What are the tax implications for new migrants in New Zealand? What is transitional resident status?

New Zealand's tax system has a potentially huge benefit for new migrants called "transitional resident" status that could save you significant money on foreign income. Understanding NZ tax residency and this special status is crucial for financial planning.

New Zealand Tax Residency:

You become a tax resident if you meet either test:

Permanent Place of Abode Test:

• Have a permanent home in NZ, OR

183-Day Test:

• Present in NZ for more than 183 days in any 12-month period

As a tax resident: You're taxed on your worldwide income (income from NZ and overseas).

As a non-resident: You're taxed only on NZ-sourced income.

Most work visa holders become tax residents quickly once they arrive.

Tax Rates (2026):

New Zealand uses progressive tax rates:

Examples:

Income: NZD $70,000

• First $15,600 at 10.5% = $1,638
• Next $37,900 at 17.5% = $6,632.50
• Next $16,500 at 30% = $4,950
• Total tax: $13,220.50 (18.9% effective rate)
• Take-home: $56,779.50 before ACC levy

Income: NZD $100,000

• Tax calculation through brackets
• Total tax: $24,170 (24.2% effective rate)
• Take-home: $75,830 before ACC levy

ACC Earner Levy:

On top of income tax, all earners pay ACC levy: 1.67% of income

• Capped at: NZD $2,551.59 per year
• Automatically deducted from wages
• Provides accident compensation coverage

GST (Goods and Services Tax):

• 15% on most goods and services
• Already included in displayed prices (unlike USA)
• Not added at checkout

PAYE (Pay As You Earn):

• Employers withhold tax from wages
• Automatically calculated and deducted
• Most employees don't need to file tax returns unless:
• Self-employed
• Have untaxed income
• Have overseas income
• Claiming expenses or rebates

IRD Number - Critical First Step:

Before you can work or open bank accounts, you need an IRD number:

How to Get:

1. Apply online at ird.govt.nz
2. Or visit local IRD office
3. Need passport and visa documentation
4. Takes 8-10 business days

Do this in your first week in New Zealand.

Transitional Resident Status - The Big Benefit:

Here's where it gets interesting for new migrants:

What It Is:

A special tax status that exempts most foreign-sourced income from NZ tax for your first 4 years as a New Zealand tax resident.

This is HUGE if you have:

• Investment income abroad
• Rental properties overseas
• Foreign dividends or interest
• Capital gains from foreign assets
• Foreign pensions

Eligibility:

You qualify as a transitional resident if:

1. You haven't been a NZ tax resident in the past 10 years, AND
2. You become a NZ tax resident through work visa or residence visa, AND
3. You haven't previously held transitional resident status

Most new migrants on work visas or residence visas qualify.

What Income is Exempt?

Exempt from NZ Tax:

• Foreign interest
• Foreign dividends
• Foreign rental income
• Foreign royalties
• Most foreign capital gains
• Foreign pension income

Still Taxed in NZ:

• Your NZ employment income
• NZ business income
• NZ investment income
• NZ rental income

Real-World Example:

Without Transitional Resident Status:

• NZ employment income: NZD $80,000 (taxed)
• Foreign investment income: NZD $20,000 (taxed)
• Total taxable: NZD $100,000
• Tax: ~$24,000

With Transitional Resident Status:

• NZ employment income: NZD $80,000 (taxed)
• Foreign investment income: NZD $20,000 (exempt)
• Total taxable: NZD $80,000
• Tax: ~$17,000
• Savings: ~$7,000/year

Over 4 years: $28,000 savings!

