Inland Revenue - Te Tari Taake - New Zealand

The Inland Revenue or Inland Revenue Department is the public service department of New Zealand charged with advising the government on tax policy, collecting and disbursing payments for social support programmes, and collecting tax.

If you are planning to work in New Zealand, you will need to register with the Inland Revenue before starting work. Your taxes will be deduced from your salary as you earn. You may need to file a tax return if you have other worldwide income which is subject to taxation.

New Zealand has a simple system of taxation laws with minimal loopholes and is one of the most favourable environments for investors in all of the OECD countries. There is no capital gains tax, inheritance tax, estate tax, healthcare tax or local taxes aside from property taxes. There is, however, a Goods and Services Tax (GST) of 15% factored in to the price of most goods and there are taxes on alcohol, tobacco and petrol.

Individuals are subject to income tax on worldwide income whilst tax resident in New Zealand. Tax is based upon a sliding scale and all worldwide income of a tax resident in New Zealand is taken into account in determining their effective rates of tax. The tax rates range from 10.5% to 33% but in April 2021 a new top tax bracket was introduced at 39% for all income over NZD 180,000.

The official currency of New Zealand is the New Zealand dollar (NZD).

What is an IRD number? How do I get one?

An Inland Revenue Department Number, IRD number is a unique number given to you by New Zealand's Inland Revenue Department. It is used by Inland Revenue, banks, financial institutions, government departments and employers to identify you for tax purposes.

You will need an IRD number if:

• You become an employee in New Zealand, working on a work visa or student visa
• You are starting a business in New Zealand
• You are buying, selling or transferring New Zealand property.
• You open a New Zealand bank account
• You are registering for a student loan
• You file tax returns

You can apply for an IRD number online or by completing an IRD number application form (IR742)  if you have a NZ resident, student or work visa or an Australian passport. If you live outside NZ you need a current New Zealand bank account before you apply for an IRD number.  Please read our guide to opening a New Zealand Bank Account.

If you do not have an IRD number, tax will be deducted at the non-declaration rate, which is higher than the normal rates.

Tax returns and compliance When are tax returns due?

The tax year runs to 31 March and an annual income tax return (if required) is due on 7 July. Taxpayers who have a filing extension with an agent are required to file returns by 31 March the following year.

Terminal taxes are payable by 7 February of the following year (or 7 April for taxpayers with a filing extension).

Interest and penalties may apply to late payment of taxes owing. Taxpayers with income that has not had New Zealand tax deducted at source may be liable to make tax payments in instalments throughout the year (provisional tax).

What are the compliance requirements for tax returns in New Zealand?

Residents

Taxpayers who derive income other than income that has tax withheld at source, will be required to file a tax return.

Taxpayers who derive income only from employment, interest, or dividends that have tax withheld at source during the income year are not required to file an annual income tax return, provided the correct withholding deductions are made.

If the Inland Revenue knows that a taxpayer has not had the correct amount of tax deducted, then the Inland Revenue will send the taxpayer a personal tax summary, setting out the taxpayer’s correct tax liability. In certain circumstances, a taxpayer who does not receive a personal tax summary, but who knows that they have not had enough tax deducted is required to request a personal tax summary from the Inland Revenue and arrange for it to be corrected.

Non-residents

Non-residents are required to file an annual tax return if they have income that is New Zealand sourced.

Interest and dividends sourced in New Zealand and paid to a non-resident are subject to non- resident withholding tax (NRWT). As NRWT is usually a final tax for non-residents, a tax return is not usually required if these are the only forms of income received from New Zealand sources.

Tax rates What are the current income tax rates for residents and non-residents in New Zealand?

Both residents and non-residents are taxed in general using a tiered rate table with 5 tax bands from 10.5% to a maximum rate of 39%.

Residence rules For the purposes of taxation, how is an individual defined as a resident of New Zealand?

A New Zealand resident taxpayer is taxable on their worldwide income. For income tax purposes a resident individual is defined as a person:

• who has a permanent place of abode in New Zealand or;
• is personally present in New Zealand in excess of 183 days in any 12-month period (note that any part day of physical presence in New Zealand is included as days present in New Zealand).

If you are resident in New Zealand for less than 183 days in any 12 month period, you are liable for taxes on your local income only and not your worldwide income.

