- What income is taxable in New Zealand
- What if you are earning income in New Zealand
- How do you pay tax in New Zealand
- Do you need to file an income tax return in New Zealand
- Your obligations if you are earning employment income
- Superannuation schemes in New Zealand
For information about being a New Zealand resident for immigration purposes, please check the Immigration New Zealand website
New Zealand taxes income on both a residency and a source basis.
New Zealand residents
If you are a resident of New Zealand for tax purposes, you will be taxed in New Zealand on all of your "worldwide income". This is income derived from New Zealand as well as income derived from all other countries.
Your worldwide income includes any income that you derive in a foreign country even if you do not bring the money into New Zealand. For example, your worldwide income could include:
- an amount of interest you derive from funds you have in an offshore bank account
- rental income
- salary and wages paid both by New Zealand companies and offshore companies
If you have derived overseas income that has also been taxed in the overseas country, you may be entitled to a credit for the tax already paid. The available credit is limited to the lesser of tax payable in New Zealand on the income or the tax paid offshore. This is an attempt to ensure that the same income is not taxed twice.
Jodi is a New Zealand resident for tax purposes. She received total income from New Zealand sources of $100,000 in the 2010 income year. She also worked in the United Kingdom for two months in the 2010 income year and received a salary of $25,000. The United Kingdom taxes this income at a rate of 20%. Jodi pays $5,000 to the United Kingdom Revenue.
Jodi is required to file a personal income tax return in New Zealand. She will be required to return her New Zealand income and her United Kingdom income. Jodi's United Kingdom income will be taxed at 33% (i.e. at a rate higher than the UK rate), therefore, she will be entitled to claim a tax credit for the full amount of tax she has paid in the United Kingdom.
New Zealand will also tax income derived by a non-resident if it has a New Zealand source. This is known as source based taxation.
Generally, income will have a New Zealand source if it has a connection with New Zealand. Some examples of incomes with a New Zealand source include:
- income derived from employment performed in New Zealand even if the employer is a non-resident
- pensions paid by the New Zealand government
- dividends paid by New Zealand companies.
New Zealand's right to tax income as outlined above may change if a double tax agreement applies. A double tax agreement may remove New Zealand's right to tax a particular type of income.
New Zealand has a temporary exemption that may apply to you if you have become a New Zealand tax resident after 1 April 2006
If you are earning income in New Zealand, you need to ensure that you apply for an IRD number
If the only income you derive is from a PAYE income payment (e.g salary or wages, cash allowances, cash bonuses) and it has had the correct amount of PAYE deducted, you will have no further tax obligations in relation to that income.
You may be required to file a New Zealand income tax return if you have received income from New Zealand which has not had tax deducted.
Short term visits
If you come to New Zealand to work and you expect to be in New Zealand for less than 183 days, any income you earn from employment during your visit, may not be liable for tax. There are two circumstances where this will apply:
- Short term visit exemption
This exemption applies if:
- Your stay in New Zealand is for 92 days or less, counting the days of your arrival and departure as a whole day each; and
- The total number of days that you are present in New Zealand in the tax year (1 April to 31 March) is 92 days or less; and
- You are working for an employer that is not resident in New Zealand; and
- The income you earn while in New Zealand is taxed in your home country (the country where you are tax resident)
- Double tax agreement exemption
This exemption applies if:
- you are a tax resident of a country that New Zealand has a double tax agreement with; and
- your stay in New Zealand is for no more than 183 days in any 12 month period or in any income year (depends on double tax agreement); and
- the income you earn during this period is paid by an employer that is not resident in New Zealand; and
- your employer does not have operations in New Zealand that takes a deduction for the income paid to you.
If you think that this exemption may apply to you, read the double tax agreement carefully as the wording of each agreement is different.
If you are not sure how long you will be in New Zealand it is important that you contact us as soon as possible after you arrive because if you are in New Zealand for more than 183 days, any income you received is liable to tax from the date you first arrived in New Zealand.
New Zealand has a pay as you earn system ("PAYE") for people on salary and wages. This means that tax is deducted by your employer before the payments are made to you. Your employer then pays the tax deducted to Inland Revenue on your behalf.
You give your employer your IRD number and tax will be deducted from your salary and wages and paid to Inland Revenue on your behalf.
Tax will be deducted from your salary/wage payments at the applicable marginal tax rate.
