Tax in New Zealand
In New Zealand, Inland Revenue (IR) collects most of the revenue that government needs to fund its programmes. IR also administers a number of social support programmes and provides the government with policy advice.
It’s important that everyone pays the right amount of tax because tax pays for the things that are so great about living in New Zealand, like our health and education systems.
In New Zealand, paying tax is a legal requirement. People not paying their fair share can be prosecuted.
If you have recently arrived in New Zealand, and will be receiving income from any source, you need an IRD number to register for tax. If you do not have an IRD number, tax will be deducted at a no-declaration rate, which is higher than the normal deduction rate.
It is best to register for an IRD number as soon as you arrive in New Zealand, even if you do not have a job.
How to get an IRD number in New Zealand
An IRD number is a unique number given to you by New Zealand's Inland Revenue Department. It is used by Inland Revenue, banks and financial institutions, government departments and employers to identify you for tax purposes.
You will need an IRD number if:
- You become an employee in NZ, working on a Working Visa or Student Visa
- You are starting a business in NZ
- You open a NZ Bank Account
- You are registering for Working for Families Tax Credits
- You are registering for a student loan
- Your child has a part-time job
- You file tax returns
- You apply for child support
You can apply for an IRD number by completing an IRD number application form (IR595). Once you arrive in New Zealand you need to take the completed form and your supporting documents (as outlined on the application form) to a New Zealand Postshop or an Automobile Association (AA) Driver Licensing Agent.
If you are not able to provide the required identification documents recommended on the form you can phone IRD on 0800 227 774 (within New Zealand) to discuss your options.
For more information about your tax obligations and entitlements while in New Zealand either permanently or for the short term, visit www.ird.govt.nz [keyword: coming to New Zealand]
Tax rates on income in New Zealand
How much tax you pay depends on how much you earn. You can find more information about income tax rates for individuals on the IR website.
Filing an income tax return
For some people it is compulsory to complete a tax return (IR3) at the end of the financial year.
This is the case if you:
- arrived or left New Zealand part way through the financial year
- received income from overseas
- are self-employed or have your own business
- did jobs for cash
- have had withholding tax deducted from your income
- received rent
- received income from a trust, estate or partnership.
These are due in early July unless you have a tax agent or extension of time.
For an introduction to how to work out a return, visit the IR’s website.
Tax on interest from bank deposits
Your bank will make automatic tax payments on your behalf for the interest you earn (withholding tax). You must supply your bank with your IR number and the correct deduction rate to ensure that your interest is taxed at the correct rate.
A tax on goods and services (GST) of 15% is included in the price of most items.
If you are running a business in New Zealand, you may need to be Goods and Services Tax (GST) registered. For more information on registering for GST visit the IR website.
People becoming tax residents in New Zealand may qualify for a temporary tax exemption on some of their foreign income. The exemption lasts for four calendar years (up to 49 months). The exemption has the following conditions:
- you became a tax resident in New Zealand on or after 1 April 2006, and
- you must not have been a New Zealand tax resident at any time in the past 10 years prior to your arrival date in New Zealand.
- this is a once in a lifetime exemption, you cannot extend your tax exemption or renew it after its expiry date
- you or your partner cannot receive Working for Families Tax Credits while being tax exempt from foreign income, but will have to determine which is better for your situation.
The following types of foreign income are not tax exempt for transitional residents:
- Employment income from overseas employment performed while living in New Zealand
- Business income relating to services performed offshore.
More information about the types of foreign income that is temporarily exempt from tax in New Zealand is available on the ‘International’ section of the IR website.
Double taxation agreements
Double taxation agreements are made so that tax residents do not have to pay tax twice on the same income. The New Zealand Government has double taxation agreements with many countries. There is more information about double taxation agreements on the IR website.
Tax on investments in a Portfolio Investment Entity (PIE) is based on the Prescribed Investor Rate (PIR) of its investors. This is calculated on the individual investor’s income received in the previous two years.
For more information about PIEs check the IR website.
There is also information on the IR website about calculating a PIR.
Transitional residents who invest in a PIE can find out more about how to calculate their PIR rate on the IR website.
Foreign Investment Funds and Overseas Pensions
Foreign investment fund (FIF) income is taxed for certain types of investment. IR has created a questionnaire to help identify funds that are liable for tax in New Zealand.
Overseas pension plans may be affected by these tax requirements. Contact IR for more information.
Tax on investment issues are often complex and it may be useful to get professional advice.
In New Zealand it is compulsory for financial investment advisors to register with the Financial Markets Authority (FMA). Check their website for more information about choosing an advisor.
There are advisors who specialise in working with pensions. Check the yellow pages or use a web search engine for more information.
For other tax advice you can check the NZ Institute of Chartered Accountants website to find a chartered accountant in your area.
Working for Families Tax Credits are an entitlement for families with dependent children aged 18 or younger.
You need to be a New Zealand resident and have been living in New Zealand continuously for 12 months to be eligible for these credits. The children you are claiming for must be both resident and present in New Zealand. The children you are claiming for must have an IRD number.
For more information about who can get Working for Families Tax Credits, visit the IR website.
Working for Families Fact Sheets in other languages
The fact sheets What are Working for Families Tax Credits (IR691) have been translated into 10 languages so customers can read the information in their own language: Arabic (IR979),Cantonese (IR977), Hindi (IR980), Korean (IR986), Mandarin (IR978), Māori (IR697), Samoan (IR692), Thai (IR987), Tongan (IR693) and Vietnamese (IR988).