New Zealand depends on Tax to assist fund services that benefit all New Zealanders. All tax paid to Inland Revenue – Government’s Tax department also known as IRD (Inland Revenue). This page assists you to learn about taxes in New Zealand and how it works. It is just a summary — we suggest you seek professional advice for more information.
Types of taxes in New Zealand
Businesses and Individuals in New Zealand must pay the tax on their income. The Government of New Zealand also collects the tax on Goods and Services (GST).
- Income tax — Tax on what you earn also known as Pay-As-You-Earn or PAYE.
- Goods and Services Tax — Tax what you buy from sellers also known as GST.
Also read about: How to Register for GST in New Zealand
How to pay income tax
If you’re an employee of a company, the employer will take PAYE Tax from your salary or wages before paying you and pay it to IRD (Inland Revenue). IRD works out how much personal tax you’ve paid. But some people have to file an individual tax return (IR3) to declare their income.
An IR3 is the statement on how much you earned over the tax (1 April to 31 March). It includes money earned from a range of sources, like salary and wages, overseas income, rental income, and investments.
Filing a tax return
Most new arrivals will need to return a tax file in their first year. For none-residentials like work on a visa, may need to return a tax file at the end of the year or when they leave New Zealand.
Get an IRD number
If you’re earning in New Zealand, you’ll need an IRD number. If you do not have IRD (tax number), you will be taxed at the highest possible rate.
Process for applying for your IRD number for migrants
If you’ve recently arrived in New Zealand, you can apply for IRD through IRD’s ‘new arrival’ process which makes providing documentation easier. If you’re outside from this window, you’ll need to apply through their ‘living in New Zealand and not a new arrival’ process.
If you’re buying or starting a business you must have knowledge about the tax obligations. IR’s (Inland Revenue) portal has tax information and videos for businesses. They also run regular workshops for business owners.
New Zealand Personal’s tax depends on your income increases.
- The top personal tax rate is 39% (for income over NZ$180,000).
- The lowest personal tax rate is 10.5% (for income up to $14,000).
Corporations and Companies are taxed at a flat rate of 28%.
New Zealand’s GST system is simpler than similar systems in many other countries. A 15% tax to the prices of Goods and services when you buy them, including some you buy from overseas suppliers. Visit out New Zealand Tax Calculator to calculate GST.
There are some things that are exempt from GST include residential rents, airfares for overseas travel, financial services and mortgage payments. Businesses can claim back the GST that they have had to pay for goods and services.
Features of New Zealand tax system
New Zealand’s tax is fair and has low loopholes (ways to avoid paying tax). New Zealand’s tax environment is also good for your earnings and assets. In 2019, US Based tax foundation ranked New Zealand at second position in the developed world for competitiveness and fourth for individual (personal) taxes.
New Zealand’s tax system Key Attractions include:
- No payroll tax.
- No inheritance tax.
- No social security tax.
- No general capital gains tax.
Tax exemption for new migrants
If you’re new migrants you don’t pay the GST on most of your overseas income in the first of your 4 years living here. This means you just pay the GST on the income you earn in New Zealand.
Avoiding double taxation
If you’re a tax resident in New Zealand as well as somewhere else and both countries tax their residents on worldwide income, you could be taxed twice on the same income. To limit that possibility, New Zealand has agreements with more than 40 of our main trading and investment partners that stop double taxation.
New Zealand Tax at a glance
|Personal income||39% from $180,00133% from $70,001 to $180,000 30%: $48,001 to $70,00017.5%: $14,001 to $48,00010.5%: $0 to $14,000|
|Tax credits||Working for Families credits for low and middle income earners.|
|Social security & insurance levies etc.||Social security and health: Covered by general tax, though many people have private health insurance.|
ACC (New Zealand’s unique accident compensation scheme): Earners pay 1.39% up to a maximum of $126,286 in earnings (2018/19 tax year). Motorists pay a levy with their annual car registration. Employers pay insurance cover based on industry risk.
|Capital gains||Not on New Zealand investments, but applies to foreign equity and debt investments.|
|Dividends||Imputation system to avoid double tax.|
|Gift duty||Not since 2011.|
|Tax on savings||Little tax relief on contributions to New Zealand retirement schemes, but saving is not compulsory. Tax paid at normal income levels at source, but distributions are tax free. No mortgage interest tax benefits, except for investment property.|
|Fringe benefit tax (FBT)||Paid by employer, up to a rate of 49.25% for employer provided cars, low interest loans, medical insurance premiums, foreign superannuation contributions etc. FBT (Fringe benefit tax) is tax deductible so employer cost is effectively the same as paying cash remuneration.|
|Sales & excise tax||Goods and services tax (GST) of 15% on most things.|
Excise tax paid on petrol, tobacco, alcohol.
The New Zealand tax system helps the Government to make the economy stable. New Zealand tax is fairly applied on all residents, the tax percentage depends on your income. All taxes are all collected by IRD and if you’re earning in New Zealand you must have an IRD number.