Can I Claim Staff Wages and Salaries (New Zealand) as a Business Expense in New Zealand?
Wages, salaries, bonuses, and employer KiwiSaver contributions paid to employees are fully deductible. The deduction is available in the year the wages are incurred, not necessarily when paid.
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What Inland Revenue (IRD / Te Tari Taake) says
Section DB 31 of the Income Tax Act 2007. Wages paid wholly for the purposes of earning income are deductible. Employer KiwiSaver contributions at the compulsory rate (3.5% from the first pay date on or after 1 April 2026, rising to 4% from 1 April 2028) are also fully deductible. ESCT withheld from employer KiwiSaver contributions is deductible as part of the overall employment cost. The compulsory employer rate is paid on top of gross pay. An employee can apply to contribute at a lower rate for a time, and the employer may then match the lower rate, but the employer must return to 3.5 percent if the employee moves back to a higher rate. Employees aged 16 and 17 who are enrolled in KiwiSaver are also entitled to compulsory employer contributions. All employer contributions are liable for employer superannuation contribution tax at the employee's rate.
When you can claim
- Gross salaries and wages paid to all employees for services rendered in the business
- Employer KiwiSaver contributions at the compulsory minimum rate (currently 3.5%)
- Bonuses and commission payments to employees for genuine business services
- ACC work account levies charged to the employer
- Holiday pay accrued at year-end, subject to the timing rules, and paid within 63 days of balance date
When you cannot claim
- Wages paid to the owner-director that are inflated beyond a reasonable arm's length rate to reduce company tax
- Wages to associates or related parties that cannot be demonstrated as genuine and at market rates
- Employer KiwiSaver contributions above the compulsory rate are deductible only if they are genuine employment costs, and excessive contributions for an owner can be challenged
Good to know
Pro tip: Holiday pay accrued but unpaid at year-end is deductible when the accrual meets the Income Tax Act timing rules: ensure your payroll software tracks this separately for tax purposes.
Important: Payroll must also account for PAYE, student loan deductions and ACC. The employer needs a written employment agreement and wage and time records for each employee.
Related expenses
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