Tax NZ - Tax in NZ
Understanding the New Zealand tax system
Understanding the tax system
If you stay for more than six months in New Zealand or have a enduring relationship with New Zealand as defined by the Inland Revenue Department, you are considered a "resident" for tax purposes.
Tax file number
When working as an employee in one of the New Zealand jobs, you are required to produce your tax file number. Applications for tax file numbers can be made at the Inland Revenue Department.
Resident withholding tax (RWT)
Any money held in a New Zealand bank account will have RWT deducted from it by the bank on behalf of the government. The rate of deduction will be higher if no tax file number is produced and this applies even to people who are not working.
People who stay in New Zealand for less than six months will be classified as "non-residents" for tax purposes but will be required to pay tax on any income earned while gathering work experience in New Zealand.
The financial year
The financial year runs from the 1st of April to the 31st of March.
Income Tax New Zealand
If you are staying in New Zealand for more than six months, and will be receiving any sort of income, you will be classified as a New Zealand resident for tax purposes, and may be required to pay income tax. New Zealanders use the Pay as you Earn (PAYE) system, which means that your tax contribution is figured out by your employer and deducted from your take home pay.
You will need to provide your employer with an IRD number, a unique code that the Inland Revenue Department (IRD) uses to identify you and to work out your tax rate. If you do not provide your employee with an IRD number, you will be taxed at the highest rate. You can apply for an IRD number through the New Zealand Inland Revenue Department website, which means that you can claim an IRD number before you even enter the country.
Note: income earned on bank accounts is considered income, unless you give the bank your IRD number.
Employees are taxed when they earn income for more than six months. At the end of the financial year, they must submit a tax return. This can be done via the IRD website (which provides an easy to use form) or through a chartered accountant. Even if you are no longer in New Zealand, you will still need to submit a tax return.
Once the IRD has received your forms, they will determine if you have paid too much or too little tax throughout the year.
If you have paid too much, you will be entitled to a refund. Occasionally, an employee will be issued with a bill for taxes owed to the IRD. If you are required to pay money back, you must do so before you leave the country. The IRD can arrange a payment plan for large tax bills.
Penalties for not paying the correct tax can be severe. If you are unsure about any tax related issues, a chartered accountant or a representative from the Inland Revenue Department can help you out.
Before you begin working in New Zealand, you will need an IRD number
This is number issued to you by the Inland Revenue Department for tax and identification purposes. You can get an IRD number by visiting the IRD website. It is free to do so, and you can even do it before you arrive in New Zealand.
If you are earning an income in New Zealand, you will probably have to pay income tax. New Zealand uses the Pay as You Earn (PAYE) system, which means that your employer will deduct your tax from your regular income. At the end of the financial year (July) you will need to submit a tax return. You can do this on the IRD website or hire an accountant to do it for you. Once you’ve lodged your tax return, you may be entitled to a tax refund or may be issued with a bill. If you are issued with a bill, you must pay this amount before you return home. The IRD can arrange a payment plan for large tax bills.
Be sure you are completely honest when dealing with the IRD – if you are caught lying or providing misleading information, the penalty can be anything from a large fine to jail time.
New Zealand Temporary tax exemption for foreign income
Most forms of residual foreign income will benefit from a temporary tax exemption in New Zealand as from the 1st of April. This will only apply to new arrivals from the 1st of April, onwards and will be in force for four calendar years.
Visa free country applicants are eligible for a SWP irregardless of the date of entry into New Zealand. To find out more, please visit the Inland Revenue website.