New Zealand finance glossary

This glossary brings together plain-English definitions of the financial and tax terms you will come across on Calculate.co.nz and in everyday New Zealand money matters, from PAYE, GST and KiwiSaver through to the bright-line test, FIF, LVR, DTI, OCR, RWT, ESCT, FBT, PIE, PIR, NZ Super and Working for Families. Each entry explains what the term means in a sentence or two, without jargon, and where a related calculator exists, such as the PAYE, GST, KiwiSaver or FIF tools, it links straight through so you can turn the definition into your own numbers. There is nothing to enter here; simply scan the list or use your browser's find function to jump to the term you need, whether you are reading a payslip, comparing mortgage offers, working out student loan repayments or making sense of a tax return. The entries cover the core building blocks of New Zealand's tax and finance system: income tax and levies, savings and investment vehicles, property rules, and the credits and thresholds that shape take-home pay and entitlements. It is a reference for education, not personalised advice, and figures such as thresholds, rates and repayment percentages can change with policy updates. Always check the last-reviewed date at the bottom of this page and confirm current figures with Inland Revenue or a qualified adviser before relying on them for a decision.

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PAYE: Pay As You Earn, the system under which your employer deducts income tax and the ACC earners levy from your wages before paying you. The amount deducted depends on your tax code and your income, and it is passed to Inland Revenue on your behalf. Most employees never file a return because PAYE has already collected roughly the right amount. See the paye calculator.
Tax code: The code you give your employer, such as M or ME, that tells them how much PAYE to deduct. It reflects whether the job is your main or secondary income and whether you claim entitlements such as the Independent Earner Tax Credit. The wrong code means too much or too little tax through the year, corrected at the square-up. See the tax code calculator.
Marginal tax rate: The rate applied to your next dollar of income, as opposed to your average rate across all of it. New Zealand uses progressive brackets, so only the income inside a bracket is taxed at that bracket rate. This is why a pay rise that crosses a threshold never reduces your total take-home pay.
Effective tax rate: Total tax paid divided by total income, expressed as a percentage. It is always lower than your marginal rate under a progressive system, because your earlier income was taxed in lower brackets. The effective rate is the honest answer to what proportion of your income goes in tax; the marginal rate answers what the next dollar costs. See the effective tax rate calculator.
Secondary tax: The tax code used for income from a second or subsequent job. It applies a flat rate approximating the marginal rate your combined income attracts, because the second employer cannot see the first one. It is often mistaken for a penalty. Any over-deduction is refunded at the end-of-year square-up. See the secondary tax calculator.
IETC: The Independent Earner Tax Credit, a credit for mid-income earners who receive neither a main benefit nor Working for Families. It is claimed through your tax code or at the square-up, and it abates once income passes a set point, disappearing entirely above an upper threshold. See the ietc calculator.
ACC earners levy: A levy collected through PAYE that funds ACC cover for injuries that happen outside work. It applies to salary, wages and self-employed income up to an annual maximum, so very high earners pay it only on the portion below that cap. It is a levy rather than a tax, but it is deducted alongside PAYE.
Square-up: Inland Revenue's end-of-year reconciliation of what you actually owed against what was deducted through the year. If too much came out, you receive a refund; if too little, you receive a bill. Most wage and salary earners are squared up automatically without filing anything.
Provisional tax: Tax paid in instalments through the year by people whose residual income tax exceeds the threshold, rather than as one lump sum afterwards. It applies mainly to the self-employed, contractors and companies. The instalments are estimates, reconciled against actual liability once the return is filed. See the provisional tax calculator.
Residual income tax: Your income tax liability for the year after tax credits are applied but before provisional tax instalments are counted. It is the figure that determines whether you must pay provisional tax the following year, and it is the base from which those instalments are calculated under the standard method.
Withholding tax: Tax deducted at source by whoever pays you, rather than paid by you afterwards. PAYE is the best-known form. Schedular payments to contractors, interest paid by banks and dividends paid by companies all carry their own withholding, each at its own rate.
Schedular payment: A payment to a contractor from which tax is withheld at source, even though the contractor is not an employee. Common in construction, media and agriculture. The rate depends on the type of work and the contractor may elect a different rate within limits.
GST: Goods and Services Tax, a broad consumption tax of 15% added to most goods and services in New Zealand. Registered businesses charge it on sales and claim it back on purchases, so the cost falls on the final consumer. A few supplies, such as financial services and residential rent, are exempt or zero-rated. See the gst calculator.
