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KuputakaGlossary

  • ACC earners' levy

    Income that you earn from personal effort is liable for ACC earners' levy.

    If you earn salary or wages, the levy is deducted as part of your PAYE deductions each payday.

    If you receive schedular payments or other types of income, you may need to pay the ACC earners’ levy directly to ACC.

  • Accounting basis

    What you show in your GST return about the GST you've collected and paid.

    The options are: payments basis, invoice basis or hybrid basis.

  • Allowable rental expenses

    Expenses are what you spend on your property to earn rental income.

    You can deduct your rental expenses from your rental income. There are tax rules to help you work what those expenses are.

    Once you've applied the rule, you're left with your allowable rental expenses. These are what you're allowed to deduct from your rental income.

     

  • Associated person

    Persons and companies, trusts or partnerships which are associated with each other under tax law.

    For example, two companies (or a company and a person) with common voting interests and common market value interests; two relatives; a trustee and a beneficiary; or the settlor of a trust and trust's beneficiary.

    The associated persons rules are designed to make sure that transactions are taxed fairly and honestly.

    For more information, see A guide to associated persons definitions for income tax purposes - IR620.

     

  • Benefit

    Work and Income benefits include payments to help with the cost of raising children.

    Penihana

    Kei roto i ngā penihana mō Te Hiranga Tangata ngā utunga hei āwhina i te utu mō te whakatupu tamariki.

  • Capital assets

    Assets that a business keeps for longer than a year. Also called fixed assets, they can include computers, vehicles and machinery. You claim depreciation loss on capital assets instead of claiming them as expenses.

  • Capital expenditure

    Also called capital expense, this is money spent by a business or organisation on acquiring or maintaining fixed assets, such as land, buildings, and equipment.

  • Close company

    A company where 5 or fewer ultimate natural person shareholders hold either 50% of the total voting interests of 50% of the total market interests, that is, if market value circumstance exists. Special rules apply to treat certain associated persons as one person. Learn more in the guide at the bottom of this page, Associated persons definitions for income tax purposes - IR620.

  • Commercial production environment

    Commercial production means producing products or services for sale.

  • Customer due diligence

    Customer due diligence (CDD) is a process that is completed with a New Zealand reporting entity. As part of this process the reporting entity will need to:

    • gather information about a customer's identity
    • verify a customer's identity to make sure the customer is who they say they are.

    This process aids the detection, management and mitigation of the risk of money laundering and the financing of terrorism.

    You must already be, or become, a customer of a New Zealand reporting entity so that CDD can be carried out by them. If you aren't a customer of a New Zealand reporting entity, you can become one by choosing to use the service(s) provided by them.

  • Dependent child

    Dependent children are all children in your care who are:

    • 15 years of age or younger
    • 16 or 17 years of age and financially dependent on the caregiver
    • 18 years of age, financially dependent on the caregiver and still at secondary school or at a tertiary institution
    • not married, in a civil union or de facto relationship
    • not in receipt of Foster Care Allowance, Unsupported Child's Benefit, Orphan’s Benefit or board payment for their care.

    A financially independent child would be a child that works 30 hours or more a week or receives a student allowance, benefit or other government assistance.

    Ngā tamariki whirinaki

    Ko ngā tamariki whirinaki ko ngā tamariki katoa e tiakina ana e koe:

    • kei te 15 tau te pakeke, tamariki iho rānei
    • kei te 16, 17 tau rānei te pakeke kei te whirinaki ā-moni hoki ki te kaitiaki
    • kei te 18 tau te pakeke, kei te whirinaki ā-pūtea ki te kaitiaki, kei te kura tuarua tonu hoki, kei tētahi whare akoranga tuatoru rānei
    • kāore anō kia moe tāne, kia moe wahine rānei, kua piri ā-ture rānei, kei tētahi hononga moe māori rānei
    • kāore anō kia whiwhi i te Tāpiritanga Tiaki Tamariki Whāngai, i te Penihana Tamaiti Taurima-kore, i te Penihana Tamaiti Pani, i te utunga rēti rūma rānei mō ngā mahi tiaki i a ia.

    Ko tēnei mea te tamaiti tū motuhake ā-pūtea he tamaiti e mahi ana mō te 30 hāora neke atu rānei i te wiki, ka whiwhi moni ākonga, penihana rānei, tētahi atu āwhina kāwanatanga rānei.

  • EI (Employment information)

    This is the information an employer files with us after every pay day.

  • Employer superannuation contribution tax (ESCT)

    A tax on any cash contribution an employer makes to a superannuation fund for the benefit of an employee. For example, employer contributions to an employee's Kiwisaver.

    If an employee asks their employer to make deductions from their wages and pay them to a superannuation scheme, these are not employer superannuation contributions.

  • End result assets

    End-result assets are:

    • the object of the R&D
    • used in the R&D process
    • used in the business’ activities.

  • Excess deductions

    When you rent out property you can deduct allowable rental expenses from your rental income. When your rental income is less than your expenses you're left with excess deductions. These are sometimes called your rental losses.

  • Exclusions to the brightline property rule

    When you sell residential property there are situations when the brightline property rule does not apply:

    • The property is your main home.
    • You inherited the property.
    • You're the executor or administrator of a deceased estate.

     

  • Exempt income

    Exempt income is income you do not have to pay GST or income tax on. 

  • Facilitative assets

    Facilitative assets are used to assist the progress of R&D. This includes test equipment and technology.

  • Filing frequency

    How often you file your GST returns.

    The options are: monthly, two-monthly or six-monthly.

    Your filing frequency is also called your taxable period.

