Withholding and Resident Withholding Tax - Whats the Difference?
 

Hi,

I recently got residency and my bank asked if i want to change to Resident Withholding Tax or stick with Withholding Tax?

It only applies to the $7 of interest i get on any small savings i have

Only other source of income is my job

Will i now have to pay more as a Resident? Do i have to switch?

Re: Withholding and Resident Withholding Tax - Whats the Difference?
 

Withholding Tax is a totally different ballgame to Resident or Non-resident Withholding Tax

Withholding tax is something a company might deduct from you if you are a contractor working as self employed and you do not have an exemption certificate. A bit like PAYE for the self-employed.

The bank will be wanting to know if you are resident or non-resident - are you paying taxes in NZ or are you declaring elsewhere. Resident withholding tax is the tax on interest from investments and savings and it's just a matter of selecting the correct rate according to your circumstances. As you have already found they deduct the tax at source and show this on your bank statement. You need to tell the bank if you are resident or non-resident and select the rate of tax that you expect to have to pay. e.g. If you're earning between the $48k to $70k range then the tax rate is 30% or if you earn over $70k then you would have to pay the highest tax 33% on interest income

Re: Withholding and Resident Withholding Tax - Whats the Difference?
 

thanks for that
Resident Withholding seems quite steep!

I'll call IRD and see what i have to pay

I'll hardly get any interest on my money with a 30% tax hit - not that i have saved much

I need to work out what i'm paying now with non-resident withholding tax

This wont affect how much i'm taxed from work will it?
I always think i am getting ripped off by IRD - but they make you do all the work to see if you are due a tax refund unlike the UK
I might have to work it out somehow

Re: Withholding and Resident Withholding Tax - Whats the Difference?
 

Likely it will be 10% assuming they have you down as resident in the UK,

You're right though the tax is a big hit on your interest earnings, you should look into getting a Cash PIE account, these have slightly lower tax burden.

http://www.canstar.co.nz/cash-pie/cash-pie-advantages/

Re: Withholding and Resident Withholding Tax - Whats the Difference?
 

Thanks for the info about the PIE - sounds good. Especially if there are no fees associated. Might shop around and see what's out there

However, do i have to switch to NZ Resident Withholding Tax right now? Or can i hold off for a bit. I only got residencey a month ago so i might try and hold off on the 10% Non Resident Withholding tax for a bit longer

I cant see myself saving that much at the moment - got a trip to the UK planned at XMas

PLus i am thinking of joining kiwisaver so that will mean lesss money to put into any savings- i need to shop around for this too