GST-inclusive: A price that already contains the GST component. Retail prices to consumers must be shown GST-inclusive. To find the tax inside such a price, multiply by three twenty-thirds rather than by fifteen per cent, because the GST is a fraction of the total rather than of the pre-tax amount.
GST-exclusive: A price stated before GST is added, common in quotes between businesses because a registered buyer reclaims the tax. Adding GST means multiplying by 1.15. Confusing the two is the most common costing error in small business, and it understates a quote by about thirteen per cent of the total.
GST registration threshold: The annual turnover above which registering for GST becomes compulsory. Below it registration is optional, and it can still be worthwhile if you buy more than you sell or if your customers are themselves registered. Turnover is measured over any twelve-month period, looking both back and forward.
Input tax: The GST a registered business pays on its own purchases and can claim back from Inland Revenue. Claiming input tax is what stops GST compounding at each stage of a supply chain, and it is why the tax ultimately falls on the final consumer rather than on businesses.
Output tax: The GST a registered business charges on its sales and must pay to Inland Revenue. A GST return sets output tax against input tax; the difference is what you pay or are refunded. A business with more inputs than outputs in a period receives a refund.
Zero-rated: A supply that carries GST at zero per cent rather than being exempt. The distinction matters: a zero-rated supplier still registers and still claims input tax back, while an exempt supplier cannot. Exports and certain land transactions between registered parties are zero-rated.
KiwiSaver: New Zealand's voluntary work-based retirement savings scheme. Employees contribute a percentage of gross pay, employers contribute on top, and the government adds an annual contribution for eligible members. Funds are generally locked in until the age of eligibility for NZ Super, with limited early withdrawal for first homes and hardship. See the kiwisaver calculator.
Employer contribution: The compulsory contribution an employer makes to an employee's KiwiSaver account, calculated on gross salary or wages. It is paid on top of salary unless the employment agreement lawfully adopts a total remuneration approach, and it is subject to ESCT rather than being paid tax free.
ESCT: Employer Superannuation Contribution Tax, deducted from an employer's KiwiSaver contribution before it reaches the member's account. The rate is set by the employee's total remuneration in the previous year, using its own band structure. It is why an employer contribution arrives smaller than the headline percentage suggests.
Government contribution: An annual payment into your KiwiSaver account matching a proportion of what you contributed yourself, up to a capped amount, for members who meet the age and residence conditions. It is calculated over the KiwiSaver year to 30 June rather than the tax year, so contributions are timed against that date.
Contributions holiday: A period during which a KiwiSaver member pauses their own contributions, now known as a savings suspension. Employer contributions stop too, and so does eligibility for the full government contribution, so a suspension costs considerably more than the member's own money.
PIE: Portfolio Investment Entity, a fund taxed at each investor's Prescribed Investor Rate rather than at the fund's own rate. Most KiwiSaver and managed funds are PIEs. The structure caps the tax rate on investment income below the top personal rate, which is its main advantage for higher earners. See the pie calculator.
PIR: Prescribed Investor Rate, the rate at which your share of a PIE's income is taxed. It is set from your income in the two preceding years, and you tell the fund which rate applies. Giving too low a rate leaves you with tax to pay; too high, and the overpayment is refundable. See the pir calculator.
LVR: Loan-to-Value Ratio, the size of a mortgage as a percentage of the property's value. Lenders use it to price risk and the Reserve Bank uses restrictions on high-LVR lending as a policy tool. A lower ratio generally means access to better interest rates and no low-equity margin. See the lvr calculator.
DTI: Debt-to-Income ratio, total borrowing measured against gross income. The Reserve Bank uses DTI restrictions alongside LVR to limit how far lending can outrun incomes. Unlike LVR, it does not improve when house prices rise, which is why the two tools constrain different risks. See the dti calculator.
Bright-line test: A rule taxing the profit on residential property sold within a set period of buying it, regardless of intention. It exists because the ordinary intention test is hard to prove. The main home is generally excluded. The period has changed several times, and the one that applies is set by when you acquired the property. See the bright-line test calculator.
Ring-fencing: The rule preventing losses from residential rental property being offset against other income such as salary. Losses are instead carried forward against future income from the same portfolio. It removed a long-standing tax advantage of negatively geared rental investment.
Chattels: Moveable items included in a property sale, such as carpets, curtains, light fittings and appliances. They matter for tax because chattels can be depreciated where the building generally cannot, and they matter at settlement because a dispute over what was included is a common cause of delay.
