While it is no tax haven, New Zealand has comparatively simple tax laws with a focus on minimising loopholes. It has the major attractions of simplicity, fairness and predictability.
New Zealand offers a favourable tax environment for investors’ earnings and assets – the most attractive of all 27 OECD countries, according to research by Professor Rob Salmond of the University of Michigan.
Key features of New Zealand’s tax system include:
- No inheritance tax
- No general capital gains tax (it can apply to some investments)
- No local or state taxes apart from property rates paid to local authorities
- No payroll tax
- No social security tax
- No health care tax, apart from a minimal accident compensation tax.
The top personal tax rate has recently been reduced to 33% for income over NZ$70,000.
Company tax rates also fell recently, from 30% to 28% from 2011.
The Government has ruled out any prospect of a comprehensive capital gains or land tax.
New Zealand’s moves differs from many countries where Governments are boosting taxes to meet burgeoning budget deficits.
New Zealand has a tax on consumption called Goods and Services Tax (GST). It applies at a flat rate, currently 15%, on almost all purchases. It’s a simpler system than that of other countries where similar taxes are applied at confusingly different levels for different products and services.
Businesses can recover the GST they pay as an input cost.
Four years’ tax concession
A big attraction if you’re considering living in New Zealand is the tax concession on overseas investment income and pensions that applies for your first four years of living here.
It generally means that only your New Zealand sourced income is liable to income tax here for that period.
While there’s no general capital gains tax on New Zealand investments, after the four year adjustment period tax can apply to realised and non-realised gains on overseas portfolios, including exchange gains.
Avoiding double taxation
You might find yourself a tax resident in New Zealand as well as in another country or territory. In that case, if both countries tax their residents’ worldwide income, there’s a possibility your income could be taxed twice.
New Zealand minimises that possibility by unilaterally providing credits for tax paid overseas on income that is also subject to New Zealand tax. In addition, New Zealand has agreements with 35 of our main trading and investment partners which eliminate double taxation.
NZ tax at a glance
|Personal income||Top rate: 33% from $70,000
30% - $48,001 to $70,000
17.5% -$14,001 to $48,000
10.5% - $0 to $14,000
|Tax credits||Working for Families credits for low and middle income earners|
|Social security & insurance levies etc.||Social security and health: covered by general tax, though many people have private health insurance
ACC (New Zealand’s unique accident compensation scheme):: levy paid with annual car registration. Earners pay 2% up to a maximum of $110,018 in earnings. Employers pay insurance cover based on industry risk
|Capital gains & dividends||Capital gains: generally not on New Zealand investments but applies to foreign debt and equity investments|
|Dividends||Imputation system to avoid double tax|
|Gift duty||None since 2011|
|Tax on savings||Little tax relief on contributions to New Zealand retirement schemes, but saving is not compulsory. Tax paid at normal income levels at source but distributions are tax free. No mortgage interest tax benefits except for investment property|
|Fringe benefit tax||Paid by employer, up to a rate of 49.25% for employer provided cars, low interest loans, medical insurance premiums, foreign superannuation contributions etc. FBT is tax deductible so employer cost is effectively the same as paying cash remuneration|
|Sales & excise tax||Goods and services tax (GST) of 15% on most things.
Excise tax paid on petrol, tobacco, alcohol
Tax is a complex area, and this information is only a summary. You should seek professional advice.
For more information visit our tax department Inland Revenue.