  • Goods and services tax (GST)

    GST is a tax of 15% added to the price of most goods and services, including imports.

    As a customer, you'll pay this when you buy goods and services. You'll also pay this on most imported goods and some imported services.

    If you're selling goods or services that are taxable, you may need to register for GST and charge it to customers.

    GST

  • Group of companies

    A group of companies means 2 or more companies in which a person holds common voting interests that add up to at least 66%.

  • Income tested benefits

    Income tested benefits are any of these:

    • Sole Parent Support
    • Supported Living Payment
    • New Zealand Superannuation - non-qualified partner included
    • Orphan's Benefit
    • Unsupported Child's Benefit
    • Jobseeker Support
    • Veteran’s Pension – non-qualified partner included
    • Young Parent Payment
    • Youth Payment
    • Emergency Benefit
    • Emergency Maintenance Allowance.

  • Income year

    The 12-month period you count for your income for. In most cases this will be the same as the tax year (1 April to 31 March).

    Your balance date is the last day of your income year. The standard balance date is 31 March.

  • Independent earner tax credit (IETC)

    If you're a New Zealand tax resident earning between $24,000 and $48,000 in a tax year, you may qualify for the independent earner tax credit (IETC) of up to $520 per year.

    If you or your partner receive Working for Families tax credits, you will not qualify for the independent earner tax credit.

  • Intention test

    When a property has been bought with the firm intention of resale you'll have to pay tax on any profit from the sale.

    The intention to sell does not need to be the main reason for buying the property - it could be one of a number of reasons for buying.

  • Long-term residential renting

    When you're renting out your residential property for 4 or more consecutive weeks. The people renting the property would be tenants who see your property as their main home. For example students, boarders or care home residents.

  • Look-through interests

    Look-through interest means a person’s shares in a look-through company.

    There are different criteria for look-through interests, depending on the income year - see "Terms we use" in the Look through companies - IR879 guide for full details.

  • Main home

    You cannot have more than 1 main home. If you live in more than 1 property - for example you own a property in a city you live and work in for part of the week, you must decide which property is your main home.  You need to think about:

    • where your personal property is kept
    • the amount of time you spend living in each house (if you have more than one house)
    • where your immediate family lives
    • where your social ties are strongest
    • your use of the home
    • what other ties (for example: employment, business, economic) you have with the surrounding community.

  • Main home exclusion

    The main home exclusion is the tax exemption for income earned from the sale of a main home.

    If you buy and sell your main home within five years (two years if the property was acquired on or after 1 October 2015 through to 28 March 2018 inclusive), the income you earn from the sale of the property is not taxable if you used:

    • the property as your main home more than 50% of the time while you owned it
    • more than 50% of the area of the property as your main home. This includes the yard, gardens, garage, pool areas and tennis courts, etc.

  • Market value consideration

    You must charge fees for R&D services on commercial terms.

  • Mates rates

    This is when you rent out your property to family or friends under your property's market value rent. The rate is anything under 80% of the market value.

    So if rent for you property is usually $100 per night, and your friends rent it for $50, that's a mate rate because you're only charging them under 80% of your property's market value. 

  • Mixed expenses

    Mixed expenses are those from income-earning use and private use. For a rental property, they'll be for things like:

    • utility bills
    • internet expenses
    • repairs and maintenance
    • mortgage interest paid
    • insurance
    • rates.

  • Mixed-use asset

    Mixed-use assets are holiday homes, boats and aircraft with both private and business use.

    You have a mixed-use asset if during the tax year the asset is used for both private use and income-earning use, or unused for 62 days or more.

    This does not include residential property used for long term rental, business assets where the private use is minor like once a year, or home office where your expense claim is based on floor area.

  • Multi-rate PIE (MRP)

    A multi-rate PIE or multi-rate portfolio investment entity is an investment scheme where investors can choose their tax rate (prescribed investor rate or PIR).

    MRPs work out tax based on the PIR their investors give them.

    Kiwisaver scheme providers are a common type of MRP.

  • New provisional taxpayer

    Generally you will not have to pay provisional tax if your residual income tax (RIT) for the previous year was $2,500 or less. However, there are certain situations when you'll have to pay provisional tax for the current year, even if you have not paid it before. This is called a new provisional tax liability.

    You're a new provisional taxpayer if:

    You're an individual (not including a trustee of a trust) and your residual income tax was less than $2,500 for the last 4 years; and your residual income tax for the current year is $60,000 or more; and during the current year you've stopped earning income from employment and have started to earn untaxed income from a taxable activity instead.

    You're a non-individual (including a trustee of a trust) and you've started to earn income from a taxable activity during the current year; you did not receive income from a taxable activity in the last 4 years; and for the 2018 year onwards, your residual income tax is $60,000 or more.

  • New Zealand source

    New Zealand will tax non resident taxpayers who earn income from an entity in New Zealand. This is called source based taxation.

    New Zealand's right to tax income from a New Zealand source may change if a double tax agreement applies.

    Double tax agreements (DTAs)

  • Non resident withholding tax (NRWT)

    Non resident withholding tax (NRWT) is a tax withheld from New Zealand-sourced payments of interest, dividends and royalties to non residents (foreign investors).

    NRWT is still a tax on the foreign investor and they will usually get a credit in their home jurisdiction for the New Zealand tax paid.

  • Non-business researcher

    A business not seeking profit.

  • Off the plan

    Entering into an agreement to purchase a property that is yet to be built. You can view the design, building plans and specifications but there is no physical property to see or inspect.

