New Zealand is quite a popular destination for expats, and it’s easy to see why. People are drawn to the beauty of this small grouping of islands with its picturesque landscape. Not only that, but it’s considered to be a very safe country and has retained its membership of the UK Commonwealth and maintains close links with the United Kingdom. However, you may not be aware that American expats in New Zealand may be required to file a tax return with the New Zealand tax authority, known as the Inland Revenue Department (IRD).
The New Zealand Tax Year & Deadlines Are Different Than Those in the US
The New Zealand tax year is a fiscal one that runs from April 1st of one year through March 31st of the next, with a tax return deadline of July 7th if you file your own tax return. If you use a tax advisor known as a tax agent, you’ll have an additional 7 months to submit your return (or “lodge” it) to the Inland Revenue Department (IRD).
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
- 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.
The tax rates in New Zealand are as follows:
|Taxable income||Tax rate|
|Up to $14,000||10.5%|
|Over $14,000 and up to $48,000||17.5%|
|Over $48,000 and up to $70,000||30%|
|Remaining income over $70,000||33%|
Things to Know About Expat Taxes in New Zealand
If you’re a citizen or permanent resident of the US, you must file a US tax return each year, no matter what country you happen to live in at the time. While the US taxes the international income of all citizens and permanent residents who live overseas, fortunately, it does provide several provisions to help protect you from double taxation on your US tax for expats. These include:
- The Foreign Earned Income Exclusion, which allows you to exclude up to $103,900 in foreign earned income from your 2018 US taxes.
- The 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.
Note that in addition to your US tax for expats, you may also be required to file an informational return on your assets held in foreign financial accounts called a Foreign Bank Account Report (FBAR), otherwise known as FinCEN Form 114.
The Tax Treaty Between the Us and New Zealand
The tax treaty in place between the US and New Zealand helps determine to which country different types of US tax for expats should be paid and at what point they should be paid. The purpose of the treaty is to ensure taxes are paid to the right country. Navigating the treaty on your own can be a bit complicated, so it’s a good idea to consult with an expat tax professional if you’re unsure of the requirements for your situation.
By planning ahead, you should be able to take advantage of the strategies above in order to minimize or eliminate your US tax obligation.
Just Moved Abroad and Need Help Understanding Your US Tax for Expats Obligations?
Our team of expat-expert CPAs and IRS Enrolled Agents are here to provide you with the knowledge and resources you need in order to fulfill your tax obligations with the IRS. Get started with Greenback today for the most hassle-free tax prep imaginable!