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Employment Taxation for Expats in New Zealand

Submitted: October 2014

Residence

Generally you will be considered to be tax resident once you have stayed New Zealand for more than 183 days during a 12 month period; once this period has been exceeded you will be considered to have been resident from the first of the 183 days. A resident will not become non-resident until they have been absent from New Zealand for more than 325 days in a 12 month period; once this period has been exceeded you will be considered to have been non-resident from the first of the 325 days.

If an expat arrives in New Zealand with dependent family and buys or takes out a long-term lease on a home, it is likely that they will be considered resident from the date of their arrival.

It is important to be aware of the terms of any tax treaty that exists between New Zealand and your home country, as this may well dictate how you are treated with regards to residency and tax. For more details see: Taxation – Tax Treaty Considerations for Expats in New Zealand. As a resident you will be taxable on your worldwide income and gains. If you remain non-resident you will only be taxed on New Zealand source income.

 

Tax rates

The tax year runs from 1 April to 31 March. As a resident, your New Zealand employer will withhold tax from your wages or salary each time you are paid. They will also deduct the Accident Compensation Levy which is described here. After the end of the year, your employer will give you a form which shows how much tax they have deducted. If these deductions have been made correctly, there should be no need to fill in a tax return at the end of the year, unless you have other income to declare. The amount deducted by your employer will be calculated monthly based on the table below. If you are a non-resident, you will be subject to the same tax rates.

The following table shows the 2014 progressive tax rates in New Zealand:

Income NZ$ Rate
Up to 14,000 10.5%
14,001 – 48,000 17.5%
48,001 – 70,000 30.0%
70,000 and over 33.0%

 

Tax returns for the year can be filed on paper or electronically. The form must be filed by 7 July following the end of the tax year. This deadline can be extended to 31 March of the following year if you use a registered tax agent. There are penalties for late or incorrect returns. Payment of any outstanding tax must be made by 7 February, unless you use a tax agent, in which case payment must be made by 7 April. There are also penalties for late payment.

For the self-employed, no tax is deducted at source. Instead you will be taxed on the basis of the assessment of your tax return. This means that during the first year of self-employment, you will not have to actually have to pay any tax. Once you have completed your return, you will be sent an assessment showing how much tax you owe, which you must then pay. This amount will then form the basis of provisional tax payments which have to be made three times a year during the second and subsequent years.

Generally the provisional tax payments are due on 28 August, 15 January and 7 May. The amount you will have to pay is based on your previous year’s liability, increased by an annual specified factor, generally 5% or 10%. This is based on the assumption that your profit will tend to increase as the years pass. The amount payable can also be based on your reasonable estimate of the current year’s profits. However if you underestimate your profit, you may end up paying interest on the underpayments of provisional tax, once the final tax liability for the year has been calculated. You will not have to pay provisional tax if your actual tax liability in the previous year was less than NZ$2,500.

 

 

 




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