NZ Tax Resident?

[klimki]

Hi, Gang!

I'm about to buy my first IP, and I've been reviewing the PT article entitled "An Introduction to Taxes in New Zealand"

http://www.propertytalk.co.nz/modules.php?name=Content&pa=showpage&pid=29

The article says:
"As a New Zealand tax resident, an individual is liable to tax in New Zealand on their worldwide income.
As a non-resident, an individual is only liable to tax in New Zealand on income sourced from New Zealand."

I was planning on buying this first IP in a joint tenancy arrangement with hubby, but I am left wondering how we can actually retain NZ non-residence for tax if I don't set up a LAQC or trust from the start?

The idea of paying NZ tax on WORLDWIDE income has me sweating!

Thanks for any help!
~ englishmum

[drelly]

Sounds like you need some professional tax advice! However, if you're not normally resident in NZ, I don't see how having a NZ company or trust would make any difference to your tax status.

[CJ]

Just owning a house will not be enough. There are a list of factors and the usual one for houses is that you dont have access to accomodation, ie it is let full time. If you leave a family house empty for your return you are in trouble but no problems otherwise.

Have a look on the IRD website. You would be supprised how much info it contains.

[klimki]

Thx for your responses, Dave & CJ!

As suspected, I was heading towards the "danger zone" then, as we were considering using the "flat" at the bottom of the house for our own use during the winter months, while renting out the remainder of the house full time. I guess this would immediately qualify us as NZ tax-resident then... ARGH!

I'm heading over to the IRD website now for more info...

Thanks!
~ englishmum

[CJ]

NOt necessarily but it would increase your risk.

IRD has just put out a new guide - IR292 which you can get from there website.

[klimki]

Phew! For a while there, I thought I was going to be permanently lost in the belly of the IRD site but that's when your helpful tip about the new tax guide showed up! Thx a lot, CJ

For anyone else tuning in, here's the link to form IR 292, entitled "New Zealand tax residence - Who is a New Zealand resident for tax purposes?" and dated July 2003

http://www.ird.govt.nz/library/publications/geninfo/ir292.pdf

Well... I'm a bit the wiser on the subject of NZ tax residency now... but none the happier...

My hubby is a ski instructor and was planning to work up at the mountain during our winter visit to NZ... but it seems that even short-term "holiday" employment is just one more way to end up with the NZ tax resident sticker :-(

What a bummer!
~ englishmum

[inzvestor]

It is my understanding that if you are a fully paid up (taxwise) employee in another country then you will only be taxed on any income that has not already been taxed.

ie. If you live in the USA / UK and pay tax in the USA / UK then you will not be taxed by the IRD in NZ for that taxable amount.
However, you will still be taxed for any NZ income (ie RWT by the bank etc)

This is the advice I was given from the IRD very recently (December 2003)

Each individuals circumstances are different, and it is worth checking before acting upon this information.

[CJ]

Inzvestor,

That is a very simplistic test that does not always work (but usually does). Remember, some IRD employees are very simplistic people and often get it wrong.

Read the NZ Guide, and see if you can get a simpilar guide for the country you work in.

You may be Dual Resident - Arrggghhhh. In which case you have to rely on Double tax agreement relief from double tax.