Taxes in New Zealand

In New Zealand the government department that collects taxes is called the Inland Revenue Department, or the IRD. It’s similar to the IRS in the United States or the HMRC in the United Kingdom.

The New Zealand tax year generally runs from 1 April to 31 March, and most people pay their taxes as they earn their income under the pay-as-you-earn (PAYE) scheme.

PAYE means that when you receive pay from your employer, it’s already had tax and ACC levies deducted. ACC levies give you insurance cover in case you have an accident outside of work – and entitle you to certain types of health care and rehabilitation.

Everyone who works in New Zealand needs an IRD number, including new migrants. This is a unique number that allows you to pay taxes on your wages or salary. You’ll need an IRD number to give to your employer and to ensure that you pay the right tax rate.

Without an IRD number you’ll be taxed at a much higher rate than you should. It’s called the ‘no declaration’ rate, and it’s 45% of your gross income. So you can see why getting an IRD number is so important.

Tax rates:

The rate at which you’re taxed depends on your level of income. In New Zealand the tax rate is a graduated scale – rather than a flat rate – and starts at 10.5% for income up to $14,000, capping at 33%. However, businesses pay a flat tax rate of 30%. Taxable income PAYE rate (excluding ACC earner’s levy):

  • Up to $14,000 -> 10.5%
  • $14,001 to $48,000 -> 17.5%
  • $48,001 to $70,000 -> 30%
  • $70,001 and over -> 33%
  • No notification -> 45%
  • Company tax -> 28%

Tax on income from overseas:

If you’re going to be here for more than 183 days within a 12-month period or have an ongoing relationship with New Zealand, you’ll become a New Zealand tax resident – even if you’re already a tax resident in another country.

To prevent you being taxed twice, New Zealand has negotiated double tax agreements with many other countries. These establish which country has the first or sole right to tax certain types of income.

When it comes time for you to do your first income tax return, the IRD requires that you declare your worldwide income. But the good news is, as a migrant, you may qualify for a tax exemption on some of your foreign income.

You can find out more about tax and tax exemptions on foreign income on the IRD website.

Tax on investments:

There is no capital gains tax in New Zealand. So if you invest in property or shares, you’re not taxed on the increase in their value over time unless this is your primary occupation.

However you do have to pay Resident Withholding Tax (RWT) on interest earned from your bank accounts or investments. As long as you have an IRD number, your bank or investing organisation will deduct this before they credit interest to your account.

Tax on overseas pensions:

If you receive an overseas pension, social security payments or life insurance annuity while living in New Zealand as a tax resident, these are subject to New Zealand tax also.

*The above information has been provided by the New Zealand Government: http://www.newzealandnow.govt.nz

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