Real Estate Agent Tax in NZ: Income Tax, GST and the 20%
The amount that lands in your bank account is not the amount you put on your tax return. Counter-intuitive, but true. IRD's own sample commission invoice shows why.
The short answer: a licensed salesperson's commission is a schedular payment. Before paying you, the agency withholds 20% of the GST-exclusive commission and sends it to IRD. One invoice therefore has four figures: the GST-exclusive commission goes on your income tax return, the GST-inclusive total on your GST return, the 20% withheld is tax already paid for you, and the net amount banked appears on no return at all. Report from your bank statement and you under-declare income.
What is the 20% that disappears before you are paid?
Most licensed salespeople are independent contractors, not employees. IR830, IRD's factsheet *Income tax and GST in the real estate industry* (August 2026 edition), states that commissions are schedular payments, tax is "usually withheld at a rate of 20%", and it "is worked out on the GST exclusive amount". The agency must withhold unless you hold a valid certificate of exemption; if you never gave the agency an IR330C, the rate is the 45% no-notification rate.
One invoice, four figures — where does each go?
IRD's sample invoice in IR830, three sales in one month:
| Line on the invoice | Amount | Where it goes |
|---|---|---|
| Total agent commission (GST-exclusive) | $5,335.00 | Income on your income tax return |
| GST at 15% | $1100.25 | — |
| Gross commission (GST-inclusive) | $6,135.25 | "Total sales and income" on your GST return |
| Tax withheld at 20% on the GST-exclusive amount | $1,067.00 | Tax already paid to IRD for you |
| Net commission paid to you | $5,068.25 | Appears on no return |
How is income tax settled at year end?
Add up the year's commissions — the GST-exclusive figures — deduct allowable expenses, and tax the net profit at the individual rates (current IRD rates from 1 April 2025):
| Taxable income | Rate |
|---|---|
| $0 – $15,600 | 10.5% |
| $15,601 – $53,500 | 17.5% |
| $53,501 – $78,100 | 30% |
| $78,101 – $180,000 | 33% |
| $180,001 and over | 39% |
The bands stack; the whole amount is not taxed at the top rate. The result, less the 20% already withheld, is what you pay or receive back. The trap: IR830 says the automatic myIR assessment must be checked so schedular income "is showing correctly" and you must "add in your expenses". IRD only holds the income the agency reported. Leave your expenses out and you are taxed on gross commission.
Why is 20% often not enough, and why is year two the tightest?
Twenty percent is flat. Once net profit reaches $120,000, a large slice of income sits in the 33% band while the agency still withholds 20%; the 13-point gap is billed in one lump at year end.
Once that year-end bill exceeds $5,000, you become a provisional taxpayer the following year. On a 31 March balance date the standard option is three instalments — 28 August, 15 January and 7 May; six-monthly GST filers pay two (28 October and 7 May). In year two you pay last year's shortfall and this year's instalments together — close to two years of tax in one. My standing advice: move one third of every commission into a separate account the day it lands. See business advisory and cash-flow forecasting.
The third bill: ACC
ACC is separate from IRD. It invoices you each year on the income declared for your last complete tax year, and cover pays out on that figure too. Rates change annually by classification, so budget from the invoice ACC sends.
How should GST actually be returned?
You may assume GST starts at $60,000. IR830 says that in most cases the agency will require you to be GST-registered, because it charges GST on commissions. The threshold only matters if the agency does not require it: register once turnover exceeds $60,000 in the last 12 months or is expected to in the next 12. The default is two-monthly filing on the invoice basis. Return $6,135.25, not the $5,068.25 banked — IR830: use the bank figure and "you'll be missing the tax and under-declaring your income". IRD also warns your commission should include GST but does not always; confirm with your agency. See Do I need to register for GST in NZ?.
What can you claim, and what can you not?
IR830A (also August 2026) is specific:
| Deductible | Not deductible |
|---|---|
| Driving between two workplaces for the same agency on the same day (for example between open homes); mixed-use vehicles need a logbook | The commute from home to the office |
| Home office, by floor area | Plain clothing such as black trousers and a white shirt, even if the agency requires it |
| Advertising, stationery, REA licence renewal, accounting fees and software, ACC levies, wages to assistants, directly related training | Hairdressing, cosmetics, skin products, glasses and sunglasses |
| Client meals and gifts of food and drink: 50% only | Your own meals |
| Equipment costing $1,000 or less, claimed in the year bought | — |
Only distinctive work clothing such as a uniform with a logo qualifies. Yes, it is that strict.
Why can the GST box on the agreement be the most expensive mistake?
Not your tax, but possibly the costliest error. Page one of the sale and purchase agreement has a GST box: whether the vendor is registered, and whether the price is plus GST or inclusive of GST. Plus GST means 15% on top; inclusive means it is already inside. On a $1,000,000 property the two wordings differ by $150,000. Neither option deleted? The price is treated as GST-inclusive, and a registered vendor pays that 15% to IRD out of the sale price. REA training material records a real disciplinary case where a salesperson omitted the vendor's GST number and failed to record a going-concern sale (the whole business sold as one, zero-rated); the salesperson and supervisor were ordered to pay compensation. One box. I confirm a vendor's GST status in writing, every time.
To close: the banked figure is not the return figure; 20% is only a deposit; add your own expenses; GST uses the GST-inclusive figure; never leave the GST box blank. General rules, not advice for any one person.
FAQ
My agency already withholds 20%. Do I still need to file? Yes. The 20% is a prepayment, not the final tax. myIR generates an automatic assessment, but it contains only the income the agency reported and none of your expenses. Check the income, add the expenses, calculate the true net profit and tax, and settle the difference against the 20% withheld.
Why can't I return GST from my bank statement? Because the banked amount has already had 20% withholding removed. In IRD's example the GST-inclusive commission is $6,135.25 but only $5,068.25 arrives. Returning the banked figure drops the $1,067 withheld out of your sales, which IRD calls under-declaring income. Return from the agency's commission invoice.
When does provisional tax start? When last year's year-end tax bill exceeded $5,000. On a 31 March balance date with two-monthly GST, the standard option is three instalments: 28 August, 15 January and 7 May. The first provisional year is the tightest, because last year's shortfall and this year's instalments fall in the same twelve months.
Talk to us
Your commission invoice will not match today's example, and the lines that differ are where mistakes hide — someone has to go through them line by line. Book a free 15-minute consultation: call 021 202 4028, email info@optimalaccountants.co.nz, or use our contact page. Personal tax returns (IR3) start at $700 +GST and GST returns at $110 +GST per period — see tax and GST returns and services and prices. Optimal Accountants Limited, Level 3, Candida Building, 4/61 Constellation Drive, Rosedale, Auckland (North Shore). Chartered Accountant, CA ANZ member. English and Mandarin.