For most New Zealand company owners, the question of how much to take as salary versus dividends comes down to tax efficiency. Both routes ultimately result in the same income tax being paid - because dividends carry imputation credits from the 28% company tax already paid. The real differences lie in ACC (which applies to salary but not dividends), KiwiSaver employer obligations, and whether the IETC applies to your situation. This calculator models both options from the same pool of company pre-tax profit and shows you exactly what ends up in your pocket either way.
See your net take-home, KiwiSaver impact, and total tax across all three scenarios
New Zealand has a dividend imputation system, which means company profits that have already been taxed at 28% carry imputation credits when paid out as dividends. When you receive a fully imputed dividend, you get a credit for the 28% already paid at the company level. If your personal marginal rate is higher than 28%, you pay a top-up. If your marginal rate is lower than 28%, you receive a refund. This is designed to prevent double taxation of company profits.
Because of this, salary and dividends result in the same income tax being paid in most cases. The real differences that make one option better than the other are ACC, KiwiSaver, and in some income ranges, the IETC.
ACC earners' levy at 1.75% applies to salary but not to dividend income. On a $150,000 salary, that is $2,491 per year in ACC that you would not pay if you took the same amount as a dividend. For higher income owners this advantage is capped at the $156,641 ACC earnings threshold, but it still represents a meaningful saving. Dividends also carry no employee KiwiSaver obligation, so if you want to preserve maximum personal cash flow without contributions to a retirement fund, dividends achieve this.
Salary triggers the employer KiwiSaver contribution, which is a real benefit to you even though it costs the company. At 3.5% employer contribution on a $100,000 salary, the company puts $3,500 into your KiwiSaver fund each year - and while ESCT is deducted from this, the net contribution is still meaningful retirement savings at no direct cash cost to you personally. Salary also makes you eligible for the IETC if your income is between $24,000 and $70,000, and may create a record of personal income that supports mortgage applications.
For most owner-operators, the most tax-efficient approach is a combination. Taking a salary up to a level that triggers the employer KiwiSaver and captures any IETC benefit, then taking the remainder as a fully imputed dividend, often produces the best overall outcome. The exact optimal split depends on your income level, KiwiSaver settings, and whether the employer KiwiSaver benefit outweighs the ACC cost at your income level.
Note that IRD requires shareholder-employees to receive a market-rate salary for work performed in the business - you cannot zero out salary entirely just for tax purposes if you are doing real work in the company. This calculator models the tax outcomes but does not advise on IRD compliance with the shareholder-employee salary rules.
Any profit not distributed remains in the company and is subject to 28% company tax. Retained profit can be paid out as a dividend in future years, still carrying the imputation credits from the tax already paid. The decision to retain profit versus distribute it is separate from the salary/dividend question and depends on your reinvestment plans, future income needs, and personal tax rate trajectory.
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