  • Offshore person

    For an individual an offshore person is someone who:

    • is a New Zealand citizen and has been overseas for the last 3 or more years continuously
    • doesn’t have a New Zealand residence class visa granted by Immigration New Zealand
    • has a New Zealand residence class visa and has been overseas for the last 12 or more months continuously.

    A company is an offshore person if it is:

    • incorporated outside New Zealand
    • 25% or more owned or controlled by offshore persons.

    A trust is an offshore person if:

    • 25% or more of its governing body are offshore
    • offshore person(s) have 25% or more beneficial interest or entitlement to its trust property
    • 25% or more of persons with the right to amend or control the trust’s trust deed are offshore persons
    • 25% or more of persons with the right to control the composition of the trust’s governing body are offshore persons.

    A unit trust is an offshore person if:

    • the manager or trustee (or both) are offshore person(s)
    • offshore person(s) have beneficial interest or 25% or more of the trust’s property.

    A non-individual partnership, unincorporated joint venture, or other unincorporated body is an offshore person if:

    • 25% or more of its partners (or members) are offshore persons
    • offshore person(s) have a beneficial interest or entitlement to 25% or more of its profits or assets
    • offshore person(s) have the right to exercise (or control the exercise) of 25% or more of voting power at a meeting.

    Tangata o tāwāhi

    Mō te takitahi ko te tangata o tāwāhi ko:

    • te kirirarau o Aotearoa kua noho pūmau ki tāwāhi mō ngā tau e toru neke atu ka taha
    • tētahi kāhore tāna momo kōkota kainoho o Aotearoa i tukua e Immigration New Zealand
    • tētahi he momo kōkota kainoho o Aotearoa tāna otirā kua noho pūmau ki tāwāhi mō te 12 marama ka taha.

    Ko te kamupene ko tētahi tangata o tāwāhi ki te mea:

    • i whakakaporei i waho o Aotearoa
    • kei te pupuritia, kei te whakahaeretia rānei e te 25% neke atu tāngata o tāwāhi.

    Ko te kaitiaki ko tētahi tangata o tāwāhi ki te mea:

    • kei tāwāhi he 25% neke atu o tōna rōpū kaiwhakahaere
    • kei ngā tāngata o tāwāhi te 25% neke atu o āna pānga whaihua, o te whiwhinga rānei i āna rawa kaitiaki
    • kei ngā tāngata o tāwāhi he 25% neke atu o te mana ki te whakatika, ki te whakahaere rānei i te whakaaetanga ā pukapuka kaitiaki o te kaitiaki
    • kei ngā tāngata o tāwāhi e 25% neke atu o te mana ki te whakahaere i ngā mema o te rōpū kaiwhakahaere o te kaitiaki.

    Ko te kaitiaki wawae ko tētahi tangata o tāwāhi ki te mea:

    • he tangata o tāwāhi te kaiwhakahaere, te kaitiaki rānei (rāua e rua rānei)
    • kei ngā tāngata o tāwāhi he wāhi whaihua, he 25% neke atu rānei o ngā rawa o te kaitiaki.

    He tangata o tāwāhi te pātuitanga kore-takitahi, te hononga pakihi kaporeikore, te rōpū kaporeikore kē rānei, ki te mea:

    • he tāngata o tāwāhi te 25% neke atu rānei o āna kaipātui (mema rānei)
    • kei ngā tāngata o tāwāhi te 25% neke atu o āna pānga whaihua, o te whiwhinga rānei i āna monihua, āna rawa rānei
    • kei ngā tāngata o tāwāhi te mana ki whakahaere (ka tino whakahaere rānei) i te 25% neke atu o te mana pōti i tētahi hui.

  • Pay cycle

    How often the employee is paid - for example, weekly, fortnightly, monthly.

    Also referred to as 'pay frequency'.

  • Pay frequency

    How often the employee is paid - for example, weekly, fortnightly, monthly.

    Also referred to as 'pay cycle'.

  • Pay period

    The period covered by an employee's pay. Your employees may have different pay periods.

    For example, employees you pay weekly may have a 7-day pay period. Employees you pay fortnightly may have a 14-day pay period.

    The pay period start date is the first day the employee's pay covers.

    The pay period end date is the last day the employee's pay covers.

    For example, an employee is paid weekly and their pay period start date is 1 August. Their pay period end date will be 8 August. They receive their pay on 9 August.

    You enter each employee's pay period start date and end date each time you file employment information about the employee.

  • Prescribed investor rate (PIR)

    A prescribed investor rate (PIR) is the tax rate that your portfolio investment entity (PIE) uses to work out the tax on your investment income.

    The PIR is based on your taxable income. You choose your rate.

     

  • Principal caregiver

    The person who is at least 16 years old and responsible for the day-to-day care of the child on a permanent basis.

    Kaitiaki mātāmua

    He tangata kei runga ake i te 16 tau te pakeke, ka riro māna e tiaki te tamaiti ia rā, ia rā, mō te wā tino roa.

  • Principal settlor

    The principal settlor is the person who has made the biggest financial contribution to the trust.

  • Publicly available

    Publicly available information refers to accessible information where New Zealand based professionals in that field would look. This information does not have to be available for free for it to be publicly available. It must be available on market terms. 

  • Qualifying company

    Qualifying companies have tax rules that aim to treat the company and its shareholders as one entity.

    If your company was not already a qualifying company before 1 April 2011, you cannot choose to be a qualifying company. You can choose to be a look-through company instead.

  • Rental expense deductions

    Rental expense deductions are your allowable rental expenses for the current tax year.

    They're called deductions as you can deduct them from your rental income, lowering the income tax you pay.