What is a Permanent Place of Abode?

A prerequisite for the existence of a permanent place of abode is having an available dwelling in New Zealand. This dwelling does not need to be directly owned by the taxpayer to be considered available for the purposes of this test. In addition, for a property to be regarded as available it is not necessary that it be vacant or able to be occupied immediately.

Where an individual has an available dwelling in New Zealand, in order to determine whether the dwelling will be considered a permanent place of abode, there are two key considerations; the continuity and duration of the individual’s presence in New Zealand and the durability of the individual’s association with the property. The following factors would be considered in addressing the level of an individual’s connection with a property:

• nature and use of the dwelling
• intentions
• family and social ties
• employment, business and economic ties
• personal property
• other “relevant” factors, e.g. receipt of Government assistance, whether holidays are spent in New Zealand

Determination of a permanent place of abode is a question of fact and varies from person to person.

Is there a de minimus number of days rule when it comes to residency start and end date?

A person who is physically absent from New Zealand in excess of 325 days in any 12-month period is deemed not to be resident in New Zealand from the beginning of that period of absence provided they have no permanent place of abode in New Zealand. Therefore, a taxpayer cannot come back to New Zealand for more than 39 days in the 12-month period following departure in order to meet the days test for non-residence from their departure date. Whether you remain a New Zealand resident will depend upon your individual circumstances.

What if the employee enters New Zealand before their employment begins?

You will be a resident for New Zealand tax purposes if you spend more than 183 days in any 12-month period in New Zealand or if you have a permanent place of abode in New Zealand.

You will become a New Zealand tax resident from the first day in the 12-month period that you gain residency. This means that any prior trips to New Zealand before your move to New Zealand may cause you to become a tax resident from the date of the prior visit.

Transitional residents

People who have not been tax resident in New Zealand for at least 10 years and return or move to New Zealand will be a transitional resident for New Zealand tax purposes. A person may only be a transitional resident once during their lifetime.

The general requirements for being a transitional resident are as follows: the individual is

• resident in New Zealand
• for a continuous period (the non-residence period) of at least 10 years ending immediately before the individual satisfies the requirements of the determination of residence other than company for becoming resident in New Zealand, the individual:
• did not satisfy the requirements for being resident in New Zealand
• was not resident in New Zealand.
• the individual has not been a transitional resident before the non-residence period
• the individual has not ceased to be a transitional resident after the end of the non- residence period.

A transitional resident is taxed only on their New Zealand-sourced income, and any overseas employment or business income. This exemption from tax on most foreign-sourced income will apply for 48 months from the date of New Zealand tax residence (the exemption period may extend to up to 54 months depending on when a New Zealand permanent place of abode arises).

Non-residents

A person who is physically absent from New Zealand in excess of 325 days in any 12-month period is deemed not to be resident in New Zealand from the beginning of that period of absence, provided they do not have a permanent place of abode in New Zealand.

Termination of residence Are there any tax compliance requirements when leaving New Zealand?

There are no special procedures on termination of residence.

A return must be filed by a person who is non-resident for part of the tax year. Therefore, all taxpayers are required to file a tax return for the tax year in which they cease to be a tax resident in New Zealand.

What if the employee comes back for a trip after residency has terminated?

After residency has been terminated (that is, the taxpayer has been physically absent from New Zealand for more than 325 days) a taxpayer cannot come back to the host country/jurisdiction for more than 183 days in any 12 months. If the 183-day period is exceeded the assignee could be regarded as being a resident from the first day of their arrival into New Zealand.

Types of taxable compensation What categories are subject to income tax in general situations?

In general, all types of remuneration, monetary benefits, and housing received by an employee for services rendered constitute taxable income regardless of where paid. Typical items of an expatriate compensation package as follows are fully taxable unless otherwise indicated:

• base salary
• overtime payments
• reimbursements of foreign and/or home country taxes
• school tuition reimbursements
• cost-of-living allowances
• expatriation premiums for working in New Zealand
• relocation packages

The first 3 months of any housing or housing allowance paid is exempt from tax where it relates to an employee's relocation. However, after 3 months, employer provided accommodation will be taxable to that employee, unless subject to specific exemption.

