Company vs Personal Tax Crossover Calculator NZ 2026/27

Worked example

Grace runs a marketing consultancy and is deciding whether to keep trading as a sole trader or set up a company. Either way, she plans to pay herself a $70,000 salary, and she estimates the extra cost of running a company, accounts, a company tax return and the Companies Office annual return, at $1,500 a year. Entering those two figures, the calculator solves for her personal crossover point: $96,460.00 of annual profit. Below that level, incorporating would cost Grace more than it saves. Above it, retaining the extra profit in a company at 28% starts to win.

Grace expects to make $110,000 in profit this year, comfortably above her $96,460.00 crossover. As a sole trader, tax on the full $110,000 is $26,177.50. As a company, her $70,000 salary attracts $13,220.50 of personal tax, and the remaining $38,500 of profit, after her salary and the $1,500 running cost are set aside, is retained in the company and taxed at the flat 28% company rate, for $10,780.00 of company tax. Add the salary tax, company tax and running costs together and her total is $13,220.50 + $10,780.00 + $1,500.00 = $25,500.50, a saving of $677.00 against the $26,177.50 she would pay as a sole trader. That saving comes entirely from the profit sitting above her crossover point being taxed at 28% instead of the 33% marginal rate it would otherwise attract in her own hands.

If Grace's profit had come in at $85,000 instead, below her $96,460.00 crossover, the company route would have cost her more than staying a sole trader, once the $1,500 running cost and the earlier, less efficient retained dollars taxed at 28% below the $53,500 pivot are accounted for.

How the crossover works

Every dollar of sole trader profit is taxed in the year you earn it, at your own marginal rate. A company instead pays a flat 28% on the profit it retains, after your salary and its running costs are covered. Because 28% sits between the 17.5% and 30% marginal brackets, whether a company helps depends on which side of $53,500 in total profit you are on. Below that level, your marginal rate is 17.5% or 10.5%, both under 28%, so retaining money in a company at 28% actually costs more tax than simply taking it personally. Once profit passes $53,500, the marginal rate you would otherwise pay rises to 30%, then 33%, then 39%, all above the company rate, so every extra dollar retained from that point saves the difference. Your personal crossover point is the profit level at which the tax saved on the dollars above $53,500 finally outweighs the extra tax paid on the earlier, less efficient dollars, plus your company's running costs.

Why $53,500 is the pivot, not the crossover itself

It is a common mix-up to treat $53,500, the point where the 30% bracket begins, as the crossover point itself. It is not, it is only the pivot where the maths starts working in a company's favour. Your actual crossover sits higher, because the company route first has to make up the running costs you enter and any dollars taxed at 28% while your total profit was still moving through the 17.5% bracket below $53,500. For a $70,000 shareholder salary, no profit is retained at all below that salary, so the calculation effectively starts from $70,000 rather than $53,500, and the running costs on top of that push the true break-even higher still, as the worked example above shows.

The market salary rule

None of this works if your shareholder salary is not commercially realistic for the work you actually do. Inland Revenue expects a working shareholder to be paid roughly what an unrelated employee would earn for the same role, not an artificially low figure chosen purely to push more profit into the 28% company rate. The leading authority is the 2011 Supreme Court decision in Penny and Hooper, where two surgeons paid themselves well below a market rate and were found to have entered into tax avoidance, even though using a company was legitimate in itself. A separate attribution rule can also tax retained profit directly to the person who did the work in some personal-services businesses. Set your salary figure at a genuine market rate before relying on the crossover point this calculator gives you.

A saving now, not forever

Retaining profit in a company at 28% is a timing benefit, not a permanent exemption. While the money stays in the business, it is taxed once, at 28%. As soon as you draw it out as a dividend, imputation credits cover the 28% already paid, and you pay further personal tax if your marginal rate at that time is above 28%. If your rate at that later date is below 28%, the excess imputation credit is not refunded to you as an individual, which can turn what looked like a saving into a net cost. The crossover shown here measures the saving in the year the profit is earned and retained. Whether that saving survives once you eventually draw the money out depends on your tax bracket at that later date, which the companion Sole Trader vs Company Tax Calculator models in full.

What this calculator does not cover

• ACC levies, which differ between self-employed classifications and a PAYE salary, and are excluded here.
• The top-up tax, or wasted imputation credit, due once retained profit is actually paid out as a dividend.
• The attribution rule and other anti-avoidance provisions, which can apply in specific personal-services situations regardless of the numbers shown here.
• Trusts, which have their own 39% trustee tax rate and different rules again.
• The legal and accounting cost of setting up a company itself, beyond the ongoing running-cost figure you enter.

Who this calculator is for

This is for sole traders and contractors trying to work out, before they pay for the accounting and legal work involved, at what profit level incorporating would actually start saving them tax. It assumes your profit is earned mainly through your own effort, that your shareholder salary is set at a genuine market rate, and that any profit not paid as salary is retained in the company rather than drawn out immediately. Figures are rounded for display and are a planning estimate, not a substitute for advice from an accountant familiar with your full circumstances.

Related calculators

• Sole Trader vs Company Tax Calculator: the full year-by-year comparison, including what happens on eventual distribution.
• Shareholder Salary Calculator: tax on a shareholder-employee salary in more detail.
• Dividend Tax Calculator: work out top-up tax or a refund on any dividend, not just a full distribution.
• Company Tax and Imputation Calculator: company tax and available imputation credits.
• Self-Employed Take-Home Calculator: after-tax income for a sole trader.

Official NZ sources

This calculator is built from primary New Zealand sources. Always confirm current figures against the official source for your situation:

• Inland Revenue (IRD): income tax for companies
• Inland Revenue (IRD): maximum imputation ratio
• Inland Revenue (IRD): tax for self-employed people
• Companies Office: completing a company annual return