  • Rental income

    Your rental income includes: 

    • rents charged to tenants (eg $400 per week)
    • payments from short-term guests, eg $165 per night
    • fees paid to services like Airbnb or Bookabach, or to a property management company
    • payments from the Tenancy Board for damages or rent arrears
    • depreciation recovered. 

  • Rental losses

    Rental losses are when your rental income is less than your rental expenses.

    They're also called 'excess deductions' under the loss ring-fencing rules.

    Rental property losses and ring-fencing

  • Residency requirements

    To get Working for Families you must meet one of the following residency requirements:

    • you were born in New Zealand
    • you have New Zealand citizenship
    • you are a New Zealand resident and have been in New Zealand continuously for at least 12 months at any time
    • you care for a child who is a New Zealand resident and lives in New Zealand.

    Ngā whakaritenga kāinga noho

    E whiwhi ai koe i Working For Families me mātua tutuki i a koe tētahi o ngā whakaritenga kāinga noho e whai ake nei:

    • i whānau mai koe i Aotearoa
    • kua whai mana kirirarau koe i Aotearoa
    • he tangata noho tūturu koe i Aotearoa, ā, i Aotearoa tonu tō kāinga mō te 12 marama ka hipa, ahakoa te wā
    • e tiaki ana koe i tētahi tamaiti noho tūturu i Aotearoa, kei Aotearoa hoki e noho ana ināianei.

  • Resident withholding tax (RWT)

    Resident withholding tax (RWT) is a tax that is deducted from investment income before the investor receives it.

    It helps people who receive investment income to pay their tax throughout the year, and makes sure that people who do not declare their investment income still have tax deducted from it. (Inland Revenue still follows up on undeclared investment income and takes action against people who do not declare it.)

  • Residential exclusion

    Part of the intention test, the term is used in tax law to describe the exclusion of main homes from the tax rules around disposal of residential property.

  • Residential income

    Residential income includes income from renting out your property and what you earn from its sale.

  • Residential land

    Residential land includes a rental property with an existing dwelling, land that is to have a dwelling built on it, and bare land that may have a dwelling built on it under the relevant district plan.

  • Residual income tax (RIT)

    The amount of income tax you pay for the year, less any PAYE and other tax credits you may be entitled to, except for Working for Families Tax Credits.

  • Shadow payroll

    Your regular payroll pays your employee’s salary and manages their tax obligations to your country.

    In most cases your employee will also have tax obligations to New Zealand. You need to set up a shadow payroll in New Zealand to manage these.

    A shadow payroll is not needed if your employee’s salary is paid by a New Zealand employer.

  • Shared care

    At least one third of the care of the child is shared between people in different households. One third care equals 122 days a year or 5 days a fortnight. To count as shared care the arrangement needs to be in place for at least 4 months.

    Te tiaki tiri

    Kia kaua e iti iho i te kotahi hautoru o te wā e tiakina ana te tamaiti e ētahi tāngata i ētahi whare tū motuhake. Te ritenga o te kotahi hautoru nei kei te 122 rā i te tau, e 5 rā o roto i te rua wiki rānei. E kīia ai te tiaki he tiaki tiri, me mātua whai mana mō te whā marama, kaua e hoki iho.

  • Short-term residential renting

    This is when you're renting out your residential property to guests for up to 4 consecutive weeks. Your guests would not also see your property as their main home.

  • Tax residency

    Your tax residency is different from your immigration residency. You'll need to know your tax residency status to pay the right tax in New Zealand. 

    You'll either be a:

    • non-resident taxpayer
    • New Zealand tax resident.

    A transitional tax resident is a New Zealand tax resident with a temporary tax exemption.

    Tax residency status

     

  • Tax year

    The tax year is from 1 April to 31 March.

  • Taxable activity

    A taxable activity is a regular activity undertaken by an entity that supplies or intends to supply goods or services for money or other reward.

    This includes activities that do not make a profit.

    These things are not taxable activities:

    • working for salary or wages
    • selling items as a hobby or recreation
    • selling the occasional domestic item
    • making GST-exempt supplies.

  • Taxable income

    The income that you pay tax on. It's your net income, minus your expenses and any available losses.

  • Taxable period

    The period of time covered by your GST return.

    It may be one, two, or six months.

    Taxable periods end on the last day of the month.

  • Taxable supplies

    The supplies you provide while carrying out your taxable activity, which you need to pay GST on. This is charged at either 15% (standard-rated) or 0% (zero-rated).

    You can only claim back GST you pay on your purchases and expenses if you use those goods and services to make taxable supplies.

  • The brightline property rule

    The brightline rule only applies to residential properties bought and sold on or after 1 October 2015. 

    The brightline rule means you'll pay tax when you buy and sell a residential property within the brightline period, unless an exclusion applies. 

    Thre are 2 brightline periods. Properties bought on or after 1 October 2015 through to 28 March 2018 inclusive are subject to the brightline rule if sold within 2 years of buying them. Properties  bought on or after 29 March 2018 are subject to brightline if sold within 5 years of buying them. Unless 1 of the following exclusions applies:

    • The property is your main home.
    • You inherited the property.
    • Relationship settlement property when first settled
    • You’re the executor or administrator of a deceased estate.

    The brightline rule is only for residential property. Commercial property or farmland is not part of the brightline rule. 

    The brightline property rule

  • Transitional tax resident

    A New Zealand tax resident who has a temporary tax exemption. 

    You are a transitional tax resident if you are a new migrant or New Zealander returning home and meet the exemption's criteria.

    Temporary tax exemption

  • Use of money interest (UOMI)

    Use of money interest (UOMI) is not a penalty. It's an amount charged or credited to pay for "use of money" in the same way banks charge or credit interest.

