As a New Zealand tax resident, you'll generally pay tax on your worldwide income.
If you do not know your tax residency status, you'll need to work it out.
Tax residency status for individuals
Applying for an IRD number
An IRD number is a tax identification number that you'll need in most cases if you're earning income in New Zealand.
- It allows you to pay the right amount of tax from the start instead of higher 'no-notification' rates.
How types of worldwide income are taxed
As noted above, being a New Zealand tax resident, you'll generally pay tax on your worldwide income. You'll need to pay tax on your overseas income even if:
- you do not bring it into New Zealand
- the other country or territory has deducted tax.
If you're a new tax resident or returning to New Zealand after 10 years, you may qualify for a 4-year temporary tax exemption on most types of foreign income.
Double tax agreements
If your country or territory has a double tax agreement with New Zealand, it may affect how different types of income are taxed.
Common types of income
We've described some common types of income in the following list.
International tax can be complex and you may want to consult a tax professional if you're in doubt about your situation.
If you're an employee, your New Zealand employer will deduct tax each time you're paid. This is called pay as you earn (PAYE) and covers your income tax and an ACC earners' levy, New Zealand's accident insurance scheme.
When you start working in New Zealand, you’ll need to give your employer your IRD number and tax code.
- You provide this information on an IR330 form.
- If you do not give this information to your employer, you'll be taxed at a higher rate.
- You will usually not need to file a tax return if your only income is from New Zealand employment and you have been on the correct tax code.
If you're working for an overseas employer, you'll need to include this amount on your Individual tax return - IR3. This is true even if you have the 4-year temporary tax exemption.
You can work out your tax code with our online tool or in the Tax code declaration - IR330 form.
If you're self-employed, you'll need to report your income and claim expenses in an Individual tax return - IR3.
If you're getting schedular payments, you'll need to give your tax rate to the payer on a Tax rate notification for contractors - IR330C form.
If the amount of tax you owe at the end of the tax year is over $5,000, then you'll need to pay provisional tax during the next tax year.
If you become a New Zealand tax resident, you'll need to let your New Zealand bank or financial institution know so they can deduct resident withholding tax (RWT) from any interest you earn.
You'll need to provide them with your IRD number and elect your RWT rate on the form they provide. If you do not, your bank or financial institution will use the highest rate.
The financial arrangements rules may apply to interest you earn. If you go over certain thresholds, you'll need to use a method that spreads your income or expense over the arrangement's term. Whether or not you need to use a method, you'll usually need to calculate a base price adjustment when the arrangement finishes.
You need to declare interest you earn overseas even if it is not brought into New Zealand and even if tax has been deducted in the overseas country or territory. You may be entitled to a tax credit for income tax paid overseas. Double tax agreements may affect the amount withheld.
If you have the 4-year temporary tax exemption, you do not need to include foreign-sourced interest income in your Individual tax return – IR3.
Note that different rules apply if you invest in a portfolio investment entity (PIE). See our guidance for PIEs later in this list.
If you get dividends from a New Zealand company, you should get a statement showing how much resident withholding tax (RWT) and imputation credits have been deducted.
If you need to file an Individual tax return - IR3, you'll need to enter these amounts correctly along with your gross income.
If you have shares in a company which is not a controlled foreign company (CFC), you'll need to consider whether the foreign investment fund (FIF) rules apply.
If your holdings are over $50,000, you'll probably need to calculate FIF income using 1 of 5 methods. The most common method is the fair dividend rate. This method calculates your FIF income as 5% of your opening value plus an adjustment for any shares bought and sold in the same year. Any result will also be affected by currency fluctuations.
There are a number of exemptions and you should either:
- read the Guide to foreign investment funds and the fair dividend rate - IR461
- consult a tax professional if these rules might apply to you.
If you return FIF income, you do not need to put any dividends in your tax return.
You may also need to make a disclosure of your interests but there are exemptions.
If your holdings are under $50,000 and you do not choose to use the FIF rules, you'll need to put the dividend amounts in your Individual tax return - IR3. Note that you cannot claim Australian franking credits.
If you have the 4-year temporary tax exemption, you do not need to declare dividends from a foreign source or apply the FIF rules.
A portfolio investment entity (PIE) is an entity which invests contributions from its investors in different passive investments, for example KiwiSaver schemes. There are different types but the most common is a multi-rate PIE. These pay tax based on an investor's prescribed investor rate (PIR).
You'll need to advise your multi-rate PIE of your PIR. Your PIR is based on your income in the previous two income years. There are 3 PIRs: 10.5%,17.5% and 28%.
Portfolio investment entities (PIEs) for New Zealand residents
For the 2020 and earlier tax years, if your PIR is too low, your PIE income is included in your annual income tax assessment. If your PIR is too high, you cannot get a refund. It's important to review your rate each year.
From 1 April 2020, there is a new process to deal with under and over payments. A separate PIE calculation will be made using your correct PIR for the year. If any of your PIE income or loss was not taxed at your PIR, the tax difference will be included in your tax to pay or refund due as part of your income tax assessment.
