IRD: tax resident vs. tax non-resident

[acehutle]

I am desperately looking for some advice - the IRD have succeeded in frightening me!!!

I have been told from the tax dept to fill out a questionnaire for which will determine whether I am a tax resident or not *i.e. whether I will have to submit my income overseas and have it taxed by the IRD! I own a home in New Zealand, which is rented out. We have a bank account and a life insurance policy on us both, as they were requirements by our bank for the mortgage. I will be working overseas for the next 5-10 years. We just want to rent out our house in NZ and keep it, because we may want to come back there someday (after these years away).

I don't want to have to pay NZ tax on my income that I earn overseas - especially since the tax rate is so high. I am merely a perm resident. My husband is a citizen and his parents and sisters still live in NZ. Is there anyway that I can have myself (and my husband) labeled as a tax non-resident whilst keeping my house in NZ? I have to keep the bank account and the life insurance in NZ and I have to send money home every month to cover the mortgage - the rent the tenants are paying does not come close to covering the mortgage.

Any help would be tremendously appreciated, expecially since the IRD are being incredibly grey in their definitions of an "enduring relationship" and their "weighting system".
a.h.

[spaceman]

Hi

I'm working oversea's and have an "enduring" relationship with NZ, but I managed to get Non-resident tax status thanks to my working for the UN.

This probably doesn't help you much. But I had several "NO's" from the IRD and my accountant before I got the "YES" answer that I was after.

My parents were in the same postion as you a few years ago and managed to get non-resident stauts ..... i'll ask them how and let you know

I agree completely that the IRD make grey rules that can be apparently moulded to suit the whim of whoever is looking at your case.

It's real hard to argue you don't have an enduring relationship with NZ.

You could try as see if the country you are in has a Double Tax Argreement with the NZ govt. This means that the two goverments have an agreement to only tax the money once and that the second government will agree not to tax you as long as you have proof that you've paid tax to the first.

Good luck ... i'll post again when I have an answer from mummy

put up your rent

cheers
Spaceman

[SEIBU]

You should be O.K

I answered the same questionnaire the IRD sent me. I said I hadn`t lived in NZ for 8 years, but I rent a place out.

They declared me a non-resident, and any earnings made outside of NZ are ignored.

I reckon you`ll be O.K.

[JGS]

Hi ,

We are in the same boat,
I also work overseas and have 2 properties rented out and 1 for my parents to live in.
I asked my accountant in NZ and he told me if you don't live in NZ more than 6 months in a tax year, you are considered non-resident , then you don't have to declare your income overseas nor your property overseas, however you still have to file tax for your rental income in NZ.
Most of countires also have this similar rules.

Cheers

Jim

[Kiwi_Investor]

I filled out the same form when I left NZ to move to QLD over 2.5 years ago.
My advice is to fill out the form, more than likely you will be a non resident.
You will however still have to fill out a NZ IRD Non Res tax return and mail it to the IRD each year.
I do this even though my ppty is neg gear.

K

[acehutle]

just two more questions

thank you for the thoughtful replies! Just two more questions ....

Shouldn't I wait six months until I fill out the form?

Does anyone know a good accountant in NZ (preferably WGTN area) that would know about this sort of stuff? I believe I am going to need one!

[acehutle]

first year?

Also, I was reading on another page "Once a person has become tax resident in New Zealand, they will cease to be resident in New Zealand once they have both ceased to have a permanent place of abode and have been outside New Zealand in excess of 325 days in any 12 month period." Does this mean that I have to keep clear of NZ for 325 days during this first year, or does the 6 month period apply to the first year as well as every year after?

[ChiefWigum]

Hi there, I'm in a similar situation. It's a very emotional topic and you need to play this one correctly.

Your non-residency status begins the day you first leave NZ (provided you stay away from NZ >325 days in the next 12 months).

You become a NZ resident the day you first arrive back in NZ (provided you were in NZ >183 days during next 12 months). Note: this day you "first arrive back in NZ" includes a trip home say 3 months earlier to source a property! So no recce trips prior to arriving!

If your tax rate overseas is same or higher than NZ's then there's no problem with still being a NZ tax resident really. Also, even if you are deemed a NZ tax resident, you don't get taxed twice on the same income. You would probably get taxed on the overseas income first, and then pay any shortfall on this to the NZ Govt.