    The use of money interest rules are designed to encourage people to pay the right amount of tax at the right time, compensate people who pay too much tax and compensate the Government if people pay too little tax.

  • Worldwide income

    New Zealand tax residents pay tax on their worldwide income, that is, what they earn from sources in New Zealand and overseas. This is called residency based taxation. Even if you do not bring the money you earn into New Zealand, you'll need to include this income in an Individual tax return IR3. 

    New Zealand's right to tax certain types of income may change if a double tax agreement (DTA) applies.

    Double tax agreements (DTAs)

  • Zero rated

    When the charge for GST is at 0%. GST is a tax on the supply of goods and services by a registered person on any taxable activity they do. Some supplies are zero rated or 'exempt' from GST. 

  • Dependent child

    Dependent children are all children in your care who are:

    • 15 years of age or younger
    • 16 or 17 years of age and financially dependent on the caregiver
    • 18 years of age, financially dependent on the caregiver and still at secondary school or at a tertiary institution
    • not married, in a civil union or de facto relationship
    • not in receipt of Foster Care Allowance, Unsupported Child's Benefit, Orphan’s Benefit or board payment for their care.

    A financially independent child would be a child that works 30 hours or more a week or receives a student allowance, benefit or other government assistance.

    Ngā tamariki whirinaki

    Ko ngā tamariki whirinaki ko ngā tamariki katoa e tiakina ana e koe:

    • kei te 15 tau te pakeke, tamariki iho rānei
    • kei te 16, 17 tau rānei te pakeke kei te whirinaki ā-moni hoki ki te kaitiaki
    • kei te 18 tau te pakeke, kei te whirinaki ā-pūtea ki te kaitiaki, kei te kura tuarua tonu hoki, kei tētahi whare akoranga tuatoru rānei
    • kāore anō kia moe tāne, kia moe wahine rānei, kua piri ā-ture rānei, kei tētahi hononga moe māori rānei
    • kāore anō kia whiwhi i te Tāpiritanga Tiaki Tamariki Whāngai, i te Penihana Tamaiti Taurima-kore, i te Penihana Tamaiti Pani, i te utunga rēti rūma rānei mō ngā mahi tiaki i a ia.

    Ko tēnei mea te tamaiti tū motuhake ā-pūtea he tamaiti e mahi ana mō te 30 hāora neke atu rānei i te wiki, ka whiwhi moni ākonga, penihana rānei, tētahi atu āwhina kāwanatanga rānei.

  • EI (Employment information)

    This is the information an employer files with us after every pay day.

  • Employer superannuation contribution tax (ESCT)

    A tax on any cash contribution an employer makes to a superannuation fund for the benefit of an employee. For example, employer contributions to an employee's Kiwisaver.

    If an employee asks their employer to make deductions from their wages and pay them to a superannuation scheme, these are not employer superannuation contributions.

  • End result assets

    End-result assets are:

    • the object of the R&D
    • used in the R&D process
    • used in the business’ activities.

  • Entity

    An entity can be:

    • a person
    • a company
    • an incorporated or unincorporated society or club
    • a joint venture or partnership
    • a trustee or a trust or estate
    • a public or local authority.

  • Excess deductions

    When you rent out property you can deduct allowable rental expenses from your rental income. When your rental income is less than your expenses you're left with excess deductions. These are sometimes called your rental losses.

  • Exclusions to the brightline property rule

    When you sell residential property there are situations when the brightline property rule does not apply:

    • The property is your main home.
    • You inherited the property.
    • You're the executor or administrator of a deceased estate.

     

  • Exempt income

    Exempt income is income you do not have to pay GST or income tax on. 

  • Facilitative assets

    Facilitative assets are used to assist the progress of R&D. This includes test equipment and technology.

  • Filing frequency

    How often you file your GST returns.

    The options are: monthly, two-monthly or six-monthly.

    Your filing frequency is also called your taxable period.

  • Goods and services tax (GST)

    GST is a tax of 15% added to the price of most goods and services, including imports.

    As a customer, you'll pay this when you buy goods and services. You'll also pay this on most imported goods and some imported services.

    If you're selling goods or services that are taxable, you may need to register for GST and charge it to customers.

    GST

  • Grandparented

    Meets old rules or regulations but not current ones.

    For look-through companies, a grandparented Māori authority or tax charity is one that before 3 May 2016 was an owner of a look-through company or had entered into an arrangement to become a look-through company. 

    A Māori authority is also grandparented if it was a beneficiary of a trust that was an owner of a look-through company before the same date.

    Even though the look-through company rules have changed, a grandparented charity or Māori authority can still be a look-through company if they were one (or connected to one) before the rules changed.

  • Group of companies

    A group of companies means 2 or more companies in which a person holds common voting interests that add up to at least 66%.

  • Income tested benefits

    Income tested benefits are any of these:

    • Sole Parent Support
    • Supported Living Payment
    • New Zealand Superannuation - non-qualified partner included
    • Orphan's Benefit
    • Unsupported Child's Benefit
    • Jobseeker Support
    • Veteran’s Pension – non-qualified partner included
    • Young Parent Payment
    • Youth Payment
    • Emergency Benefit
    • Emergency Maintenance Allowance.

  • Income year

    The 12-month period you count for your income for. In most cases this will be the same as the tax year (1 April to 31 March).

    Your balance date is the last day of your income year. The standard balance date is 31 March.

  • Independent earner tax credit (IETC)

    If you're a New Zealand tax resident earning between $24,000 and $48,000 in a tax year, you may qualify for the independent earner tax credit (IETC) of up to $520 per year.