Rental or business income
When you receive rental or business income, you need to:
- keep records
- fill in an Individual tax return (IR3) every year.
Goods and services tax (GST)
Goods and services tax (GST) is a tax imposed on most goods and services in New Zealand, most imported goods, and certain imported services. GST is added to the price of taxable goods and services at a rate of 15%.
You need to register for GST if you carry out a taxable activity with turnover above $60,000 over a 12 month period.
Offshore income and investments
As a New Zealand tax resident, there are tax implications on your income from offshore sources such as:
- shares in a foreign company
Find out about your obligations if you own shares in a foreign company
- rental property overseas
Find out about your obligations if you have a rental property outside of New Zealand
- bank accounts
Find out about your obligations if you have a credit/debit card from an offshore bank
- foreign pension scheme
Find out about your obligations if you have an interest in a foreign pension scheme
This is not a separate tax but a way of paying your income tax in instalments during the year, based on what you expect your tax bill to be.
If you had income tax of more than $2,500 to pay at the end of any tax year you may have to pay provisional tax for the following year. The amount of provisional tax you pay is then deducted from your tax bill at the end of the year.
Not everyone who derives income in New Zealand and/or is a New Zealand tax resident is required to file an income tax return.
If you only derive income from salary, wages, interest, dividends, and/or taxable Maori authority distributions (with the correct tax deducted at source), you are not required to file an annual income tax return.
Marnie works for the New Zealand Government. She receives a salary of $50,000 per annum. When she receives her fortnightly salary payment, PAYE has already been deducted. Marnie also receives interest from her bank on the savings she has accumulated. Before the interest is paid to Marnie, the bank deducts withholding tax at the correct rate. These are the only two income streams Marnie has. Accordingly, Marnie is not required to file an annual income tax return in New Zealand.
Most payments you receive from your employer will be subject to tax in New Zealand. How this tax is collected will depend on whether or not:
- the payment is a PAYE income payment
- you are a New Zealand tax resident
- your employer is a New Zealand tax resident, and
- the services are performed in New Zealand.
It does not matter if your employer is based overseas.
PAYE income payments
If you receive a PAYE income payment from your employer, your employer must deduct the tax and pay it to us on your behalf. This is administered via our PAYE system.
The above PAYE rules apply if:
- you are a New Zealand tax resident and perform services in New Zealand, or
- you are not a New Zealand tax resident and you perform services in New Zealand, or
- you are a New Zealand tax resident employed by a New Zealand-based employer and you perform services overseas (you may be able to apply for a reduced or zero rate certificate if you have to pay tax overseas)
It is your employer's obligation to withhold PAYE from any PAYE income payment you receive however if this is not done, you will be liable. Our form IR56 taxpayer registration (IR359) enables you to register if you are paying your own PAYE
Unlike other countries, New Zealand does not have a compulsory superannuation scheme. New Zealand has a voluntary superannuation scheme known as KiwiSaver. KiwiSaver is a voluntary, employment based savings initiative to help you with your long-term saving for retirement.
You are only able to join KiwiSaver if:
- you are currently living, or normally live in New Zealand; and
- you are a New Zealand citizen or you are entitled to live in New Zealand indefinitely, in terms of the Immigration Act 2009
Your ability to join KiwiSaver does not depend on your tax residency status but on your residency for immigration purposes.
If you are eligible to join KiwiSaver, you will be automatically enrolled when you start a new job. If you do not wish to participate, you will need to opt out. Your employer should be able to assist you with this.
Your employer may also administer its own superannuation scheme.
What if I have retirement savings in my home country?
If you are a New Zealand tax resident and have foreign retirement savings, these savings may be taxable in New Zealand. There are many types of foreign retirement savings and these may include:
- an interest in an employment related foreign pension plan or retirement savings scheme
- an interest in a non-employment related foreign pension plan or retirement savings scheme
- amounts set aside in an individual retirement savings account
- an entitlement to receive a pension from the Government or some other statutory body
How these are taxed in New Zealand will depend on how we classify the retirement savings for New Zealand tax purposes (e.g. foreign investment fund, company, unit trust, or foreign trust). It is possible that you may be taxed on one or all of the following:
- any contributions you make;
- any growth in your savings;
- any distributions you receive
If you are a transitional resident, then your foreign retirement savings will not be taxable until you stop being a transitional resident.
This is a very complicated area so if you have foreign retirement savings, you may wish to seek professional advice.
Date published: 09 Jan 2014
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