Tax in New Zealand for Expats

With its vibrant green scenery, wide open spaces and stable Government, it is no wonder that New Zealand is such a sought-after spot for relocation. But as with relocation to any country, having an understanding of the tax system is crucial for anyone planning to move to New Zealand.

This article will provide a general overview of the tax system in New Zealand, with expats specifically in mind. However, please remember that you must always seek professional advice from a qualified New Zealand tax specialist in regards to making important decisions.

Who pays tax in New Zealand?

The biggest influence on an individual’s tax position is their status as a New Zealand tax resident, which is measured in two types of test.

If you are in New Zealand for more than 183 days in any 12-month period, you are then treated as tax resident (this method is referred to as a day count test). With the exception of entertainers, athletes and artists, you are most likely to be exempt from all tax if you are in New Zealand for less than three months.

A tax resident of New Zealand is taxed on worldwide income, whereas a non-resident is taxable only on income sourced within New Zealand.

The second test to determine whether or not you are a tax-resident is called the ‘permanent place of abode’ test. This will mean considering whether or not you have a permanent place to reside within New Zealand, independent of the above day count test. It is not relevant whether you directly own the property, own through the source of a company, or is rented out, but more about whether it is permanently available to you.

Going to New Zealand on a work visa means that there is a strong possibility of triggering tax residence also, as they can be granted for periods of up to 5 years, which is something to be aware of.

How is income taxed in New Zealand?

Most new arrivals to New Zealand will need to file their own tax return within their first year of residence. The filing of tax returns has recently changed – either you will electronically file a return by yourself or via your tax agent, or alternatively, you may simply need to confirm on-line that the earnings details that Inland Revenue hold for you (New Zealand employment income, New Zealand interest and dividend income) are complete and correct.  The latter option is not always suitable for new arrivals.

As most New Zealand tax residents are liable for tax on their overall worldwide income, it is no wonder that as much as 36 billion of its core revenue (recorded in 2019-2020) came from individual income taxes.

The types of taxable income in New Zealand include:

• Salary/ wage
• Overseas incomes (including overseas pensions)
• Rental income
• Investment income
• Business and self-employed income

New Zealand salary / wage income as well as New Zealand interest and dividend income are taxed at source.  If source withholding is at the correct rates, you should not usually have additional income tax to pay unless you have other sources of income (e.g., rental, business or overseas income).

Your international investments (unless you are transitional resident – see below) will be taxable, regardless of whether funds are remitted to New Zealand or retained offshore.  If you maintain any financial arrangement (such as mortgages or loans), or foreign currency bank accounts whilst in New Zealand, you may also be liable to be taxed on ‘foreign exchange fluctuations’.  You could also be liable to pay a New Zealand withholding tax if you still make mortgage or debt interest payments to banks or financial institutions in your home country – this cost can usually be reduced with upfront advice.

Tax residents (excluding transitional residents) of New Zealand with any overseas investments will need to consider the impact of these investments on their tax position on an annual term.  

New Zealand Income Tax Rates Overview

Earning an income in New Zealand also means that you will need an IRD number (tax number). Not having this means that you will be taxed at an even higher non-declaration rate.   An employer may often in practice delay the payment of earnings until they have been supplied with an IR number.  They can be applied for online and are needed as soon as you arrive in New Zealand.  Applying for an IR number before coming to NZ is possible but due to Anti-Money Laundering regulations, the list of documents to provide is far greater in this scenario.

What are the tax rules on residency?

Understanding your New Zealand tax residence status

You become a tax resident of New Zealand when you either:

• Have been in New Zealand for more than 183 days in any 12-month period; or
• Have a NZ permanent place abode in New Zealand

If you are a new tax resident of New Zealand, or are returning after 10 years of NZ tax non-residence, you will be classified as a transitional resident.  Such transitional residents are eligible for a tax exemption on certain foreign incomes for usually four years.  The scope of this exemption is generally an area where professional advice is strongly recommended and indeed beneficial.

Taxes for Expats in New Zealand: Is there double tax relief?

Your tax liabilities may be impacted by the existence of a ‘double tax treaty’ if you are treated as a tax resident in another country besides New Zealand.

Double taxation treaties are agreements between two different states which are designed to prevent double taxation, when the same income is taxable in two states. New Zealand is a participant to these double taxation agreements (DTA’s) with 40 of the world’s jurisdictions.

Do I pay Capital Gains Tax in New Zealand?

In summary, New Zealand does not have a broad-based capital gains tax.  However, there are certain areas where the concept of taxable income may be much wider that what you may be use to.  For example:

• The taxation of offshore investments is complex and you may be taxed on income that is different that your interest and dividend receipts; and
• Gains on residential property (bought and sold within a five-year period) will be taxable unless the main family home exemption applies.  This five-year threshold was extended from the original rule of two years in 2018. 

Do I pay Inheritance Tax or Estate Tax or Gift Duty in New Zealand?

No.  However advice is always recommended if you are expecting to receive distributions from offshore trusts and certain estates as sometimes there may be New Zealand taxation implications to consider.

Do I have to pay ‘Good and Services Tax’?

Goods and Services tax (GST) is a tax added onto most goods and services that are sold for domestic consumption. The consumer pays the tax, where it is then paid forward into the government by the businesses that are selling the goods/services that made the GST.

GST is charged at 15% and now makes up over 30% of the core revenue of New Zealand’s Government. The exceptions to this tax include the export of goods and services overseas, residential rental income and transactions as well as financial services such as life insurance and banking.  In addition, most “taxable” land transactions are now zero-rated (GST applies at 0%).

Whether a tax resident or not, this tax is included in the final price of all goods and services and paid for by the consumer at the point of any sale.

Request a free introduction to a New Zealand Tax consultant

International tax matters can be extremely complex, and you must always make sure to seek help from a professional if you are in doubt about your circumstances.  The structures and investments that may be tax efficient in the UK may have quite different tax implications from a New Zealand perspective.

Our free introduction service will connect you with a hand-picked New Zealand tax expert that has the required qualifications and experience to assist both British and New Zealand expats with their New Zealand tax affairs.