About This Guide

Are you paying a lump sum to an employee or ex-employee? Lump sums include back paid holiday pay and redundancy. This factsheet tells you how the lump sum may change their tax obligations or entitlements.

When to Use This Guide

If you know you are going to make a lump sum or extra payment to an employee or ex-employee, talk to them first. An employee can tell you what tax code and rate
to use. They’ll usually do this if they have other income.
Otherwise, take their last 4 weeks of income and annualise the amount, adding your lump sum to the total, which will determine the tax to be deducted. You can find the rates at www.ird.govt.nz (search keywords: rates).
All payments will have PAYE deducted from them in the period they were paid. You may have to make other deductions such as student loans, KiwiSaver or child support.

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