Understanding the US Expat Tax in New Zealand

US Expat Taxes in New Zealand

It’s true, you are required to file US expat tax in New Zealand. In fact, this is true no matter which country you earn your living in, but how will your taxes be affected if you live in New Zealand specifically? With an unsurpassed natural beauty and English speaking culture, it is understandable why New Zealand is a desirable destination for US expatriates. Nevertheless, it is important to understand how your US tax return will change with your move to New Zealand, and what taxes you will be required to pay to Inland Revenue Department of New Zealand.

US Expat Taxes in New Zealand

If you are a citizen or permanent resident of the United States, you are obligated to file US taxes with the IRS each year regardless of the country in which you reside. In addition to the regular income tax return, you could also be required to file an informational return on your assets held in foreign bank accounts, either business or personal. While the US taxes the international income of its citizens and permanent residents who reside overseas, it does have special provisions to help protect them from double taxation including:

  • The Foreign Earned Income Exclusion, which allows you to exclude up to $107,600 of foreign earned income from your 2020 US taxes; $108,700 for 2021.
  • A Foreign Tax Credit, which allows you to offset the taxes you paid in your host country with your US expat taxes dollar for dollar, and
  • The Foreign Housing Exclusion, which allows you to exclude certain household expenses that occur as a result of living abroad.

With proper planning and quality tax preparation, you should be able to take advantage of these and other strategies to minimize or even eliminate your US expat taxes. Please note that even if you do not believe you will owe any US income taxes, you will more than likely still be required to file a return. For more information about saving money on US expat taxes when you move overseas, check out our tax guide for Americans moving abroad.

Income Tax in New Zealand – Rates

The 2020-2021 tax rates from the Inland Revenue Department are progressive for all income tax in New Zealand.

Earnings in New Zealand Dollar (NZD) National Income Tax Rate (%)
0 – 14,000 10.5%
14,001 – 48,000 17.5%
48,001 – 70,000 30%
70,001 – 180,000 33%
Over 180,000 39%

Note that non-resident tax withholding is a flat rate of 15%, which may be reduced due to the US double taxation agreement with New Zealand.

New Zealand’s tax rate is similar to that of the US. Depending on your income level, you are not particularly at risk of paying high US expat taxes due to low taxes in New Zealand.

New Zealand Residency

New Zealand residency is based on meeting the following requirements:

  • An individual is physically present in New Zealand for more than 183 days in a period of 12 months (note: does not need to be consecutive).
  • An individual has a permanent place of abode (PPOA) in New Zealand. A residence is considered a PPOA if the home is yours for your use. A home alone is not enough for residency; you must also consider relationships (both business and personal), employment ties, and the location of your family. The tax authorities will also take into consideration your intentions in New Zealand.
  • Transitional residency applies for individuals who are new to New Zealand and others who have been absent from New Zealand (and non-resident for tax purposes) for ten years or more. The exemption period begins the first day an individual buys a PPOA or exceeds 183 days of presence in New Zealand and is applicable until the 48th complete month from that date.

New Zealand Taxation for Foreign Income

The New Zealand taxation of worldwide income is dependent on your residency status.

  • Resident – taxed on worldwide income, minus foreign tax credits to protect residents from double taxation
  • Non-resident – only taxed on New Zealand sourced income; foreign-sourced income is not taxable
  • Transitional resident – taxable on worldwide income and New Zealand personal income, unless within the 48-month exemption period

New Zealand Tax Due Date

The New Zealand tax year is different from the US tax year, as it begins April 1st and ends March 31st of the following year. This means that your income will need to be adjusted accordingly on your US expat taxes, even if you are using the New Zealand tax year for your New Zealand returns. Tax returns need to be filed with the Inland Revenue Department before July 7th, although an extension until March 31st of the following year is available if you are enrolled with a tax agency.

Tax payments are made in three installments – August 28th, January 15th, and May 7th. These are required if the taxpayer has a liability of NZ$2,500 or more.

And it may come as a surprise, but many people in New Zealand aren’t required to file tax returns at the end of the tax year at all. If your income is from salary, wages, benefits or taxable pensions, your tax will automatically be deducted under the PAYE (pay as you earn) system. This means when you get your weekly, or monthly pay, your tax has already been deducted from it.

You’ll only need to file an individual tax return (an “IR3”), if you earned income other than salary, wages, interest, dividends, and/or taxable Māori authority distributions. Other income includes:

  • Rental income
  • Income from a taxable property sale
  • Self-employed or business income
  • Overseas income
  • Income from cash jobs or “under the table” payments
  • Income from an illegal enterprise
  • Royalties
  • More than $200 of schedular payments (formerly withholding payments)
  • Estate, trust or partnership income
  • Distribution of income/loss from a look-through company (LTC)
  • Over $200 of overseas interest and dividends that did have tax deducted
  • Overseas interest and dividends that didn’t have tax deducted
  • Income without PAYE deducted, such as shareholder-employee salary or a claim received under a taxable loss of earnings policy
  • Allocated income from a portfolio investment entity that was taxed at a zero rate
  • Received portable superannuation or Veteran’s Pension (note that due to this late change the requirement to file an IR3 return is not shown in the 2010 IR3 return guide).

You’ll also need to file an individual tax return (IR3) return if you:

  • Have losses to claim or brought forward from the previous year
  • Have excess imputation credits brought forward from the previous year
  • Left or arrived in New Zealand part-way through the year
  • Are filing a return for a deceased person to the date of death (if there is a requirement to file a return for the income year)
  • Were declared bankrupt part-way through the year (if there is a requirement to file a return for the income year)
  • Changed your balance date part-way through the year
  • Received allocated income from a portfolio investment entity that was taxed at a rate lower than your correct rate
  • Choose to include dividends received from a portfolio investment entity listed on the New Zealand Stock exchange, in order to claim imputation credits.

Social Security in New Zealand

New Zealand does have a Social Assistance System which must be paid into by those earning income in New Zealand. As there is no Totalization Agreement between the United States and New Zealand, this may be one aspect of US expat taxes where Americans in New Zealand face double taxation. The American Social Security Administration provides US expats with an explanation of social security in New Zealand so that taxpayers know just what they are paying into.

New Zealand US Tax Treaty

The US – New Zealand tax treaty is helpful for situations where an expat is not sure if taxes should be paid on their New Zealand return or on their US expat tax return. The New Zealand US Tax Treaty is relatively straightforward, but if you have any questions regarding the tax treaty, you should seek expat tax advice.

New Zealand Expatriates and Other Taxes

Employment income in New Zealand also includes an Accident Compensation Corporation, or ACC. This scheme is in place to provide insurance in “no fault” accidents. Employers and employees must pay into it and the rate changes annually. Employees pay 1.39%, up to a maximum of $126,286 for the 2018/19 tax year.

New Zealand does not have a capital gains tax regime, although certain capital gains are taxed through separate tax regimes. If you are claiming gains, it would be best to talk to a tax advisor.

New Zealand has a Goods and Services Tax (GST) of 17.5% on all applicable goods or services.

Have More Questions About How Your New Zealand Expatriate Taxes Will Be Affected in New Zealand?

Our team of expat-expert CPAs and IRS Enrolled Agents can help! Contact us today with all of your questions about filing US expat tax in New Zealand.

Originally published in 2012; updated October 2020.

More in Topic