Kiwis are a friendly bunch, and many expats move to New Zealand to join their peaceful and relaxed way of living.
People tend to be polite and a little conservative, so if you’re ever stuck for what to do and need to ask for help, you’re assured of finding someone to point you in the right direction.
New Zealand Expat Taxes
The big question when you’re deciding where in the world to move is how much tax will I pay?
New Zealand tax is like the UK, where your tax rate steps up the more you earn. As a non-resident expat, you won’t need to think about paying local tax.
Likewise, if you’re planning to settle in New Zealand and you’re still a tax resident elsewhere, you can apply for relief under a double taxation treaty to ensure you’re not being taxed twice on the same money in both countries.
Once you become a resident, you’re liable for New Zealand income tax, which is between 10.5-33% depending on how much salary you are earning.
- Salaries over NZ$70,000 are taxed at 33%
- Wages up to NZ$14,000 are taxed at 10.5%
New Zealand is considered to have one of the best tax regimes in the world. In 2019 the Tax Foundation ranked the country as second for competitive levels, and fourth for personal tax systems.
What’s user-friendly is that the rates are fixed, and capped at certain levels, so you won’t need to worry about unexpectedly changing tax bands.
QROPS NZ – If you are moving to New Zealand or retiring to New Zealand, you may want to look into transferring your pension to a Qualifying Recognised Overseas Pension Scheme (QROPS) in New Zealand.
HMRC rules for 2017/18 mean that you can transfer a UK pension to New Zealand and draw retirement benefits from the age of 55. However, under the rules, you must remain a tax resident in New Zealand for five years following the transfer or move your pension scheme to a different QROPS in the new country you are moving to in order to avoid a retrospective 25% exit tax from HMRC.
Tax on NZ Pensions
- If you are not resident of NZ or been in NZ less than 4 years after acquiring the pension then you transfer is tax free
- If not you can use either the schedule method or formula method to calculate your tax – the results of both can differ wildly
- You can use the lowest method for determining your tax
If you are not a resident of New Zealand or have been in New Zealand less than four years since you acquired your UK pension fund then there is no tax on pension transfers you make. This no tax on pension transfers extends to returning New Zealanders who have acquired pensions while in the UK – you are no longer required to be outside of New Zealand for 10 years to receive this exemption. This was a very positive move by the IRD in New Zealand.
Boil it down into it’s simplest terms, if the value of your foreign pension, in New Zealand dollar terms, was worth more than four years after you arrived in New Zealand then when you transferred it to New Zealand you will have NO tax on pension transfers to New Zealand.
This applies to the higher amount of time that you have lived in NZ the higher the tax rises, this is called the schedule method. The other way that it is taxed is based on the formula method that involves background and is more complex.
Why Consider Setting up a QROPS in New Zealand?
Reasons you may want to move your pension fund overseas to a QROPS:
- your UK pension scheme is being closed or wound up
- you want to transfer to a better pension scheme in New Zealand
- you have pensions from more than one employer and want to bring your pension together under one platform which is more easily managed in New Zealand
- you’re moving to New Zealand and want to move your UK pension to a pension scheme in New Zealand
- you are already resident in New Zealand and want to move your UK pension to a pension scheme in New Zealand
- you want to move your pension out of the UK and into a regulated pension scheme in New Zealand
Tax on a NZ QROPS for Residents in New Zealand
- No tax on death at source
- No tax on growth
- There is a double taxation agreement between the UK and New Zealand
- Local taxes in New Zealand apply when receiving retirement benefits
Tax on Transfer
There is no tax on transfer under current rules.
However, there is an Overseas Tax Charge (OTC) which can apply if you leave New Zealand within five years of transferring your pension scheme.
So, only move your pension scheme to a QROPS in New Zealand if you intend to stay in NZ for a period of five years or more, otherwise, there is a 25% Overseas Tax Charge or “exit tax” which will be applied.
If you have an occupational pension scheme, final salary scheme, defined benefit (DB) pension scheme, a SIPP, SSAS or defined contribution (DC) pension scheme in the UK and you are leaving the UK to live and work in New Zealand, you are entitled to transfer your existing UK pensions to a QROPS in NZ.
I have written a few articles explaining about QROPs/ROPs and platforms in other articles. You can find them under the pensions section on the website.
If you would like more information or have a question, please feel free to contact me at info@investmentsforexpats.com