Equity: The share of a property you own outright: its market value less the debt secured against it. Equity grows through repayments and through any rise in value, and falls if the market drops. Lenders often let you borrow against equity in an existing property to fund a deposit on another.
Offset mortgage: A mortgage arrangement where credit balances in linked accounts reduce the balance on which interest is charged. You keep access to the cash, and the saving equals your mortgage rate rather than a taxable deposit rate, which usually makes it worth more than the interest the money would have earned. See the offset mortgage calculator.
Revolving credit: A mortgage that works like a large overdraft, letting you draw down and repay freely up to a limit. Interest is charged daily on the balance, so wages sitting in the account reduce it. It suits disciplined borrowers with variable income and punishes those who treat the limit as spending money.
Break fee: The charge a lender applies when you exit a fixed rate early. It compensates the lender for the difference between your rate and the rate it can now earn for the remaining term. Break fees are large when wholesale rates have fallen since you fixed, and typically nil when they have risen. See the break fee calculator.
Cash contribution: A lump sum a bank pays you for taking out or switching a mortgage, often a percentage of the loan. It comes with a clawback period, commonly three or four years, during which leaving means repaying some or all of it, usually pro-rated by the days remaining.
Rateable value: The value a council assigns to a property for setting rates, updated on a cycle of about three years. It is not a market appraisal and can differ substantially from what a property would sell for, particularly late in a revaluation cycle or after significant improvements.
Compound interest: Interest earned on your interest as well as on your original capital. Because each period's return joins the balance that earns the next one, growth accelerates over time. It is the single most important idea in long-term saving, and it is why starting a decade earlier usually beats contributing more later. See the compound interest calculator.
Simple interest: Interest calculated only on the original principal, never on interest already earned. It is rare in savings and common in short-term lending and some hire purchase arrangements. Over any long period it produces markedly less than compound interest on the same nominal rate.
RWT: Resident Withholding Tax, deducted by banks and other payers from interest and dividends paid to New Zealand residents. You elect the rate that matches your income. If you do not supply an IRD number the payer must deduct at a penal no-declaration rate instead.
Imputation credit: A credit attached to a dividend representing company tax already paid on the profit being distributed. It stops the same income being taxed twice. A shareholder on a rate above the company rate pays the difference, and one below it can have the excess credited against other tax.
FIF: Foreign Investment Fund rules, which tax certain overseas shareholdings on a deemed basis rather than on dividends alone. They generally apply once the cost of your foreign shares passes a set threshold. Several calculation methods exist, and the choice between them can change the result substantially. See the fif calculator.
Dollar cost averaging: Investing a fixed amount at regular intervals regardless of price, so you buy more units when prices are low and fewer when they are high. It removes the need to time the market and smooths the entry price, at the cost of leaving money uninvested longer than a lump sum would.
Diversification: Spreading investments across different assets, sectors and countries so that no single failure is decisive. It reduces the risk specific to any one holding without necessarily reducing expected return, which is why it is often described as the only free lunch in investing.
Managed fund: A pooled investment where many investors money is managed together under a stated strategy. Most New Zealand managed funds are PIEs, so income is taxed at your PIR. Fees are charged as a percentage of the balance each year and compound against you exactly as returns compound for you.
Index fund: A fund that tracks a market index rather than trying to beat it, holding the constituents in proportion. Because it requires little research it charges far less than an actively managed fund, and over long periods that fee difference is the main driver of the gap in outcomes.
Volatility: How much an investment value moves up and down over time. Higher volatility means a wider range of possible outcomes in any given year, though not necessarily a worse long-run return. It matters most when you need the money soon, because a fall may not have time to recover.
Risk profile: A description of how much variability in returns you can tolerate, shaped by your time horizon and circumstances as much as your temperament. It determines the mix of growth and income assets in a portfolio, and it should change as the time until you need the money shortens.
Term deposit: A deposit locked with a bank for a fixed period at a fixed rate. It offers certainty rather than growth, and breaking one early usually costs a reduction in the rate paid. Interest is taxable as it is earned, so the after-tax return is what should be compared against alternatives. See the term deposit calculator.
OCR: The Official Cash Rate, set by the Reserve Bank of New Zealand to influence inflation and economic activity. It anchors very short-term wholesale rates and feeds through to floating mortgage and deposit rates quickly, and to fixed rates less directly, since those follow longer wholesale rates.
Inflation: A general rise in prices over time, which reduces what a given sum of money will buy. It is why a return has to be judged after inflation rather than before: a five per cent return during four per cent inflation has increased your purchasing power by about one per cent. See the inflation calculator.