How to Claim:

Don't need to apply: Status is automatic if you qualify

What to do:

1. Complete IR3 tax return (individual return)
2. Declare you're a transitional resident
3. Include foreign income details but claim exemption
4. Keep records of foreign income and taxes paid

Duration:

4 years from the date you become a New Zealand tax resident

Example:

• Arrive in NZ: March 1, 2026
• Become tax resident: March 1, 2026 (183 days later)
• Transitional resident until: February 28/29, 2030

Important Limitations:

Foreign income is still reportable:

• You must declare it on tax returns
• You claim the exemption
• Keep records in case IRD asks

Tax treaties still apply:

• Some countries may tax the foreign income
• Double taxation agreements may affect this
• Consult tax advisor for your specific situation

Doesn't apply to business income:

• If you run a foreign business actively managed from NZ, different rules apply
• Transitional resident status doesn't exempt foreign business income in some cases

After 4 Years:

Once your 4-year period ends, you're taxed on worldwide income like all other NZ tax residents.

Plan accordingly:

• May want to restructure foreign investments
• Consider tax implications before 4 years expire
• Seek professional advice in year 3-4

Tax Year and Filing:

Tax Year: April 1 - March 31

• Called "tax year ending" the March 31 date
• E.g., "2026 tax year" means April 1, 2025 - March 31, 2026

Filing Deadline:

• July 7 if filing individually
• March 31 (following year) if using tax agent

Who Must File IR3:

• Self-employed
• Those with untaxed or overseas income
• Those claiming expenses
• Transitional residents with foreign income

Who Doesn't Need to File:

• Employees with only PAYE employment income
• No overseas income
• No expenses to claim
• Tax automatically deducted correctly

KiwiSaver - Retirement Savings:

What It Is:

• Voluntary retirement savings scheme
• Employer must contribute 3% if you contribute
• Government may add up to NZD $521.43/year
• You contribute 3%, 4%, 6%, 8%, or 10%

Eligibility:

• NZ citizens and permanent residents automatically eligible
• Some temporary visa holders may be eligible
• Check with your employer

Worth It?

• Yes! Employer 3% is "free money"
• Government contribution bonus
• Can withdraw for first home (after 3 years) or retirement

For US Expats:

Special Considerations:

FATCA:

US citizens must report foreign financial accounts if aggregate value exceeds $10,000

Tax Treaties:

NZ-US tax treaty prevents double taxation, but:

• US citizens still must file US returns
• May need to report NZ income to IRS
• Foreign Tax Credit available
• Seek expat tax specialist

Transitional resident status doesn't affect US obligations:

• IRS still taxes worldwide income
• May create complexity
• Professional advice strongly recommended

Tax Resources:

Official:

• ird.govt.nz - IRD website
• 0800 227 774 - IRD helpline

Tax Agents:

• For complex situations, hire registered tax agent
• Fees typically NZD $200-600 for individual returns
• Worth it for first year and if claiming transitional resident status

Comparison to Other Countries:

vs Australia:

• NZ top rate 39% vs Australia 45%
• NZ has transitional resident status (Australia doesn't have equivalent)
• Both have employer retirement contributions

vs United States:

• NZ simpler tax system
• No state/local income taxes in NZ (federal only)
• USA has more deductions but more complexity
• NZ has 15% GST vs USA varied sales tax

vs United Kingdom:

• UK top rate 45% vs NZ 39%
• UK has council tax, NZ has rates (property tax)
• Similar PAYE systems

Tips for New Migrants:

1. Get IRD number immediately - week one priority

1. Understand your tax residency date - important for transitional resident status

1. Keep records of foreign income - even if exempt, must be declared

1. Join KiwiSaver - free employer money

1. Consider tax agent for first year - especially with overseas income

1. Plan for year 4-5 transition - when foreign income becomes taxable

1. US citizens: get expat tax help - complex interactions

Common Mistakes:

• Not claiming transitional resident status when eligible
• Not getting IRD number early enough
• Assuming foreign income doesn't need to be declared
• Not joining KiwiSaver (missing free money)
• Filing taxes unnecessarily (if only PAYE income)

The transitional resident status is one of New Zealand's most generous tax benefits for new migrants. If you have foreign income, this could save you thousands of dollars annually for four years. Combined with relatively straightforward tax system and no state/local taxes, NZ's tax environment is quite favorable for skilled migrants.