Planning on working in New Zealand? How much tax you pay depends on the length of your stay, your income level, and whether you qualify for tax exemption on foreign income. If you'll be self-employed you may need to be registered for Goods and Services Tax (GST), and just like employees will need to pay levies to New Zealand's no-fault personal injury insurance scheme (ACC). Most of your banking, like the filing of your tax return, can be done online.

Income tax rates and residency

You need an IRD number (Form IR595, or phone 0800 377 774) if you are working in New Zealand. The tax year runs from 1 April to 31 March, and the amount of tax you pay is determined by your residence status and your income level:

• If you are working in New Zealand for less than 92 days you do not need to pay income tax (but may need to present a tax exemption certificate to your employer);
• If you are working in New Zealand for between 92 and 183 days and are self-employed you will be charged a 15% or 30% non-resident withholding tax on your New Zealand-sourced income;
• If you are working in New Zealand for more than 183 days you will be considered resident for tax purposes and tax will be deducted on your worldwide income at the following rates:
  

  Earnings	Percent
  Income up to $38,000	19.5%
  Income 38,001 to $60,000	33%
  Income over $60,001	39%

What happens when you leave New Zealand? According to IR292:

You become a non-resident for tax purposes if:

• you're away from New Zealand for more than 325 days in any 12-month period, and
• you no longer have an enduring relationship with New Zealand.

As long as you have an enduring relationship with New Zealand you'll always be a resident. This test overrides any rules about the number of days you're here.

Examples of situations that constitute an "enduring relationship" (such as owning property) are given in the leaflet.

Tax exemption on foreign income

As mentioned above, if you're resident for tax purposes you pay tax on worldwide income—including on foreign income upon which you're already been taxed, even if you don't bring that income into New Zealand. That pretty much sucks, although under double-taxation agreements you can claim a credit for this overseas tax against the New Zealand tax paid on the overseas income. That said, according to IR292:

From 1 April 2006 most types of individual income derived from overseas may be temporarily exempt from tax in New Zealand. This temporary tax exemption is available to people who:

• have qualified as a tax resident in New Zealand on or after 1 April 2006, and
• are new migrants or returning New Zealanders who have not been resident for tax purposes in New Zealand for at least 10 years prior to their arrival in New Zealand.

The temporary tax exemption for foreign income is for four calendar years (up to 49 months). The exemption starts on the first calendar day of the month you qualify as a tax resident in New Zealand and is valid until the last calendar day of that month four years later. The period between your arrival in New Zealand and the date you qualify as a tax resident is also treated as an exempt period.

If you qualify for the exemption, you're not required to tell us about foreign income you receive (except for foreign income that doesn't qualify for the temporary tax exemption) for the period of your exemption.

Exempt income includes, for example, foreign interest, rental income derived offshore, and royalties derived offshore.

GST

You don't need to worry about GST if you are solely earning wages as an employee. If you are self-employed and resident for tax purposes you may want to—or may need to—register for Goods and Services Tax (GST). This would mean adding 12.5% to each invoice you submit, and in return you are able to claim GST refunds on work-related expenses. It works the same way as VAT in the UK.

In general if your business' annual turnover will exceed $40,000 (excluding GST) you must register and select an accounting basis and taxable period. The way you account for GST is your accounting basis. Depending on your turnover, you may be able to choose from three types: invoice, payments (cash), or hybrid. Depending on your turnover, you may choose a one-month, two-month (the "standard" option) or six-month taxable period when you register, which will determine how often you file a GST return.

There are advantages and disadvantages to voluntary registration if your turnover will be less than $40,000. Before deciding which way to go you may like to read GST—do you need to register? (IR365), GST guide (IR375), and GST Smart business quick reference summary sheet (IR324).

To register download the IR360 form or register online. You will need to know your IRD number, and business description (e.g. "General practitioner medical") and code (e.g. 862102).

Note: You need to keep your GST records, in New Zealand, for 7 years.

ACC

The Accident Compensation Corporation (ACC) is a Crown entity that administers New Zealand's accident compensation scheme, which "provides accident cover for all New Zealand citizens, residents and temporary visitors to New Zealand. In return people do not have the right to sue for personal injury, other than for exemplary damages." Among their responsibilities (which include accident prevention) is the collection of personal injury cover levies.

Employers buy cover from the ACC on behalf their employees, which will show as a deduction on your payslip (note that ACC also covers you for non-work injuries). If you are self-employed, you have to buy your own ACC cover. Things become complicated if you're a "mixed earner", receiving income from employment and from self-employment.

The basic level of cover is called CoverPlus, which the self-employed pay on receipt of an annual invoice. The actual cost depends on your earnings as declared in your tax return (communicated directly from the IRD to ACC) and the type of work you do. A higher level of cover, giving greater compensation at additional cost, is called CoverPlus Extra. Phone ACC on 0508 426837 and ask them to send you a "welcome pack".

Personal liability insurance

This is something that self-employed people should consider, in case they cause damage while on the job. It's also something tenants (self-employed or employed) are advised to obtain.

Banking

Banking in New Zealand is quite a different user experience compared to banking in the UK, where it doesn't sting. Banks in New Zealand take a fee-for-service approach, taking a cut of various transactions. Whereas we paid no account fees, or fees on "ordinary" transactions in the UK, they are unavoidable here. If you are resident for tax purposes (see above) your bank will deduct a Resident Withholding tax on interest earned.

In New Zealand we were fortunate to have a pre-existing account, which we changed from a low-interest savings account (while it was not in use) to a no-interest cheque (current) account once we arrived. Getting a credit card could be a bit more complicated, especially if you fall into one or more of the following categories:

• Part-time earnings;
• Time-limited duration of stay;
• Being on a Work Visa.

Luckily online banking is the norm, so making inter-account transfers and managing direct debits/ automatic payments is possible—although not as flexible as in the UK (e.g. the customer can't cancel a direct debit arrangement).

Do it online

Inland Revenue are automatically notified of PAYE earnings so that, when you register for Online Services, your income and deductions are automatically detailed. You can file your return online but, as of this writing, must complete it in one go. You cannot save it and come back to complete later, as you can when completing your return online in the UK.

Tip: In our experience Inland Revenue are extremely poor at communicating. They do not reply to e-mails and do not respond to requests for written confirmation of advice. The tax return is an awful document. They will ask you to put your questions to third parties who will in turn refer you back to IRD. Do consider employing an accountant unless your tax affairs are straight-forward.

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