Real return: The return on an investment after inflation is removed, which is the only measure describing whether you can buy more than before. A nominal return can be positive while the real return is negative, which is the usual position for cash during periods of high inflation.
Amortisation: The process of paying off a loan through regular instalments covering both interest and principal. Early payments are mostly interest because the balance is large, and the mix shifts towards principal over the term. This is why paying a little extra early saves far more than the same amount later. See the amortisation calculator.
Principal: The amount actually borrowed, as distinct from the interest charged for borrowing it. Reducing principal is the only thing that reduces future interest, which is why a lump sum payment saves money at the rate of your loan for every year remaining on it.
Interest-only: A loan arrangement where instalments cover interest and none of the principal, so the balance does not fall. Payments are lower, but nothing is being repaid and the full amount remains due when the period ends. Lenders usually grant it for limited periods and on stricter terms. See the interest-only calculator.
Fixed rate: An interest rate locked for an agreed term, giving certainty about repayments and protection if rates rise. The trade-off is a break fee if you exit early and no benefit if rates fall. Many borrowers split a loan across terms so only part rolls over at any one time.
Floating rate: An interest rate that moves with the market, usually tracking the OCR closely. It is normally higher than fixed rates but carries no break fee, so it suits borrowers expecting to repay lump sums or to sell within a short period.
Refinancing: Replacing an existing loan with a new one, often with a different lender, to obtain a better rate or different terms. It is worthwhile when the saving over the remaining term exceeds the switching costs, which typically include legal and valuation fees and any break fee, less any cash contribution. See the refinancing calculator.
Debt consolidation: Combining several debts into one loan, usually at a lower rate and a single repayment. It lowers the monthly cost but often lengthens the term, so total interest paid can rise even as the rate falls. It only helps durably if the spending that created the debt also changes. See the debt consolidation calculator.
Credit score: A rating derived from your borrowing and repayment history that lenders use to assess risk. In New Zealand it is held by credit reporting agencies and you are entitled to see yours. Missed payments and multiple applications in a short period both weigh against it.
Hire purchase: A credit arrangement where you take possession of goods immediately but ownership passes only when the final instalment is paid. Because the seller retains title, repossession is easier than under an ordinary loan, and the effective interest rate is often much higher than the advertised figure suggests.
Buy now pay later: A short-term instalment arrangement, usually interest free, splitting a purchase into several payments. Revenue comes from merchant fees and from late fees, so the cost falls on those who miss a payment. Several arrangements running at once is a common route into difficulty.
Gross pay: Your pay before any deductions, the figure usually quoted in an employment agreement. PAYE, the ACC earners levy, KiwiSaver and student loan repayments all come out of it, so gross is a poor guide to what will actually reach your account.
Net pay: What actually reaches your bank account after every deduction. It is the figure worth budgeting against. Two people on the same gross salary can take home noticeably different amounts depending on their KiwiSaver rate, student loan and tax code. See the net pay calculator.
Ordinary weekly pay: A statutory measure of a week of pay used to value annual leave, defined by the Holidays Act. Where pay varies it is compared against average weekly earnings and the higher figure applies, which is why holiday pay on variable hours is more involved than it first appears.
Average weekly earnings: The average of gross earnings over the preceding twelve months, used alongside ordinary weekly pay to value annual leave. Its purpose is to stop a quiet week immediately before leave reducing what that leave is worth.
Annual leave: The paid leave an employee becomes entitled to after twelve months of continuous employment, a minimum of four weeks under the Holidays Act. It is an entitlement in weeks rather than hours, which is why converting it for someone whose hours vary requires care. See the annual leave calculator.
Final pay: The last payment on ending employment, covering time worked plus any untaken annual leave and, where applicable, a proportion of leave not yet accrued. Holiday pay on termination is calculated as a percentage of gross earnings for the part-year since the last entitlement date. See the final pay calculator.
Redundancy: The ending of a role because the position itself is no longer required. New Zealand has no statutory redundancy compensation, so any payment depends on the employment agreement. Redundancy payments are taxed as an extra pay and are exempt from the ACC earners levy. See the redundancy calculator.
Extra pay: A lump sum outside the regular pay cycle, such as a bonus, commission or redundancy payment. Tax is worked out by annualising your income, adding the lump sum and applying the resulting rate to the whole payment, which is why a bonus often looks over-taxed against a normal payslip. See the extra pay calculator.