Benefits-in-kind are generally subject to Fringe Benefit Tax (FBT) payable by the employer. Legislation allows employers to use FBT rates that correspond to the personal income tax rates of the employee receiving the benefit (with the top rate of FBT payable being 49.25 percent, based on the top marginal tax rate). The intention is to make employers indifferent from a tax perspective whether a benefit in kind is provided and FBT paid, or equivalent cash remuneration is paid to the employee. The FBT rate is set so an employer is indifferent between providing a net benefit-in-kind, or gross salary to enable the employee to purchase the benefit.

Tax-exempt income Are there any areas of income that are exempt from taxation in New Zealand?

• Certain non-monetary benefits.
• Certain cash allowances.
• Certain transfer costs.
• Contribution to a non-New Zealand-registered superannuation scheme.

Certain non-monetary benefits

Non-monetary benefits provided by the employer to the employee for services rendered are generally not taxable in the hands of the employee. However, these benefits are usually subject to FBT which is payable by the employer. Such non-monetary benefits include a company car, interest-free or low interest loans, discounted goods and services, free or subsidized travel for recreational leave and contributions to an overseas superannuation scheme, and so on. Discounted shares or share options packages do not fall within the FBT regime. Discounted shares granted or vested and share options exercised, while resident in New Zealand are taxable in the hands of the employee.

Certain cash allowances

Cash allowances are not taxable in the hands of the employee if they merely reimburse the employee for expenditure incurred on behalf of an employer. Common examples of reimbursement allowances are accommodation expenses for business travel (however see comments above re housing) and petrol allowances for business motor vehicle usage.

Certain transfer costs

When an employer requires an employee to transfer to a new location, reimbursement of the costs of relocation are generally exempt from tax. This exemption only extends to direct costs associated with an employee’s transfer.

The New Zealand IRD have issued a list of relocation costs that may be eligible as exempt from tax to provide clarity as to the type of expenditure that is exempt from tax.

Contribution to a non-New Zealand registered superannuation scheme

Where an employer makes a contribution to a non-New Zealand registered superannuation scheme (for example, a superannuation plan registered overseas), the contribution will be subject to FBT. Contributions made by an employer to a New Zealand-registered scheme may be subject to Employer Superannuation Contribution Tax (ESCT) at the employee’s marginal tax rate.

Expatriate concessions Are there any concessions made for expatriates in New Zealand?

No special exclusions from taxable income are available to expatriates residing in New Zealand apart from those relocation costs discussed above and the exemptions available for transitional residents.

Salary earned from working abroad Is salary earned from working abroad taxed in New Zealand? If so, how?

Where a resident or transitional resident of New Zealand derives income while working overseas, that income will be taxable in New Zealand. If foreign taxes are paid while overseas, it is possible to claim a foreign tax credit for the foreign tax paid. The amount of the credit may not exceed the lesser of the amount paid in the country/jurisdiction of source and the amount of New Zealand tax payable on that income. In addition, this credit will only be allowable to the extent that the foreign-sourced income would have been taxable had it been derived in New Zealand.

Taxation of investment income and capital gains Are investment income and capital gains taxed in New Zealand? If so, how?

Investment income is taxable in New Zealand if it is derived by a resident (other than a transitional resident in the case of foreign sourced investment income) or has a New Zealand source.

There is no comprehensive capital gains tax in New Zealand; however, some forms of capital gains are subject to income tax under specific provisions of the legislation. These include the following:

• gains on the sale of real and personal property that was acquired with the purposes of resale or was generally acquired as part of a profit-making activity
• gains on financial arrangements including any profit on realization and gains arising from foreign exchange fluctuations

Losses are subject to the normal tests of deductibility.

Tax is applied on any gain on the disposal of residential property (other than an individual’s main home) where it is sold within 2 years of acquisition. Buyers and sellers are also required to provide a New Zealand IRD number at the time of any transaction.

Taxation of interest income

For a New Zealand resident, any interest you earn whether from New Zealand or overseas sources will be included in your taxable income and will be subject to tax at marginal rates. A tax credit is generally allowed for any overseas taxes paid on interest derived from overseas.

