The following factsheet is designed to provide a simple overview of the New Zealand tax system as it applies to individuals. particularly those coming to New Zealand for the first time.
Tax year end: 31 March
Tax filing: 7 July (31 March with tax agent)
Tax payment date: 7 February (7 April with tax agent)
NZ$0 – NZ$14,000 @10.5%
NZ$14,001 – NZ$48,000 @17.5%
NZ$48,001 – NZ$70,000 @30%
NZ$70,001 – NZ$180,000 @33%
NZ$180,001+ @39% (effective 1 April 2021)
New Zealand has two tests of tax residence for individuals. These consider your physical presence in New Zealand and the extent to which you have enduring ties to New Zealand.
You will automatically become a tax resident if you are present in New Zealand for more than 183 days in any 12 month period. Your tax residence will commence from the first of those days. Alternatively, you may be considered a tax resident if you have a “Permanent Place of Abode” (PPOA) in New Zealand. The concept of a PPOA is subjective and looks at the extent to which you have enduring ties to New Zealand. Owning or renting a property in New Zealand does not necessarily mean you have a PPOA but you cannot have a PPOA if you do not have access to a dwelling in New Zealand. Tax residence is different to immigration residence, and is not impacted by immigration residence.
Taxation of Residents
New Zealand taxes its residents on their worldwide income. A tax credit is generally allowed for tax paid overseas on income derived from overseas. However, that credit is restricted to the amount of the equivalent New Zealand tax payable.
When you come to New Zealand for the first time, or return here after being a non-resident for at least 10 complete years, you will automatically be considered a “transitional resident”. Transitional residents are only taxable on worldwide employment or business income and their New Zealand sourced personal income. They are exempt from New Zealand taxation on their foreign passive income (foreign interest, dividends, rents etc).
Transitional residence expires 48 months after the earlier of the end of the month in which your 184th day of presence falls or the end of the month that is 48 months from the date you acquired a PPOA. Transitional residence can expire earlier if you leave New Zealand and become a non-resident again.
You can rescind your transitional residence at any point but you can only ever have one transitional residence exemption.
Double Tax Agreements
You may have become a tax resident of New Zealand under domestic law. However, if you originate from a country that has a double tax agreement* (DTA) with New Zealand and you retain strong ties to that country, you may be effectively treated as a non-resident of New Zealand under that double tax agreement. Non residents and DTA non-residents may have limited New Zealand taxation on New Zealand sourced interest (10%) and New Zealand sourced dividends (15%)
Withholding taxes are generally applied at source to employment income, interest income and dividends. These withholding taxes are not a final tax. However, if your only income is from these types of sources and withholding is correctly applied then you are generally not required to file an annual income tax return. Other income, such as business income, rental income or income from equity incentive schemes will generally not have withholding tax applied and you will be required to file a tax return to declare this income.
Provisional tax payments
If you crystallise a tax liability over NZ$2,500 (after applying withholding credits) in any year you will become a provisional taxpayer. Provisional tax is a pre-payment regime, with instalment payments generally due on 28 August (in year), 15 January (in year) and 7 May (after year end). Failure to adequately manage provisional tax can incur interest charges (and potentially penalties).
Specific Tax Regimes
New Zealand does not impose estate taxes, wealth taxes or capital gains taxes. However, certain gains can be charged under general income tax provisions, such as the sale of assets where the dominant purpose of acquisition was one of resale, certain land sales, sale of development property, residential property sales within 5 years of acquisitions (excluding the private home), gold bullion and crypto transactions. Please note, this is not an exhaustive list and other transactions may incur tax charges.
New Zealand also has specific and potentially complex tax regimes that apply to Foreign Investment Funds (overseas shareholdings and certain insurance policies), Financial Arrangements (loans, bonds, deposits and other cash based investments) and withdrawals from foreign superannuation and other retirement funds.
If you need help with your tax affairs or you require more information please contact TaxBridge Limited.
© TaxBridge Limited 2021
PO Box 100, Waikawa Bay, Picton, 7251
This publication contains generic information only and TaxBridge Limited is not providing any specific advice. TaxBridge Limited is not responsible for any loss sustained by anyone relying on the contents of this publication. TaxBridge Limited recommends that specific taxation advice is sought for all matters covered by this publication.