Contractor: Someone engaged for services rather than employed, responsible for their own tax, ACC levies and leave. The label in a contract does not settle the question: the real nature of the arrangement decides, and misclassification carries liability for the engaging business.
Minimum wage: The lowest hourly rate an employer may lawfully pay, reviewed annually and set by the government. Separate starting-out and training rates apply to defined groups. It applies to every hour worked, so unpaid overtime can breach it even where the headline rate complies. See the minimum wage calculator.
Cash flow: The movement of money into and out of a business over a period, as distinct from profit. A profitable business can fail if customers pay more slowly than suppliers must be paid. Cash flow forecasting is the discipline of checking the bank balance survives that gap.
Gross margin: Revenue less the direct cost of what was sold, expressed as a percentage of revenue. It measures the profitability of the product itself before overheads. It is routinely confused with markup, which measures the same gap against cost rather than price and is therefore always the larger number. See the gross margin calculator.
Markup: The amount added to cost to reach a selling price, expressed as a percentage of the cost. A fifty per cent markup produces a margin of about thirty-three per cent. Pricing from a target margin while calculating a markup is a common and expensive arithmetic error. See the markup calculator.
Break-even: The level of sales at which total revenue exactly covers total costs, so the business makes neither profit nor loss. It is found by dividing fixed costs by the contribution each sale makes towards them, and it states the minimum volume the business must sustain. See the break-even calculator.
Depreciation: The accounting recognition that an asset loses value as it is used, spread across its useful life. Inland Revenue sets rates by asset class. Straight line claims the same amount each year and diminishing value claims more early on, and both write off the same total at different speeds. See the depreciation calculator.
Working capital: Current assets less current liabilities, the money tied up in running a business day to day. Growth consumes working capital, because stock and unpaid invoices rise before the cash arrives, which is why fast-growing businesses can run short of money while trading profitably.
FBT: Fringe Benefit Tax, paid by employers on non-cash benefits given to employees, such as a vehicle available for private use, low-interest loans or subsidised goods. It exists so that remuneration provided in kind is not a way of avoiding the tax salary would attract. See the fbt calculator.
Look-through company: A closely held company that elects to have its income and losses attributed directly to its owners for tax, in proportion to shareholding. It combines limited liability with tax treatment closer to a partnership, and it carries entry conditions and ongoing restrictions.
NZ Super: New Zealand Superannuation, the government pension paid to eligible residents from the qualifying age. It is not means tested against income or assets, it is taxable, and the rate depends on your living situation rather than on any contribution history.
Working for Families: Tax credits topping up the income of families with dependent children. The main components are the Family Tax Credit and the In-Work Tax Credit. Entitlement abates as family income rises above a threshold, so a pay rise reduces the credit as well as attracting tax. See the working for families calculator.
Abatement: The reduction of a benefit or tax credit as income rises, at a stated rate per dollar earned. Abatement combined with tax and levies produces the effective marginal rate, which for some families is considerably higher than the top income tax rate.
Best Start: A weekly payment for families with a child under three. It is paid regardless of income in the child first year and abates against family income after that. It sits alongside Working for Families rather than replacing any part of it. See the best start calculator.
Community Services Card: A card reducing the cost of some health services and prescriptions for people on lower incomes. Eligibility is based on income and household size, and it is issued automatically to most beneficiaries and to some people receiving Working for Families.
Emergency fund: Money set aside in an accessible account to cover unexpected costs or a loss of income, commonly three to six months of essential expenses. Its purpose is to stop a shock becoming debt. It is held for certainty rather than return, so it belongs in cash rather than invested. See the emergency fund calculator.
Net worth: Everything you own less everything you owe, at a point in time. It is the clearest single measure of financial position because it captures debt as well as assets. The direction it moves each year matters more than the figure itself. See the net worth calculator.
Opportunity cost: The value of the best alternative given up when you choose one use of money or time over another. Repaying a mortgage forgoes whatever the same money would have earned invested, so the comparison is against that return after tax and risk, not against zero.
Liquidity: How quickly an asset can be turned into cash without a meaningful loss of value. A bank balance is highly liquid and a house is not. Liquidity matters most when money is needed unexpectedly, which is exactly when illiquid assets tend to be worth least.
Nominal value: An amount expressed in the money of the day, without adjusting for inflation. Comparing nominal figures across decades misleads, because the same number of dollars buys steadily less. Real values, which adjust for price changes, are the ones that support a comparison over time.
