How Is NZ Super Taxed? Tax Codes, M vs S, and Avoiding an End-of-Year Bill (NZ)

NZ Super is taxable income and tax comes out before it reaches you. Here is how it is taxed, which tax code applies (M vs S, SH, ST), how a second income changes things, and how to avoid an end-of-year bill.

NZ Super is taxable income, and tax is taken out before each payment lands in your account. For most people that works smoothly, but a wrong tax code or a second source of income can leave too little tax deducted and an unwelcome bill at the end of the year. This article explains how NZ Super is taxed, which tax code applies in common situations, and how to keep the numbers right.

TL;DR: NZ Super is taxed at source like any other income. If it is your main income, the M tax code usually applies. ⁵ For a single person living alone, M gives about $1,110.30 net per fortnight off $1,294.74 gross. ¹ If you have another income, NZ Super may take a secondary code (S, SH, ST), and a mismatch is the main reason superannuitants get an end-of-year tax bill. ⁶

Is NZ Super taxed, and how much tax comes out?

Yes. NZ Super counts as taxable income, and Work and Income deducts tax before paying you, the same way an employer deducts PAYE from wages. ¹ You receive the net amount, and the published "after tax" rates already have tax taken out.

How much comes out depends on the tax code attached to your Super. For a single person living alone on the standard M code, the gross rate is $1,294.74 per fortnight and the net rate is $1,110.30 per fortnight. ¹ For a couple where both partners qualify, each receives $984.28 gross and $854.08 net per fortnight on M. ³ These are the rates in force from 1 April 2025.

The tax itself follows New Zealand's progressive income tax scale, where different slices of your total annual income are taxed at increasing rates.

Bands effective 1 April 2025 (set 31 July 2024); current as at 23 January 2026. ⁴

The key point is that your tax code is a tool for getting the right amount deducted across the year. When NZ Super is your only income, the M code generally lines up well with these bands. When you have other income, it can drift out of line, which is where problems start.

Which tax code should you use on your NZ Super?

The right code depends on whether NZ Super is your highest source of income.

Most people who are retired and not working use the M code on their Super, because it is their main or highest income. ⁵ M is the standard primary tax code and assumes this is the income that should carry the lower tax bands first. ⁵

If you have another, larger income, NZ Super is no longer your main income, and a secondary tax code applies instead. Secondary codes are set based on your estimated total income from all sources, so the tax slice that already covers your main income is not double-counted at the bottom rate.

Secondary tax code bands; current as at 23 January 2026. ⁶

You can see the effect of the code in the net Super you actually receive. For a single person living alone, the net fortnightly rate changes with the code on the payment:

Rates effective 1 April 2025; current as at 23 January 2026. ²

The aim is not to pay the least tax on the Super line in isolation, but to have the right total tax deducted across all your income so the year balances out. A code that looks generous on one payment can simply mean too little tax overall, which surfaces later as a bill.

What changes when you have a second source of income?

A second income is the most common reason a tax code needs thought. The question is always the same: which income is the highest?

• NZ Super is your highest income. Keep M on your Super, and the other income (a part-time wage, for example) takes a secondary code based on your total. ⁵⁶
• Your other income is higher than Super. That income takes the primary M code, and your NZ Super moves to a secondary code (S, SH, ST or SA) based on your estimated total income. ⁶

The figure below maps a few common situations to the code that usually fits and the risk to watch.

Figure: NZ Super tax — which code applies with a second income. Modelled on IRD tax codes and 2025/26 rates. ⁴⁶ Scenarios are illustrations of how the codes generally work, not personalised advice; your correct code depends on your full circumstances.

The trickiest case is income that is not taxed at source, such as rent or self-employed earnings. Your Super and any wages have tax deducted as they are paid, but rental or business income usually does not, so the tax on it is settled when your return is assessed. If you have not set money aside, that settlement can be a surprise.

How do KiwiSaver withdrawals and term deposits get taxed alongside Super?

Two other common retirement income sources are taxed quite differently, and it helps to keep them straight.

KiwiSaver and managed-fund withdrawals. Tax on a KiwiSaver fund is paid inside the fund as you go, through the PIE (Portfolio Investment Entity) system, at your PIR (Prescribed Investor Rate, the tax rate on your KiwiSaver earnings). Because that tax is handled within the fund, money you withdraw from KiwiSaver in retirement is generally not taxed again as income and does not change your NZ Super tax code. Getting your PIR right matters in its own way, which we cover in how PIE tax works and what PIR you should be on.

Term deposits and savings interest. Bank interest is taxable income, and tax is deducted at source as Resident Withholding Tax (RWT). You elect an RWT rate to match your marginal tax rate, from 10.5%, 17.5%, 30%, 33% or 39%. ⁷ If you leave the RWT rate too low for your total income, the shortfall is squared up at year end, in the same way a wrong Super code is.

So three of the main retirement income sources behave differently: NZ Super is taxed through its tax code, term-deposit interest through RWT, and KiwiSaver through the PIE/PIR system. A tidy retirement income plan checks all three are set correctly, not just one.

Why do superannuitants get end-of-year tax bills?

An end-of-year bill almost always means too little tax was deducted across the year. A few patterns come up repeatedly.