    If you or your partner receive Working for Families tax credits, you will not qualify for the independent earner tax credit.

  • Intention test

    When a property has been bought with the firm intention of resale you'll have to pay tax on any profit from the sale.

    The intention to sell does not need to be the main reason for buying the property - it could be one of a number of reasons for buying.

  • Long-term residential renting

    When you're renting out your residential property for 4 or more consecutive weeks. The people renting the property would be tenants who see your property as their main home. For example students, boarders or care home residents.

  • Look-through interests

    Look-through interest means a person’s shares in a look-through company.

    There are different criteria for look-through interests, depending on the income year - see "Terms we use" in the Look through companies - IR879 guide for full details.

  • Main home

    You cannot have more than 1 main home. If you live in more than 1 property - for example you own a property in a city you live and work in for part of the week, you must decide which property is your main home.  You need to think about:

    • where your personal property is kept
    • the amount of time you spend living in each house (if you have more than one house)
    • where your immediate family lives
    • where your social ties are strongest
    • your use of the home
    • what other ties (for example: employment, business, economic) you have with the surrounding community.

  • Main home exclusion

    The main home exclusion is the tax exemption for income earned from the sale of a main home.

    If you buy and sell your main home within five years (two years if the property was acquired on or after 1 October 2015 through to 28 March 2018 inclusive), the income you earn from the sale of the property is not taxable if you used:

    • the property as your main home more than 50% of the time while you owned it
    • more than 50% of the area of the property as your main home. This includes the yard, gardens, garage, pool areas and tennis courts, etc.

  • Market value consideration

    You must charge fees for R&D services on commercial terms.

  • Mates rates

    This is when you rent out your property to family or friends under your property's market value rent. The rate is anything under 80% of the market value.

    So if rent for you property is usually $100 per night, and your friends rent it for $50, that's a mate rate because you're only charging them under 80% of your property's market value. 

  • Mixed expenses

    Mixed expenses are those from income-earning use and private use. For a rental property, they'll be for things like:

    • utility bills
    • internet expenses
    • repairs and maintenance
    • mortgage interest paid
    • insurance
    • rates.

  • Mixed-use asset

    Mixed-use assets are holiday homes, boats and aircraft with both private and business use.

    You have a mixed-use asset if during the tax year the asset is used for both private use and income-earning use, or unused for 62 days or more.

    This does not include residential property used for long term rental, business assets where the private use is minor like once a year, or home office where your expense claim is based on floor area.

  • Multi-rate PIE (MRP)

    A multi-rate PIE or multi-rate portfolio investment entity is an investment scheme where investors can choose their tax rate (prescribed investor rate or PIR).

    MRPs work out tax based on the PIR their investors give them.

    Kiwisaver scheme providers are a common type of MRP.

  • New provisional taxpayer

    Generally you will not have to pay provisional tax if your residual income tax (RIT) for the previous year was $2,500 or less. However, there are certain situations when you'll have to pay provisional tax for the current year, even if you have not paid it before. This is called a new provisional tax liability.

    You're a new provisional taxpayer if:

    You're an individual (not including a trustee of a trust) and your residual income tax was less than $2,500 for the last 4 years; and your residual income tax for the current year is $60,000 or more; and during the current year you've stopped earning income from employment and have started to earn untaxed income from a taxable activity instead.

    You're a non-individual (including a trustee of a trust) and you've started to earn income from a taxable activity during the current year; you did not receive income from a taxable activity in the last 4 years; and for the 2018 year onwards, your residual income tax is $60,000 or more.

  • New Zealand source

    New Zealand will tax non resident taxpayers who earn income from an entity in New Zealand. This is called source based taxation.

    New Zealand's right to tax income from a New Zealand source may change if a double tax agreement applies.

    Double tax agreements (DTAs)

  • Non resident withholding tax (NRWT)

    Non resident withholding tax (NRWT) is a tax withheld from New Zealand-sourced payments of interest, dividends and royalties to non residents (foreign investors).

    NRWT is still a tax on the foreign investor and they will usually get a credit in their home jurisdiction for the New Zealand tax paid.

  • Non-business researcher

    A business not seeking profit.

  • Off the plan

    Entering into an agreement to purchase a property that is yet to be built. You can view the design, building plans and specifications but there is no physical property to see or inspect.

  • Offshore person

    For an individual an offshore person is someone who:

    • is a New Zealand citizen and has been overseas for the last 3 or more years continuously
    • doesn’t have a New Zealand residence class visa granted by Immigration New Zealand
    • has a New Zealand residence class visa and has been overseas for the last 12 or more months continuously.

    A company is an offshore person if it is:

    • incorporated outside New Zealand
    • 25% or more owned or controlled by offshore persons.

    A trust is an offshore person if:

    • 25% or more of its governing body are offshore
    • offshore person(s) have 25% or more beneficial interest or entitlement to its trust property
    • 25% or more of persons with the right to amend or control the trust’s trust deed are offshore persons
    • 25% or more of persons with the right to control the composition of the trust’s governing body are offshore persons.

    A unit trust is an offshore person if:

    • the manager or trustee (or both) are offshore person(s)
    • offshore person(s) have beneficial interest or 25% or more of the trust’s property.

    A non-individual partnership, unincorporated joint venture, or other unincorporated body is an offshore person if:

    • 25% or more of its partners (or members) are offshore persons
    • offshore person(s) have a beneficial interest or entitlement to 25% or more of its profits or assets
    • offshore person(s) have the right to exercise (or control the exercise) of 25% or more of voting power at a meeting.