Present value: What a future sum is worth today, once discounted for the return that money could otherwise earn. It is the basis of comparing options paying out at different times, and it is why a dollar promised in ten years is worth markedly less than one in hand.
Annuity: A stream of equal payments made at regular intervals for a set period or for life. The idea underpins loan repayments, pensions and drawdown planning. Valuing one means discounting each payment back to the present and adding them together.
UOMI: Use of Money Interest, charged by Inland Revenue when tax is paid late or underestimated, and paid to you when you have overpaid. It is not a penalty; it prices the time the money was in the wrong hands. The rates for underpayment and overpayment differ and are set by regulation.
Donation tax credit: A credit of a third of donations made to approved donee organisations, claimable each year up to the level of your taxable income. Receipts are required and the claim is made after the tax year ends. It is a credit against tax paid rather than a deduction from income. See the donation tax credit calculator.
Capital gains: The profit made when an asset is sold for more than it cost. New Zealand has no general capital gains tax, but several rules tax specific gains, including the bright-line test on residential property, the FIF rules on offshore shares, and gains made by anyone who deals in or develops property.
Taxable income: Income after allowable deductions but before tax credits, the figure on which your tax is calculated. It includes salary, business profit, interest, rent and taxable benefits. It is usually lower than gross income for the self-employed and identical to it for most wage earners.
Deduction: An expense subtracted from income before tax is calculated, reducing the amount taxed. To be deductible an expense must be incurred in earning income, which is why private costs are not deductible and mixed-use costs must be apportioned.
Mileage rate: A per-kilometre rate published by Inland Revenue for claiming the cost of using a private vehicle for work. A higher tier covers the first block of kilometres each year and a lower tier applies beyond it, reflecting that fixed costs are recovered early.
Depreciation rate: The annual percentage Inland Revenue sets for writing off an asset class, differing by asset and by method. Using the wrong rate misstates taxable profit in both directions over the life of the asset, since the total written off is fixed and only the timing changes.
CPI: The Consumers Price Index, Statistics New Zealand's measure of the change in price of a representative basket of household goods and services. It is the standard measure of inflation and the reference point for many contractual adjustments, including some rent reviews and benefit increases.
Living wage: A voluntary hourly rate calculated by Living Wage Movement Aotearoa as the income needed for a household to meet necessities and participate in society. It is not law and differs from the statutory minimum wage, which is set by government and binding on every employer.
Unemployment rate: The proportion of the labour force actively seeking and available for work but not employed. It excludes people not looking for work, which is why it can fall for the unwelcome reason that people have stopped searching rather than because they found jobs.
Median: The middle value in a ranked set, with half above and half below. For house prices and incomes it is more informative than the average, because a small number of very large values pulls an average upwards while leaving the median where most people actually are.
Road user charges: A distance-based charge paid by diesel vehicles and, since their exemption ended, by light electric vehicles, covering their contribution to road costs. Petrol vehicles pay through fuel excise instead, which is collected at the pump rather than bought in advance as a licence.
Body corporate levy: A charge paid by owners in a unit title development to fund shared costs such as insurance, maintenance and the long-term maintenance fund. Levies vary widely between buildings and are a substantial ongoing cost that a purchase price comparison alone will not reveal.
Unit title: A form of ownership used for apartments and some townhouses, where you own your unit outright and share ownership of common property through a body corporate. It carries governance obligations and levies that freehold ownership does not.
Cross lease: An older form of shared ownership where owners hold an undivided share of the land and lease their dwelling from the other owners. Alterations usually need the consent of the other cross lease owners, which makes some changes slower and can affect resale.
LIM report: A Land Information Memorandum, issued by the council, setting out what it knows about a property: consents, drainage, hazards, rates and zoning. It reports the council record rather than the building condition, so it complements rather than replaces a builder's inspection.
Agency agreement: The contract appointing a real estate agent to market and sell a property, setting the commission, the term and whether the appointment is exclusive. Signing one creates an obligation to pay commission that can survive the agreement ending, which is where disputes usually start.
Deadline sale: A marketing method where offers are invited by a stated date without a published price, and the vendor is not bound to accept any of them. Unlike an auction, offers can be conditional, and unlike a price listing, buyers must decide what the property is worth without a guide.
Conditional offer: An offer to buy that becomes binding only if stated conditions are satisfied, such as finance, a builder's report or the sale of another property. Each condition has a date by which it must be confirmed or the agreement can be cancelled.
