Tax in NZ

Old Dec 27th 2009, 3:45 am
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Question Tax in NZ

Hi guys - sorry but a boring tax question!

We moved to NZ in Oct 09. Jo has a full time job and I am due to start full time in the New Year. We have a rental property in the UK.

Questions:
1. Will we have to fill in a NZ tax return (IR3)? I think on the IRD website it says that if you arrive half way through a tax year you will have to fill one in and if you income from outside NZ you have to fill one in - do they just send you one or do we need to ask for one? Anybody in or experienced the same situation?

2. The income from the UK rental property will be so little after agents fees, interest, wear and tear etc that it will be below our UK individual tax thresholds hence even though it will be included on our UK tax returns we will not have to pay tax on the income (split between the two of us).
However, if we have to fill in a NZ IR3, it will ask what income we have from abroad (UK rental income) and if we have paid tax on it and if so we will not have to pay tax again this end because of the double taxation agreement. But, if it falls below the UK threshold then we have not technically pay any tax on the income in the UK - in which case will NZ tax it?

3. Do you 'opt in' to the 4 year new migrant tax amnesty or do they do it automatically if you fill in IR3? In future we may have kids and want family tax credits so do not really want to use 4 year rule if I don't need to.

Sorry, I know they are boring questions but I assume others have been in this situation or are going through it or may go through it in the future and any info would be great
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Old Dec 27th 2009, 5:30 am
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Default Re: Tax in NZ

Originally Posted by Jo-Chris View Post
Hi guys - sorry but a boring tax question!

We moved to NZ in Oct 09. Jo has a full time job and I am due to start full time in the New Year. We have a rental property in the UK.

Questions:
1. Will we have to fill in a NZ tax return (IR3)? I think on the IRD website it says that if you arrive half way through a tax year you will have to fill one in and if you income from outside NZ you have to fill one in - do they just send you one or do we need to ask for one? Anybody in or experienced the same situation?

2. The income from the UK rental property will be so little after agents fees, interest, wear and tear etc that it will be below our UK individual tax thresholds hence even though it will be included on our UK tax returns we will not have to pay tax on the income (split between the two of us).
However, if we have to fill in a NZ IR3, it will ask what income we have from abroad (UK rental income) and if we have paid tax on it and if so we will not have to pay tax again this end because of the double taxation agreement. But, if it falls below the UK threshold then we have not technically pay any tax on the income in the UK - in which case will NZ tax it?

3. Do you 'opt in' to the 4 year new migrant tax amnesty or do they do it automatically if you fill in IR3? In future we may have kids and want family tax credits so do not really want to use 4 year rule if I don't need to.

Sorry, I know they are boring questions but I assume others have been in this situation or are going through it or may go through it in the future and any info would be great
Hi, yes you do need to do an IR 3 if you arrive half way thru the year. Re rental in the UK just put down what the final sum is after you have deducted all legal allowances and what UK tax you have paid. NZ IRD will not double tax you. As you say you need to decide if you are going for the 4 year exemption or claiming working for family tax credits. Its best to be fully open with the IRD about all your liabilities. Apparently few brits 'fess up to UK earnings. For me honesty is the best policy and I could not stand the stress of the worry wondering if they ever sussed me out. Re the opting in or out of the 4 year thing I guess you have to attach a letter to your IR3 stating your intentions aye?
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Old Dec 27th 2009, 6:04 am
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Default Re: Tax in NZ

I think you may misunderstand how the double tax agreement works.

Although there is a "double tax" agreement between the UK and NZ this does not mean that if income is tax free in the UK (because of allowances) it will also be tax free in NZ

In principle, the NZ IRD will take your UK gross income, convert it to NZ Dollars, calculate the NZ tax payable on that amount then deduct the tax already paid in the UK (in this case zero). You will then have to pay the difference. Because NZ income tax rates are higher than those in the UK and there are NO tax free allowances, you will certainly have to pay some tax here

This is true even if you decide to leave the income in the UK and never bring it to NZ

As Genesis has already said, as a new migrant you will be exempt from NZ income tax on your overseas income for the first 4 years. If you decide to take this option, however, you will be excluded from Working For Families tax credit.



This information is based on my understanding of the NZ tax system, but is not intended to be taken as definitive advice

Last edited by NakiMan; Dec 27th 2009 at 6:17 am.
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Old Dec 27th 2009, 11:36 pm
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Default Re: Tax in NZ

Thanks for the replies Genesis and NakiMan makes things a little clearer but I now I have a few mores questions:

1. Will IRD automatically send us an IR3 to fill in or should we 'request' one?

2. We are registered as non-resident landlords in UK so rent gets paid to us with no tax taken off. We will need to complete UK Tax Return's in April 2010 to sort out how much tax we are due in repayment or owe HMRC as we left (and finished jobs) in UK in Oct 09 - we submitted our P45's (P85) for repayments but HMRC have said that they will work it out with our Tax Returns in April instead of doing it sperately (some new computer system?). I think we are entitled to split year treatment, although not entirely sure what that means?

3. Because we have to do a UK Tax Return, we will not be sure how much tax we have paid / required to pay in UK so how can I put this in the NZ IR3 which is issued at the same time as the UK one - surely I need to know the results from UK one first?