Also, we can now instruct a PIE to change your PIR if we believe you're on the wrong rate during a year.
You can use our calculator to help find your PIR. Note that if you have the 4-year temporary tax exemption on most types of foreign income, you can use a 0% PIR if you invest in a foreign investment zero rate PIE.
Find my prescribed investor rate
If you invest in a PIE that is listed on a stock exchange (a listed PIE), any dividend paid will have a 28% imputation credit attached. You do not need to include this dividend in your Income tax return. However, if your marginal tax rate is below 28%, you may want to include the dividends if you have other income taxed at source.
Foreign investment funds, or FIFs, have already been mentioned for dividends from companies overseas.
FIFs are also relevant if you have an interest in a life insurance policy not offered or entered into in New Zealand.
If this may apply to you, we suggest you read the Guide to foreign investment funds and the fair dividend rate - IR461.
Controlled foreign companies are based overseas but controlled by a small number of New Zealand residents. The company must not be a tax resident in New Zealand or must be treated as foreign under a double tax agreement.
If you have greater than 10% ownership in a CFC, you may need to attribute income and include it in an Individual tax return - IR3.
You may also need to make a disclosure of your interests.
We recommend you consult a tax professional if the rules may apply to you.
Foreign superannuation funds are created outside of New Zealand to give retirement benefits to individuals.
If you were a New Zealand tax resident when you acquired the rights to a foreign superannuation fund, then the foreign investment fund (FIF) rules may apply.
They can also apply where you were a non-resident taxpayer when you acquired the rights and have previously applied the FIF rules consistently, having included FIF income in a return before 20 May 2013.
Since 2014, most withdrawals from foreign superannuation funds are dealt with under a separate set of rules.
You'll need to pay tax on lump sum withdrawals and transfers using either a formula or schedule method.
If you were a non-resident taxpayer when you acquired the right to a foreign superannuation fund, then you may be entitled to a 4-year exemption on lump sum withdrawals. This is different from the 4-year temporary tax exemption on most types of foreign income.
If you get a pension from a foreign superannuation fund, this will usually be taxable in the year you get it.
You'll most likely need to include this income in an Individual tax return - IR3. If you come from a country or territory that has a DTA with New Zealand, you'll need to check that agreement. In most cases, New Zealand has full taxing rights on pensions, but not all agreements are the same.
A gain made from selling a property may be taxed if you had the intention to sell it when you bought it.
However, there are also bright-line tests which tax any gains from the sale of residential property regardless of your intention when you buy. Any gains need to be included in a tax return.
The bright-line tests apply to properties:
- bought on or after 1 October 2015 to 28 March 2018 and sold within 2 years
- bought on or after 29 March 2018 and sold within 5 years
- bought on or after 27 March 2021 and sold within 10 years.
If you're an offshore person, you may need to have resident land withholding tax (RLWT) deducted from the sale. You can claim this amount as a credit when you include the gain in your tax return.
If your properties are in New Zealand, you'll need to pay tax on any profit you make. You'll need to keep receipts and detailed records of any expenses you claim.
If you have debt in relation to the property, you'll need to consider how the financial arrangements rules apply to you. You may need to spread any expenditure over the life of the loan.
If the debt is in a foreign currency, changes in the currency's value will affect your results and may lead to unexpected income. Also, if you have an overseas mortgage on your rental property, you may need to pay non-resident withholding tax (NRWT) or approved issuer levy (AIL) in New Zealand on the interest paid overseas. We recommend the advice of a tax professional in these situations.
Rental income and paying tax on it
If you buy and sell shares regularly, you may have to pay tax on the gains.
If the shares are in overseas companies and you're in the FIF rules, you do not need to include any gains separately as they will be taken into account in the different methods.
If you're a New Zealand tax resident and a beneficiary of a trust, you're taxable on your worldwide beneficiary income. This includes income from any trusts settled overseas.
If you do receive money or property from overseas, including inheritances, we advise you to read the following interpretation statement. It explains distributions from foreign trusts.
Interpretation statement - IS 19/04 - Income tax - Distributions from foreign trusts (Tax Technical)
There is a special rule which applies where you become a tax resident after having been a non-resident for less than 5 years. In this situation, you're taxed on your beneficiary income and distributions from foreign and non-complying trusts for the period of your absence.
If you're a New Zealand tax resident and settle a trust overseas with no New Zealand trustees, you'll need to make a disclosure.
Filing a tax return as a New Zealand tax resident
You may need to file an Individual tax return - IR3 to report your income from sources in New Zealand and overseas.
- If you become a New Zealand tax resident during the tax year, you'll need to show the breakdown between the New Zealand income you earnt as a non-resident taxpayer and your worldwide income as a New Zealand tax resident. Use the Individual tax return - IR3 to do this.
- If you're leaving New Zealand and becoming a non-resident taxpayer, you may need to file a return for the income you earnt as a New Zealand tax resident.