At what income does a capped percentage fee start to bite?

Divide the cap by the rate. A $1,500 cap on a 1 percent fee is reached at exactly $150,000 of income, because 1 percent of $150,000 is $1,500. Below that point the cap is irrelevant and you pay the full percentage. At that point and above it you pay $1,500 no matter how much more you earn, so every extra dollar of income is charged nothing at all. The crossover is the single most useful number in any capped fee, and it is rarely quoted alongside the headline rate.

Why does the effective rate fall as I earn more?

Because the numerator stops growing and the denominator does not. Once the cap applies, the fee is a fixed amount and the effective rate is that fixed amount divided by your income, which shrinks with every dollar you add. On a $1,500 cap, someone earning $150,000 pays 1 percent, someone earning $300,000 pays 0.5 percent, and someone earning $500,000 pays 0.3 percent. The headline rate is therefore the highest rate anyone pays, not the rate everyone pays.

Does GST change the comparison?

It depends on whether you are GST registered. A fee quoted as a percentage plus GST costs a registered business the exclusive amount, because the GST is recovered in the GST return. For someone not registered, the GST is a real cost and the effective rate is 15 percent higher than the headline suggests. This calculator reports both, because a quoted rate that omits GST is not comparable with one that includes it, and services quote it both ways.

Is a percentage fee charged on income or on profit?

Almost always on income received, not on profit. That distinction matters most to businesses with high revenue and thin margins, where a percentage of income can be a large share of what is actually earned. When comparing a percentage fee with a fixed fee, put both against the same base, and check whether the percentage is charged on the GST-inclusive or GST-exclusive amount, because on a $100,000 turnover that difference is worth $150 at a 1 percent rate.

Is the fee itself tax deductible?

A fee incurred in earning business income is generally deductible, which reduces its real cost by your marginal tax rate. A $1,500 fee costs a sole trader on the 33 percent rate about $1,005 after the deduction, and less again if the GST is recovered. That does not make the fee free, and comparing two services on their after-tax cost gives the same ranking as comparing them before tax, but it does change what you should budget.

Capped Percentage Fee Effective Rate Calculator NZ 2026

Reviewed 5 August 2026.

Quick answer A 1% fee capped at $1,500.00 a year plus GST reaches its cap at $150,000 of income. Someone earning $200,000 pays $1,500.00 before GST, an effective rate of 0.75% rather than the 1% on the tin. The cap is saving them $500.00 a year, and every further dollar they earn is charged nothing.

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A capped percentage fee is two different pricing models wearing one label. Below the cap it behaves exactly like the percentage it advertises, and the amount you pay rises in step with what you earn. At the cap it becomes a flat annual fee, and from that point the percentage stops describing anything you actually pay. The number that separates the two is the cap divided by the rate, and it is almost never printed next to the headline. That omission matters in both directions. A high earner looking at 1 percent sees a fee that sounds ruinous on $300,000 and is in fact half a percent, because the cap has been doing the work for the whole second half of their income. A lower earner sees the same cap advertised as generous protection and will never reach it. This calculator finds your crossover, reports the effective rate you are really paying, and shows how it moves across an income range so you can see which side of the model you are on.

Headline fee rate Percentage of income

Annual cap Enter 0 if the fee is uncapped

Your annual income The amount the fee is charged on

Is GST added to the fee? Recoverable only if you are registered

Your effective rate
0.75%
against a 1% headline

The cap starts to bite at

$150,000

of annual income

What the cap saves you

$500.00

a year, at your income

Your fee in full

Income the fee is charged on$200,000.00

Fee at the headline rate, uncapped$2,000.00

Annual cap$1,500.00

Fee charged, before GST$1,500.00

GST on the fee$225.00

Fee including GST$1,725.00

Effective rate, excluding GST0.75%

Effective rate, including GST0.86%

Income at which the cap applies$150,000.00

Are you above the crossover?Yes, you are paying the capped amount

Income earning no further fee$50,000.00

The effective rate across an income range

The same fee structure at different incomes. The crossover row is where the two pricing models meet, and your own income is highlighted.

Annual income	Fee before GST	Fee incl GST	Effective rate	Capped?

This is an estimate based on what you enter. Fee structures differ in what they charge on, whether the cap runs to a tax year, a calendar year or a rolling twelve months, and whether minimum charges apply to small payments. Check the provider's terms for the base the percentage is applied to and the period the cap resets on, because both change the answer materially. Nothing here is a recommendation of any particular provider.

The crossover is the number worth knowing

Everything about a capped fee follows from one division. Cap divided by rate gives the income at which the two halves of the model meet, and knowing it tells you immediately which one applies to you. Below it you are buying a percentage, and the fee grows exactly as fast as your income does, which is the feature people usually want from percentage pricing: a bad year costs less. At or above it you are buying a flat annual fee that happens to be advertised as a percentage, and your growth is free. The uncomfortable case is sitting just below the crossover, because you are paying the maximum rate the structure ever charges with none of the protection the cap offers, and a modest increase in income would cost you nothing extra at all.

Why the headline rate is the highest rate anyone pays

Once a cap exists, the advertised percentage becomes a ceiling rather than a price. Nobody above the crossover pays it, and the further above it they are, the further the real rate falls. Doubling your income from the crossover halves your effective rate. Tripling it takes the rate to a third. This is worth stating plainly because the marketing of percentage fees tends to emphasise the percentage to people below the crossover, who genuinely pay it, and emphasise the cap to people above, who genuinely benefit from it, without either group being shown the whole curve. The table above is the whole curve.

Worked example

A fee of 1% is capped at $1,500.00 a year, quoted plus GST. The crossover is $1,500.00 divided by 0.01, which is $150,000.00 of income. A contractor earning $200,000 would have been charged $2,000.00 without the cap, so the cap saves them $500.00. They pay $1,500.00 before GST and $1,725.00 including it, which is an effective rate of 0.75% excluding GST and 0.86% including it.

The same structure charged to someone earning $100,000 gives no cap at all: they pay $1,000.00, a full 1.00%, and the cap is a feature they are paying for without using. At $500,000 the fee is still $1,500.00, an effective rate of 0.30%. Three people, one fee schedule, and effective rates that differ by more than three times.

How this is calculated

The uncapped fee is your income multiplied by the headline rate. The fee charged is the lower of that and the cap, unless the cap is entered as zero, in which case the fee is treated as uncapped. GST is added at 15 percent where the fee is quoted exclusive of it. The effective rate is the fee divided by your income, reported both excluding and including GST because quoted rates are not consistent about which they mean. The crossover income is the cap divided by the rate. Income earning no further fee is the amount by which you exceed the crossover, which is the portion of your income the fee no longer applies to.

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