• A second income on the wrong code, or no code change at all. If your Super stays on M while you also draw a larger wage, both incomes may be using the lower tax bands, so the combined deduction falls short. The secondary code system exists precisely to stop this. ⁶
• Income with no tax taken at source. Rent and self-employed income are common in retirement and are not taxed as they are received, so the full liability appears at assessment time. ⁴
• An RWT rate set too low on savings interest. With more in term deposits, the gap between a low RWT rate and your actual marginal rate can add up. ⁷
• A jump in total income pushing you into a higher band. Because the tax scale is progressive, extra income can be taxed at a higher rate than a single code assumes. ⁴

None of these mean you have done anything wrong. They are simply the system catching up at year end when deductions through the year did not match the total. The fix is to get the codes and rates right in advance so the year balances on its own.

How do you check and change your NZ Super tax code?

Inland Revenue provides a short questionnaire that works out the correct code from your income details. You answer a few questions about your income sources, it returns the right code, and you then give that code to Work and Income for your Super (and to any employer or bank for other income). ⁸

A simple sequence covers most situations:

1. List every source of income you expect this year: NZ Super, any wages, rent, self-employed income, taxable interest and dividends.

2. Use IRD's "Work out my tax code" questionnaire to confirm the right primary and secondary codes. ⁸

3. Give the correct code to Work and Income for your NZ Super, and to each employer or bank for the other income. ⁸

4. For income not taxed at source (rent, self-employment), set money aside through the year, or talk to IRD about provisional tax.

5. Re-check whenever your income changes — starting or stopping work, a new term deposit, or a change in rental income.

It is worth doing this near the start of the tax year and again if anything changes, rather than waiting for an assessment to flag a mismatch.

How does NZ Super tax differ from the way KiwiSaver is taxed?

These two are easy to confuse because both relate to retirement, but they are taxed through completely separate systems.

The practical upshot is that a healthy retirement income plan checks two different settings: the tax code on your NZ Super and any wages, and the PIR on your KiwiSaver and managed funds. A right answer on one does not fix a wrong answer on the other. For how withdrawals fit together, see KiwiSaver drawdown options in retirement, and for the base payment itself, NZ Super rates and eligibility.

When is it worth getting tax-aware retirement advice?

Most people with NZ Super as their only income do not need help with their tax code; M usually does the job. It becomes more worthwhile to get a considered look when your situation has more moving parts:

• You are still working, or have a wage alongside Super.
• You have rental, self-employed or business income that is not taxed at source.
• You hold meaningful term deposits or other taxable interest.
• You are drawing from KiwiSaver or managed funds and want the PIR and drawdown set sensibly.
• You keep getting end-of-year bills and want to understand why.

The value is in seeing all the pieces together — tax codes, RWT and PIR — so the year squares up without surprises, and so the after-tax income you can actually spend is clear. This is general information rather than personalised advice; the right settings depend on your full circumstances, which is what a review works through.

Frequently asked questions

Is NZ Super taxed?

Yes. NZ Super is taxable income, and tax is deducted before each payment, so you receive the net amount. ¹ The published "after tax" rates already have tax taken out at the code on your payment.

Should I be on the M or S tax code for NZ Super?

It depends on whether NZ Super is your highest income. If it is your main or highest income, the M code generally applies. ⁵ If you have a larger income elsewhere, NZ Super takes a secondary code (S, SH, ST or SA) based on your estimated total income from all sources. ⁶

Why did I get a tax bill at the end of the year on NZ Super?

An end-of-year bill usually means too little tax was deducted across the year. Common causes are a second income on the wrong code, income that is not taxed at source such as rent, or an RWT rate on savings interest set below your marginal rate. ⁴⁶⁷ Correcting the codes and rates for the year ahead generally prevents a repeat.

Does withdrawing from KiwiSaver affect my NZ Super tax code?

Generally no. KiwiSaver tax is paid inside the fund through the PIE system at your PIR, so withdrawals are not usually taxed again as income and do not change your NZ Super tax code. ⁷ It is a separate setting to keep correct in its own right.

How do I change my NZ Super tax code?

Use Inland Revenue's tax code questionnaire ("Work out my tax code") to confirm the right code from your income details, then give that code to Work and Income for your Super. ⁸ It is worth re-checking whenever your income changes.

Do I pay tax on term deposit interest as well as NZ Super?

Yes. Bank interest is taxable, with tax deducted at source as Resident Withholding Tax at a rate you elect to match your marginal rate — 10.5%, 17.5%, 30%, 33% or 39%. ⁷ Choosing a rate that is too low can lead to a shortfall at year end.

This article is general information only and is not personalised financial advice. It does not take into account your particular financial situation, goals or needs. Before acting, consider whether it's right for you and seek advice tailored to your circumstances. NZ Super rates, the qualifying age, residency rules and tax thresholds are set by the Government and can change, so check current rules at ird.govt.nz, workandincome.govt.nz and sorted.org.nz. Tax codes, PIR and RWT settings depend on your full circumstances; this article does not cover provisional tax, estate or legal matters — please consult an appropriately authorised professional where relevant. Figures are correct as at 23 January 2026. Craig Smith Business Services Ltd (FSP712931), trading as Smiths Financial, holds a Class 2 licence issued by the Financial Markets Authority to provide financial advice on personal risk insurance, health insurance, general insurance, KiwiSaver and managed funds, and is a member of the Financial Dispute Resolution Service (FDRS), a free and independent dispute resolution scheme. Written by Henry Smith, Financial Adviser; reviewed by Craig Smith, Principal Adviser. Last reviewed 23 January 2026.