Tax is one of those inescapable facts of life, even in New Zealand. At least however the authorities here have developed a tax system that is comparatively easy to navigate.
As well as its simplicity, our tax system has the major attractions of predictability, fairness and a minimum of loopholes. It is also a relatively favourable tax environment for your earnings and assets. In fact, in 2016 the US-based Tax Foundation ranked New Zealand’s overall tax system as second in the developed world for its competitiveness - and top for its individual (personal) taxes.
Tax is a complex area, and this information is only a summary. For more detailed information you can seek professional advice
A big attraction if you are considering living in NZ is the tax concession on overseas investment income & pensions that applies for your first four years of living here.
Key features of New Zealand’s tax system include:
- no inheritance tax
- no general capital gains tax, although it can apply to some specific investments
- no local or state taxes, apart from property rates levied by local councils and authorities
- no payroll tax
- no social security tax
- no healthcare tax, apart from a very low levy for New Zealand’s Accident Compensation injury insurance scheme (ACC).
Will you need to pay tax in New Zealand?
The short answer is ‘yes’. Income tax and Goods and Services Tax (GST) are how we fund services for the benefit of all New Zealanders.
Not everyone in New Zealand needs to put in a personal tax return, but it is up to you to find out if you need to. If you have overseas income, or arrived part way through a tax year, you are required to file a return. The tax year runs from 1 April to 31 March. There are other circumstances under which you must file a return - check them out on the Inland Revenue website.
So, in practice, most new arrivals need to file a return in their first year here.
Inland Revenue is the government’s tax department. Find out about migrants’ tax obligations on the Inland Revenue (IRD) website. There is also a handy ‘Top 10 facts’ guide you should check.
Getting a tax number
Anyone earning income will have tax deducted through the PAYE (Pay As You Earn) system. If you do not have a tax number (known as an IRD number), tax will be deducted at the highest rate (see below).
It is a good idea to apply for an IRD number as soon as you arrive here so that you are taxed at the right rate right from when you start work. It is free to get an IRD number, and fairly easy to apply online.
If you are buying or starting a business, there are a number of tax obligations you need to be aware of. Information for businesses is available on Inland Revenue’s website. There are also regular workshops you can attend to learn more about business taxes in New Zealand.
New Zealand’s top personal tax rate is 33% for income over NZ$70,000. At the other end of the scale, the tax rate is 10.5% on income up to $14,000. For full details, see ‘New Zealand tax at a glance’ below.
Companies and corporates are taxed at a flat rate of 28%.
New Zealand also has a tax on consumption called Goods and Services Tax (GST). It is a flat rate tax - currently 15% - that is added to almost all purchases. However, you do not pay GST on residential rents and financial services. Businesses can recover the GST they pay as an input cost.
A flat rate GST is simpler than the systems used in many other countries where similar taxes are applied at confusingly different levels for different products and services.
Four years’ tax concession
Income from overseas investments or pensions can be exempt from New Zealand tax for your first four years of living here, if you are eligible for ‘transitional tax resident’ status.
During that period, only your New Zealand sourced income may be liable to income tax.
While there is no general capital gains tax on New Zealand investments, after the four years tax can apply to realised and non-realised gains on overseas portfolios, including exchange gains.
For more information visit Inland Revenue’s website.
Avoiding double taxation
You might find yourself a tax resident in New Zealand as well as somewhere else. In that case, if both countries tax their residents’ worldwide income, there is a possibility your income could be taxed twice.
New Zealand minimises that possibility by providing credits for tax paid overseas on income that is also subject to New Zealand tax.
In addition, New Zealand has agreements with 39 of our main trading and investment partners which eliminate double taxation.
NZ Tax at a glance
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.
Generally not on New Zealand investments, but applies to foreign debt and equity investments.
|Dividends||Imputation system to avoid double tax.|
|Gift duty||Not 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 (FBT)||
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.
Tax is a complex area, and this information is only a summary. For more information, visit the Inland Revenue website.