which represents two weeks, multiply this by 26 = $28,600 plus extra payment of $2,000 = Grossed up amount $30,600
Between $15.601 to $53,500 range so Tax Rate for the EP (extra payment) is 17.5% plus ACC levy of 1.67% = 19.17%
This example the person is paid Monthly and they have not worked for one of the months. In their final pay of 26 June, they will receive an extra payment of $15,000 as well as bonus of $500.
Pay Date | Total Gross Taxable pay (excluding extra payment) |
26 June Final Pay | $6,493.00 |
26 May | 0 |
26 April | $5,500.00 |
26 March | $7,600.00 |
Annualised Calculation:
Paid 26 April and 26 March - Add $5,500 plus $7,600 = $13,100 which represents two months, multiply this by 6 = $78,600 plus extra payments of $500 and $15,000 = Grossed up amount $94,100
Between $78,101 to $180,000 range so Tax Rate for the EP (extra payment) is 33% plus ACC levy of 1.67% = 34.67%
Tax Rates 01 April 2025 - no ACC Levy
Tax Rates 01 April 2025 - including ACC Levy and ACC threshold
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