You MUST download/obtain a copy of the IRD publication IR292, called 'NZ Tax Residence - Who is a Tax Residence for Tax Purposes?' This answers most your questions, except the big one - will they deem you a NZ tax resident! As others have said, it's very subjective.

You MUST get an accountant to represent you - do NOT liaise with IRD direct anymore, no more ok, you might end up saying the wrong thing to them. Let your accountant do this. And also get your accountant to do your annual returns - it gets quite complicated.

And don't just get any accountant - get one who understands non-resident issues. My first one didn't so I changed accountants. Ask questions first and expect to pay extra for this service. It will be worth it. Out of all the types of professionals there are out there, a good tax advisor is probably your most important at this stage. I say this out of personal experience.

So... to summarise:
1. Do NOT talk to NZ IRD anymore.
2. Download IR 292 http://www.ird.govt.nz/forms-guides/.../nonresidents/
3. Find a good accountant

I say all this from personal experience. When I went overseas my wife initially stayed in NZ still working. But it was cheaper for her to resign and join me overseas not working than her stay in NZ with me paying tax on my overseas earnings to NZIRD - i.e. the tax I had to pay to NZIRD on my overseas earnings was greater than her salary!! Go figure, no wonder people are leaving NZ in droves.

Comments welcolmed.

[ChiefWigum]

Also, consider 'removing' yourself from NZ as best as possible; e.g. resign from clubs, don't keep a personal home there available for you (speak to an accountant about this), close any unneccessary bank accounts, sell your car, don't store anything in NZ, etc etc.

Every bit helps.

Cheers.
Chief Wigum

[Monid]

I was wondering about this myself.

We own five properties in our own names, which are all rented out, is this likely to count against us?

Likewise we are going to maintain an NZ bank account for those properties to pay into. Is this perilous?

Finally I will still officially be studying at the University of Auckland and receiving a scholarship till November.

Am I correct to think that may be our status will change then?

[acehutle]

accountant

Anyone know a good accountant who is familiar with resident/non-residency tax status (WGTN area preferred, but not required)?

Many many thanks!

[spaceman]

My parents were in the same boat.

They tell me that after they had been outside NZ for 2 years, the IRD granted them non-resident status, after several requests from the acct.

So keep trying even if you get a NO first time.

Good luck

Cheers
Spaceman

[lissie]

Re: accountant

Anyone know a good accountant who is familiar with resident/non-residency tax status (WGTN area preferred, but not required)?

Many many thanks!

Try Richard Burge at Sherwin Chan Walshe www.scw.co.nz - not cheap but good !

[Perry]

Ex-Pat Kiwis Get Some Tax Certainty After Court Of Appeal Decision
30 December 2015

A Court of Appeal decision over tax payments imposed on an offshore
security consultant has implications for other Kiwi expatriates who
own property here and visit regularly. The decision centred on the way
Inland Revenue applied a residency test to a former soldier who worked
as a security consultant in Papua New Guinea, Queensland and Iraq
after retiring from the army in 2003.

Inland Revenue had ruled that the man remained a New Zealand tax
resident and therefore had to pay taxes here on his world-wide income.
Geordie Hooft, a tax partner with Grant Thornton New Zealand, said the
court decision on application of the residency test limited the Inland
Revenue Commissioner's ability to impose on tax overseas income earned
by absentee New Zealanders.

[Anthonyacat]

Inland Revenue judged that the security consultant had a "permanent place of abode" because a Ngaruawahia property he owned was available to him, even though it was rented out.

But the Court of Appeal said having an "abode" indicated a degree or permanence, and the property was never the man's home "as beyond owning it, he had no connection to it".

Hooft said the court ruling showed the test needed to consider other factors such as a taxpayer's connection to a particular place before and after periods of absence from New Zealand.


Thank god for that. This was an absolutely stupid case from the IRD, with incredibly far-reaching consequences. Really really nasty stuff. Studied it when it first came up as part of my CA qualifications. We were warned there to keep an eye on it as things progressed.

How rude that it's happening in the middle of the Xmas/NY period, when so few will be watching it. Got to wonder if that was intentional.