    Tangata o tāwāhi

    Mō te takitahi ko te tangata o tāwāhi ko:

    • te kirirarau o Aotearoa kua noho pūmau ki tāwāhi mō ngā tau e toru neke atu ka taha
    • tētahi kāhore tāna momo kōkota kainoho o Aotearoa i tukua e Immigration New Zealand
    • tētahi he momo kōkota kainoho o Aotearoa tāna otirā kua noho pūmau ki tāwāhi mō te 12 marama ka taha.

    Ko te kamupene ko tētahi tangata o tāwāhi ki te mea:

    • i whakakaporei i waho o Aotearoa
    • kei te pupuritia, kei te whakahaeretia rānei e te 25% neke atu tāngata o tāwāhi.

    Ko te kaitiaki ko tētahi tangata o tāwāhi ki te mea:

    • kei tāwāhi he 25% neke atu o tōna rōpū kaiwhakahaere
    • kei ngā tāngata o tāwāhi te 25% neke atu o āna pānga whaihua, o te whiwhinga rānei i āna rawa kaitiaki
    • kei ngā tāngata o tāwāhi he 25% neke atu o te mana ki te whakatika, ki te whakahaere rānei i te whakaaetanga ā pukapuka kaitiaki o te kaitiaki
    • kei ngā tāngata o tāwāhi e 25% neke atu o te mana ki te whakahaere i ngā mema o te rōpū kaiwhakahaere o te kaitiaki.

    Ko te kaitiaki wawae ko tētahi tangata o tāwāhi ki te mea:

    • he tangata o tāwāhi te kaiwhakahaere, te kaitiaki rānei (rāua e rua rānei)
    • kei ngā tāngata o tāwāhi he wāhi whaihua, he 25% neke atu rānei o ngā rawa o te kaitiaki.

    He tangata o tāwāhi te pātuitanga kore-takitahi, te hononga pakihi kaporeikore, te rōpū kaporeikore kē rānei, ki te mea:

    • he tāngata o tāwāhi te 25% neke atu rānei o āna kaipātui (mema rānei)
    • kei ngā tāngata o tāwāhi te 25% neke atu o āna pānga whaihua, o te whiwhinga rānei i āna monihua, āna rawa rānei
    • kei ngā tāngata o tāwāhi te mana ki whakahaere (ka tino whakahaere rānei) i te 25% neke atu o te mana pōti i tētahi hui.

  • Pay cycle

    How often the employee is paid - for example, weekly, fortnightly, monthly.

    Also referred to as 'pay frequency'.

  • Pay frequency

    How often the employee is paid - for example, weekly, fortnightly, monthly.

    Also referred to as 'pay cycle'.

  • Pay period

    The period covered by an employee's pay. Your employees may have different pay periods.

    For example, employees you pay weekly may have a 7-day pay period. Employees you pay fortnightly may have a 14-day pay period.

    The pay period start date is the first day the employee's pay covers.

    The pay period end date is the last day the employee's pay covers.

    For example, an employee is paid weekly and their pay period start date is 1 August. Their pay period end date will be 8 August. They receive their pay on 9 August.

    You enter each employee's pay period start date and end date each time you file employment information about the employee.

  • Prescribed investor rate (PIR)

    A prescribed investor rate (PIR) is the tax rate that your portfolio investment entity (PIE) uses to work out the tax on your investment income.

    The PIR is based on your taxable income. You choose your rate.

     

  • Principal

    In a contractual relationship, the principal appoints an agent or contractor to do something on their behalf.

  • Principal caregiver

    The person who is at least 16 years old and responsible for the day-to-day care of the child on a permanent basis.

    Kaitiaki mātāmua

    He tangata kei runga ake i te 16 tau te pakeke, ka riro māna e tiaki te tamaiti ia rā, ia rā, mō te wā tino roa.

  • Principal settlor

    The principal settlor is the person who has made the biggest financial contribution to the trust.

  • Publicly available

    Publicly available information refers to accessible information where New Zealand based professionals in that field would look. This information does not have to be available for free for it to be publicly available. It must be available on market terms. 

  • Qualifying company

    Qualifying companies have tax rules that aim to treat the company and its shareholders as one entity.

    If your company was not already a qualifying company before 1 April 2011, you cannot choose to be a qualifying company. You can choose to be a look-through company instead.

  • Rental expense deductions

    Rental expense deductions are your allowable rental expenses for the current tax year.

    They're called deductions as you can deduct them from your rental income, lowering the income tax you pay.

  • Rental income

    Your rental income includes: 

    • rents charged to tenants (eg $400 per week)
    • payments from short-term guests, eg $165 per night
    • fees paid to services like Airbnb or Bookabach, or to a property management company
    • payments from the Tenancy Board for damages or rent arrears
    • depreciation recovered. 

  • Rental losses

    Rental losses are when your rental income is less than your rental expenses.

    They're also called 'excess deductions' under the loss ring-fencing rules.

    Rental property losses and ring-fencing

  • Residency requirements

    To get Working for Families you must meet one of the following residency requirements:

    • you were born in New Zealand
    • you have New Zealand citizenship
    • you are a New Zealand resident and have been in New Zealand continuously for at least 12 months at any time
    • you care for a child who is a New Zealand resident and lives in New Zealand.

    Ngā whakaritenga kāinga noho

    E whiwhi ai koe i Working For Families me mātua tutuki i a koe tētahi o ngā whakaritenga kāinga noho e whai ake nei:

    • i whānau mai koe i Aotearoa
    • kua whai mana kirirarau koe i Aotearoa
    • he tangata noho tūturu koe i Aotearoa, ā, i Aotearoa tonu tō kāinga mō te 12 marama ka hipa, ahakoa te wā
    • e tiaki ana koe i tētahi tamaiti noho tūturu i Aotearoa, kei Aotearoa hoki e noho ana ināianei.