4. Will NZ IR3 take into account everything from April 2009 - April 2010 or from when we landed in NZ to April 2010?

As you can tell from the above I am confusing myself and getting mixed up with all this so to get it clear in my head, will the following be the process:

1. April 2010 - receive UK tax return and NZ IR3
2. Fill out UK return and wait for HMRC to calculate what tax I have/need to pay.
3. Once I have details of UK taxes, I can fill in NZ IR3 and send back to IRD.

Please can you tell me if any of the above is correct or where I am going wrong? An idiots guide would be great!!
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Old Dec 28th 2009, 4:39 am
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Default Re: Tax in NZ

interesting thread: I was wondering the same as I took up employment on 1st Sep, and Neil on about 1st Oct. We both had tax rebates from the UK after we left (because we applied for them) but have no rented property there. As Jo-Chris said, does the form arrive automatically?
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Old Dec 28th 2009, 5:21 am
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Default Re: Tax in NZ

Originally Posted by Jan n Neil View Post
As Jo-Chris said, does the form arrive automatically?
Ours did
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Old Dec 28th 2009, 5:26 am
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Default Re: Tax in NZ

Originally Posted by Jo-Chris View Post
2. We are registered as non-resident landlords in UK so rent gets paid to us with no tax taken off. We will need to complete UK Tax Return's in April 2010 to sort out how much tax we are due in repayment or owe HMRC as we left (and finished jobs) in UK in Oct 09 - we submitted our P45's (P85) for repayments but HMRC have said that they will work it out with our Tax Returns in April instead of doing it sperately (some new computer system?). I think we are entitled to split year treatment, although not entirely sure what that means?

3. Because we have to do a UK Tax Return, we will not be sure how much tax we have paid / required to pay in UK so how can I put this in the NZ IR3 which is issued at the same time as the UK one - surely I need to know the results from UK one first?
I do work for my old UK employer & they got me exempt from paying tax over there so I just pay it here. Surely you can do the same???
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Old Dec 28th 2009, 5:36 am
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Default Re: Tax in NZ

Just another story, slightly off topic.
We have a friend who has had a monthly Forces pension income from the uk for 5 years. This was taxed at source in the UK & then taxed again here (to make up the difference). Now, after 5 years of arguing he has managed to stop the tax at this end, so now only paying at the lower UK rate (backdated)

Thought that may be of interest to someone out here
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Old Dec 28th 2009, 6:08 am
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Default Re: Tax in NZ

Originally Posted by mickey_d View Post
Ours did
As a couple one arrived and one didn't so we had to request an additional IR3 form. Make sure you get these in time for returning them within the deadline (the date you will find on the form or the website).

We have completed an IR3 each year since we have been here (2+ years) and we have always received a tax rebate One of us has been in in a part time since we have been here and the other in and out of a variety of jobs. So we may or may not be a good example.
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Old Dec 28th 2009, 8:21 am
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Default Re: Tax in NZ

Originally Posted by mickey_d View Post
Just another story, slightly off topic.
We have a friend who has had a monthly Forces pension income from the uk for 5 years. This was taxed at source in the UK & then taxed again here (to make up the difference). Now, after 5 years of arguing he has managed to stop the tax at this end, so now only paying at the lower UK rate (backdated)

Thought that may be of interest to someone out here
How on earth did they manage to do that? I would be very interested to know the grounds, as I too have an occupational pension from my UK employer and pay UK tax on it.

Unless its treated differently because its Armed Forces?

Any information appeciated
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Old Dec 28th 2009, 8:44 am
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Default Re: Tax in NZ

Originally Posted by NakiMan View Post
How on earth did they manage to do that? I would be very interested to know the grounds, as I too have an occupational pension from my UK employer and pay UK tax on it.

Unless its treated differently because its Armed Forces?

Any information appeciated
As i said, it took him 5 years of arguing with them here, I think the basis of the argument was why should New Zealand get tax from something which they never had anything to do with them & having paid tax once in the UK (even if it is less than we pay here) why should you pay it again. I know he also got in touch with local MP's about it. I personally think he is justified to have won the argument & lets face it the money will get into the NZ economy anyway in the end.
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Old Dec 28th 2009, 9:17 pm
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Default Re: Tax in NZ

Thanks for the advice so far guys, but still looking for the answers to the following if possible:

1. Do you 'opt in' to the 4 year new migrant tax amnesty or do they do it automatically if you fill in IR3?

2. From the replies it looks like IRD send IR3's out autmatically - what are others experiences?

3. Stupid question I know but what is split year treatment?

4. Because we have to do a UK Tax Return, we will not be sure how much tax we have paid / required to pay in UK so how can I put this in the NZ IR3 which is issued at the same time as the UK one - surely I need to know the results from UK one first?

5. Will NZ IR3 take into account everything from April 2009 - April 2010 or from when we landed in NZ (Oct 09) to April 2010?

Is the following assumption right:
1. April 2010 - receive UK tax return and NZ IR3
2. Fill out UK return and wait for HMRC to calculate what tax I have/need to pay.
3. Once I have details of UK taxes, I can fill in NZ IR3 and send back to IRD.

or if after we have done the UK Tax Return it shows a credit or debit, does this then go into the next tax years figures (2010-2011) and should not be included in the 2009-2010 return?

Help please!
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