Transitional residents will only be subject to tax on New Zealand-sourced interest income at their marginal rate. Non-resident taxpayers will need to have non-resident withholding tax or approved issuer levy deducted from New Zealand interest paid to them.

Taxation of Dividends, interest, and rental income

Taxation of New Zealand-sourced dividends

Dividends paid by New Zealand companies are subject to an imputation system. This means that dividend income carries with it credits resulting from tax paid by the company, which can be used by resident shareholders against their personal tax liability on the dividends.

Resident withholding tax is imposed on dividends to the extent that the dividend is not fully imputed (that is, the dividend does not carry the maximum allowed amount of imputation credits).

Gains on financial arrangements (such as bonds and debt securities) may be taxable under the financial arrangement rules. This includes foreign exchange gains on bank accounts, which could be taxable on a realized (cash) bash or unrealized (accrual) basis depending on the taxpayer's personal circumstances.

A non-resident is subject to non-resident withholding tax on any dividends received from New Zealand companies. The standard rate of non-resident withholding tax on dividends is 30 percent, but this may be reduced to 15 percent by a double tax agreement and is automatically reduced to 0 percent to the extent that the dividend is fully imputed.

If dividends are your only New Zealand-sourced income and non-resident withholding tax has been correctly deducted, you will not need to file a New Zealand tax return.

Taxation of foreign-sourced dividends

Dividends paid by an overseas company will be taxable in New Zealand, unless the shares are subject to the Foreign Investment Fund (FIF) regime. Shares in non-New Zealand companies are generally subject to the FIF regime (discussed later). Dividends paid by overseas companies to transitional residents or a non-resident are not subject to tax in New Zealand.

Taxation of rental income

Residents will be taxable on net rental property income derived from property, regardless of location. Where mortgage interest payments are made to a foreign lender, you may be required to withhold non-resident withholding tax or approved issuer levy from the interest payments made and pay this to the Inland Revenue.

Non-residents and transitional residents will only be taxable on net rental property income derived from property located in New Zealand.

Taxation of employee share purchase schemes

In general, the benefit of shares received under a share purchase or option arrangement as a consequence of employment is taxable in the hands of the employee. The taxable benefit is calculated as the difference between the market value of the share received and the amount paid for the share. The trigger point for the tax liability is generally the point at which the employee acquires the share, whether by way of grant, purchase at a discount, or exercise of an option.

The grant of options is not a taxable event. The tax liability arises upon exercise of the options, or when the option is sold.

If a transitional resident receives a benefit under an employee share option or purchase scheme, the value of any benefit may be reduced by an apportionment based on the transitional resident’s period of employment as a non-resident over the total period of their employment in relation to the scheme.

A non-resident receiving a share benefit is taxable in New Zealand to the extent that the benefit relates to New Zealand employment.

Foreign investments

Resident taxpayers are subject to specific regimes to prevent New Zealand residents from sheltering income offshore. In many circumstances, income accumulated in a controlled foreign company (CFC) or a foreign investment fund (FIF) is taxed in New Zealand.

The CFC and FIF regimes are applicable even to entities which may have been created before you become New Zealand tax resident. Tax may be imposed on foreign income when it is derived by a resident or, in some circumstances, as it accumulates in a CFC or a FIF.

Tax planning

Timing of payments

A gross-up of income in the year of departure is not required. Therefore, lower marginal tax rates may apply if an individual leaves New Zealand early in the income year or arrives late in an income year.

Superannuation scheme benefits

As noted above, distributions from certain overseas superannuation schemes are generally taxable if received while a tax resident in New Zealand. As a general rule, if you expect to receive offshore pensions and superannuation benefits while a tax resident in New Zealand, they should be reviewed, and their tax status determined.

Gains from stock option exercises

Gains from stock options and discounted shares are generally taxable if the price paid for the share is less than the market value of the share at the time of acquisition of the share. Gains from the disposal of stock options received by virtue of employment are also generally taxable. The timing of exercise of options, or grant of shares, vis-à-vis becoming tax resident in New Zealand could determine whether the share benefit is taxable in New Zealand.

Foreign exchange gains and losses

Foreign exchange gains and losses arising on financial arrangements held by tax residents must be brought to account under the financial arrangements’ regime. Gains will be assessable. Losses will be deductible provided the interest deductibility criteria are met.