Progress payment: A staged drawdown on a construction loan, released as building milestones are certified rather than as one lump sum. Interest is charged only on what has been drawn, so the cost builds through the project rather than applying to the full amount from the start.
OPEX: Operating expenses in a commercial lease, the building running costs a tenant pays on top of base rent, covering items such as insurance, rates, cleaning and management. They are variable and can rise materially, so a rent comparison that ignores them understates occupancy cost.
Ratchet clause: A commercial lease provision preventing rent falling at a review, so it can only stay the same or rise. It shifts market risk to the tenant and is a significant term in a long lease, particularly where reviews are to market rather than to an index.
Property syndicate: A structure where many investors jointly own a commercial property through a managed vehicle, receiving a share of the rent. Units are typically illiquid with no ready secondary market, so the money is committed for the life of the syndicate.
Balance transfer: Moving credit card debt to another card offering a low or zero introductory rate for a set period. It helps only if the balance is cleared before the rate reverts, and new spending on the card usually attracts the full rate immediately.
Automatic payment: A fixed amount you instruct your bank to send on a set schedule. You control the amount and timing, which makes it suited to rent or savings. It differs from a direct debit, where the recipient initiates the withdrawal.
Direct debit: An authority allowing an organisation to withdraw varying amounts from your account, used for bills that change each period. Because the payee controls the amount, it carries an obligation on them and a right for you to have an incorrect debit reversed.
Overdraft: An arrangement letting a transaction account go below zero up to a limit, charging interest on the negative balance. It is expensive as a permanent state and useful for short timing gaps. Unarranged overdrafts attract markedly higher fees than agreed ones.
Chargeback: A card scheme process reversing a payment where goods did not arrive, were not as described, or the transaction was unauthorised. It is a scheme right rather than a legal one, with time limits, and it sits alongside rather than instead of consumer law remedies.
Credit report: The record a credit reporting agency holds on your borrowing, including accounts, defaults, enquiries and public information. You may request yours free once a year and have errors corrected, which matters because a wrong default entry can affect lending decisions for years.
Guarantor: Someone who agrees to repay a debt if the borrower does not. A guarantee is a real liability, not a character reference, and it can extend to the whole debt rather than a share of it. Guarantors should take their own legal advice before signing.
Term: The length of time an arrangement runs: the years over which a loan is repaid, or the period a rate is fixed for. Lengthening a loan term lowers each repayment and raises total interest, because the balance is outstanding for longer.
Debt snowball: A repayment strategy clearing the smallest balance first regardless of interest rate, then rolling that payment into the next. It costs more in interest than the avalanche method and works better for many people because early wins sustain the effort.
Debt avalanche: A repayment strategy targeting the highest interest rate first while paying minimums on the rest. It is mathematically optimal, minimising total interest, but the first debt can take a long time to clear, which is why some people abandon it.
Minimum payment: The smallest amount a credit card issuer requires each month, typically a small percentage of the balance. Paying only the minimum extends repayment for years and multiplies the interest paid, because most of each payment covers interest rather than the balance.
Default: A failure to meet the terms of a credit contract, usually by missing payments. It is recorded on your credit file and stays there for several years, affecting future borrowing regardless of whether the debt was later repaid in full.
Bankruptcy: A formal insolvency process where a person unable to pay their debts is discharged from most of them after a set period, at the cost of significant restrictions on borrowing, business and travel. New Zealand also offers less severe alternatives for smaller debts.
Excess: The amount you pay yourself on an insurance claim before cover starts. Choosing a higher excess lowers the premium and raises what a claim costs you, which is a trade worth making only if you could comfortably meet the excess.
Premium: The amount paid for insurance cover, usually monthly or annually. It reflects the insurer's assessment of risk, the sum insured and the excess chosen. A rising premium at renewal often reflects the insurer's claims experience rather than anything about you.
Sum insured: The maximum an insurer will pay on a claim. For house insurance New Zealand generally uses sum insured rather than full replacement, which means the figure you nominate is the cap, and setting it too low leaves the shortfall with you.
Underinsurance: Holding cover for less than the cost of replacing what is insured, usually by leaving a sum insured unchanged while building costs rise. It is discovered at the worst possible moment, and it applies to contents at least as often as to buildings.
No claims bonus: A discount that grows for each year without a claim and is usually lost or reduced when you claim. It is worth weighing before making a small claim, because the lost discount and the excess together can exceed the amount recovered.
Sole trader: A person trading in their own name without a separate legal entity. It is the simplest structure and the cheapest to run, and it carries unlimited personal liability, so business debts are the owner's debts.