  • Resident withholding tax (RWT)

    Resident withholding tax (RWT) is a tax that is deducted from investment income before the investor receives it.

    It helps people who receive investment income to pay their tax throughout the year, and makes sure that people who do not declare their investment income still have tax deducted from it. (Inland Revenue still follows up on undeclared investment income and takes action against people who do not declare it.)

  • Residential exclusion

    Part of the intention test, the term is used in tax law to describe the exclusion of main homes from the tax rules around disposal of residential property.

  • Residential income

    Residential income includes income from renting out your property and what you earn from its sale.

  • Residential land

    Residential land includes a rental property with an existing dwelling, land that is to have a dwelling built on it, and bare land that may have a dwelling built on it under the relevant district plan.

  • Residual income tax (RIT)

    The amount of income tax you pay for the year, less any PAYE and other tax credits you may be entitled to, except for Working for Families Tax Credits.

  • Shadow payroll

    Your regular payroll pays your employee’s salary and manages their tax obligations to your country.

    In most cases your employee will also have tax obligations to New Zealand. You need to set up a shadow payroll in New Zealand to manage these.

    A shadow payroll is not needed if your employee’s salary is paid by a New Zealand employer.

  • Shared care

    At least one third of the care of the child is shared between people in different households. One third care equals 122 days a year or 5 days a fortnight. To count as shared care the arrangement needs to be in place for at least 4 months.

    Te tiaki tiri

    Kia kaua e iti iho i te kotahi hautoru o te wā e tiakina ana te tamaiti e ētahi tāngata i ētahi whare tū motuhake. Te ritenga o te kotahi hautoru nei kei te 122 rā i te tau, e 5 rā o roto i te rua wiki rānei. E kīia ai te tiaki he tiaki tiri, me mātua whai mana mō te whā marama, kaua e hoki iho.

  • Short-term residential renting

    This is when you're renting out your residential property to guests for up to 4 consecutive weeks. Your guests would not also see your property as their main home.

  • Submission

    Information you have filed which we have not yet processed.

    For example, your end-of-year tax submission.

    For employers this could be the employment information you file after each pay day.

    Once we have processed your submission it becomes your 'return'. For example, your tax return.

  • Tax residency

    Your tax residency is different from your immigration residency. You'll need to know your tax residency status to pay the right tax in New Zealand. 

    You'll either be a:

    • non-resident taxpayer
    • New Zealand tax resident.

    A transitional tax resident is a New Zealand tax resident with a temporary tax exemption.

    Tax residency status

     

  • Tax year

    The tax year is from 1 April to 31 March.

  • Taxable activity

    A taxable activity is a regular activity undertaken by an entity that supplies or intends to supply goods or services for money or other reward.

    This includes activities that do not make a profit.

    These things are not taxable activities:

    • working for salary or wages
    • selling items as a hobby or recreation
    • selling the occasional domestic item
    • making GST-exempt supplies.

  • Taxable income

    The income that you pay tax on. It's your net income, minus your expenses and any available losses.

  • Taxable period

    The period of time covered by your GST return.

    It may be one, two, or six months.

    Taxable periods end on the last day of the month.

  • Taxable supplies

    The supplies you provide while carrying out your taxable activity, which you need to pay GST on. This is charged at either 15% (standard-rated) or 0% (zero-rated).

    You can only claim back GST you pay on your purchases and expenses if you use those goods and services to make taxable supplies.

  • The brightline property rule

    The brightline rule only applies to residential properties bought and sold on or after 1 October 2015. 

    The brightline rule means you'll pay tax when you buy and sell a residential property within the brightline period, unless an exclusion applies. 

    Thre are 2 brightline periods. Properties bought on or after 1 October 2015 through to 28 March 2018 inclusive are subject to the brightline rule if sold within 2 years of buying them. Properties  bought on or after 29 March 2018 are subject to brightline if sold within 5 years of buying them. Unless 1 of the following exclusions applies:

    • The property is your main home.
    • You inherited the property.
    • Relationship settlement property when first settled
    • You’re the executor or administrator of a deceased estate.

    The brightline rule is only for residential property. Commercial property or farmland is not part of the brightline rule. 

    The brightline property rule

  • Transitional tax resident

    A New Zealand tax resident who has a temporary tax exemption. 

    You are a transitional tax resident if you are a new migrant or New Zealander returning home and meet the exemption's criteria.

    Temporary tax exemption

  • Turnover

    The amount of money you make from selling goods or services over a particular period.

    Turnover is not the same as profit. Profit is the money you have after you've paid your expenses.

  • Unamortised

    example

  • Use of money interest (UOMI)

    Use of money interest (UOMI) is not a penalty. It's an amount charged or credited to pay for "use of money" in the same way banks charge or credit interest.

    The use of money interest rules are designed to encourage people to pay the right amount of tax at the right time, compensate people who pay too much tax and compensate the Government if people pay too little tax.

  • Worldwide income

    New Zealand tax residents pay tax on their worldwide income, that is, what they earn from sources in New Zealand and overseas. This is called residency based taxation. Even if you do not bring the money you earn into New Zealand, you'll need to include this income in an Individual tax return IR3. 

    New Zealand's right to tax certain types of income may change if a double tax agreement (DTA) applies.

    Double tax agreements (DTAs)

  • Zero rated

    When the charge for GST is at 0%. GST is a tax on the supply of goods and services by a registered person on any taxable activity they do. Some supplies are zero rated or 'exempt' from GST.