Principal residence gains and losses

Not applicable in New Zealand.

Capital losses

Losses are subject to the normal tests of deductibility. As New Zealand does not have a comprehensive capital gains tax regime, capital losses are generally not deductible. Losses on financial arrangements might be deductible under the financial arrangement rules.

Personal use items

New Zealand does not allow deductions against employment income for private expenditure. Benefits-in-kind provided to employees are liable to fringe benefits tax (FBT) in the hands of the employer.

Reimbursement of expenditure incurred as a consequence of employment can generally be reimbursed by the employer without the employee being subject to tax on the reimbursed amount. The Inland Revenue has released a list of what relocation costs will be non-taxable, such as the costs of finding a new property, moving personal effects, and immigration assistance.

Gifts

There is no longer gift duty in New Zealand.

Additional capital gains tax (CGT) issues and exceptions

Are there additional capital gains tax (CGT) issues in New Zealand? 

New Zealand does not have a comprehensive capital gains tax regime. Some forms of gain are subject to income tax under specific provisions of the legislation. These include:

• gains on the sale of real and personal property that was acquired with the purposes of resale or was acquired as part of a profit-making activity
• gains on financial arrangements including any profit on realization and gains arising from foreign exchange fluctuations.

General deductions from income What are the general deductions from income allowed in New Zealand?

Generally, the only deductions available to most individuals are for expenditure relating to tax return preparation and premium on certain loss of earnings insurance.

Calculation of estimates/prepayments/withholding How are estimates/prepayments/withholding of tax handled in New Zealand? For example, Pay As You Earn (PAYE), Pay-As-You-Go (PAYG), and so on.

An employer will generally be required to make deductions of income tax from salary and wages and remit those deductions to the Inland Revenue Department (either once or twice a month, depending on the size of the employer). These are referred to as Pay As You Earn (PAYE) deductions.

If an employer does not deduct PAYE, tax deductions become the responsibility of the employee and can be accounted for as an IR 56 taxpayer, where the employee makes regular payments to the Inland Revenue.

A taxpayer that has income that is not subject to source deductions, such as investment income, might be required to make instalment payments (provisional tax) during the tax year.

When are estimates/prepayments/withholding of tax due in New Zealand? For example, monthly, annually, both, and so on.

A provisional taxpayer may be required to pay provisional tax during an income year. This is generally done in three instalments.

A provisional taxpayer, for a tax year, is a taxpayer whose residual income tax for the tax year is NZD 5,000 or more; or where a taxpayer makes an election to be a provisional taxpayer.

Relief for foreign taxes Is there any Relief for Foreign Taxes in New Zealand? For example, a foreign tax credit (FTC) system, double taxation treaties, and so on.

A tax credit is allowed for foreign tax which is paid on any foreign-source income. The tax for which a credit is sought must be similar in nature to New Zealand income tax. The amount of the tax credit allowed cannot exceed the lesser of the amount of tax actually paid in the foreign jurisdiction, or the New Zealand tax liability on the foreign sourced income.

If a tax credit is claimed and the foreign tax is subsequently refunded, the amount of tax credit claimed (and refunded) must be paid to the Inland Revenue within 30 days of the date on which the foreign tax was refunded.

New Zealand has agreements for the avoidance of double taxation concluded with most of New Zealand’s major trading partners.

General tax credits What are the general tax credits that may be claimed in New Zealand?

• Pay As You Earn (PAYE).
• Foreign Tax Credit (FTC).
• Resident Withholding Tax (RWT).
• Non-resident Withholding Tax (NRWT).
• Imputation Credits (IC).

This is a general introductory guide for expatriates moving to New Zealand to work and you should seek advice from an accountant in New Zealand regarding your tax affairs.

Applicants for Medical Jobs in New Zealand

Candidates for jobs in the medical sector of New Zealand are invited to register a CV and contact us to discuss appropriate opportunities. There are opportunities for permanent employment, fixed term contracts and locums across both North and South Islands.

Advertised jobs can be viewed on our website and applications submitted by uploading a recent CV. All candidates for medical jobs must meet the eligibility criteria for registration with the Medical Council of New Zealand in a general, vocational or special purpose scope. The registration process is described in our guide to medical registration in New Zealand.