Limited liability: The principle that a company's shareholders are not personally liable for its debts beyond what they paid for their shares. Lenders often undo it in practice by requiring personal guarantees from directors of small companies.
Partnership: Two or more people carrying on business together with a view to profit. Partners are generally jointly liable for the partnership's debts, including those incurred by the other partners, which is why a written partnership agreement matters.
CAGR: Compound Annual Growth Rate, the constant annual rate that would take a starting value to an ending value over a period. It smooths away the year-to-year path, which makes it useful for comparison and misleading if the volatility along the way mattered. See the cagr calculator.
CAPM: The Capital Asset Pricing Model, which estimates the return an investment should offer given its sensitivity to overall market movements. It is a teaching model and a valuation input rather than a prediction, and its assumptions are strong. See the capm calculator.
Asset turnover: Revenue divided by assets, measuring how much sales a business generates from what it owns. A low ratio suggests capital tied up unproductively. It varies enormously by industry, so it is only meaningful compared against similar businesses.
Balloon payment: A large final payment at the end of a loan, common in vehicle finance, which keeps the regular instalments low. The debt is deferred rather than reduced, and the asset is often worth less than the balloon when it falls due.
Franchise: A licence to operate a business under an established brand and system, in exchange for an initial fee and ongoing royalties. It buys a proven format and reduces independence, and the agreement usually restricts how and to whom the business can be sold.
Franking credit: The Australian equivalent of an imputation credit, attached to dividends from Australian companies. New Zealand investors generally cannot use franking credits against New Zealand tax, which is a common surprise for people holding Australian shares directly.
Bond: A loan to a government or company that pays interest at set intervals and returns the principal at maturity. Bond prices fall when market interest rates rise, so a bond held to maturity behaves quite differently from one that must be sold early.
Yield: The income an investment produces, expressed as a percentage of its price. For property it is rent against purchase price, before or after costs depending on whether it is gross or net. A yield rises when the price falls, so a high yield is not automatically good news.
Drawdown: Taking money out of a retirement balance to live on, and also the term for a fall from an investment's peak value. In the retirement sense the central risk is that withdrawals plus poor early returns exhaust the balance sooner than the plan assumed.
Tenancy bond: Money a tenant lodges at the start of a tenancy, held by Tenancy Services rather than the landlord, against damage or unpaid rent. It must be lodged within the statutory period, and disputes about its return are decided by the Tenancy Tribunal.
Boarder: Someone paying to live in a household and receiving meals or services as part of the arrangement, which distinguishes them from a flatmate. The distinction matters for tax, because payments from boarders may be taxable above a standard-cost threshold.
Executor: The person named in a will to administer an estate: gathering assets, paying debts and distributing what remains. The role carries personal legal duties and can take many months, and an executor may need probate before institutions will release assets.
Probate: A High Court order confirming a will is valid and the executor may act on it. Banks and Land Information New Zealand generally require it before releasing significant assets, which is why estates take time to settle even when the will is uncontested.
Household Economic Survey: The Stats NZ survey that asks a large sample of New Zealand households what they actually spent, in detail, and publishes the result by region, household size, tenure and income. It runs every three years, so the latest figures are always a year or two old, and it is the only official source for what households really spend rather than what they say they intend to. See the household economic survey calculator.
Sampling error: The margin of uncertainty around a figure drawn from a survey rather than counted directly. It is published as a percentage of the estimate, so an error of ten per cent on a figure of two hundred dollars means the real value is probably within twenty dollars either way. A large sampling error usually means few surveyed households fell into that group.
Average: The total divided by the count, also called the mean. It is pulled upward by a small number of very large values, which is why average household spending is usually higher than what a typical household spends. Where a distribution is skewed, the median describes the middle household better than the average does.
Expenditure: Money spent on goods and services, as distinct from money moved between accounts or used to repay debt. The distinction matters in official statistics: mortgage principal is a transfer rather than expenditure, which is why measured housing costs for owners look lower than owners themselves would say.
Decile: One tenth of a population, ranked and split into ten equal groups. Household income deciles run from decile one, the lowest tenth of incomes, to decile ten, the highest. Deciles describe where a household sits relative to everyone else rather than the amount itself.
Enduring power of attorney: A document appointing someone to make decisions about your property or your care if you lose capacity. It must be set up while you still have capacity, which is the reason it is so often arranged too late to be of use.

Definitions are general and for education, not advice. Last reviewed 2026-08-31. See also our guides and reference data.