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Taxation in New Zealand

By: EconomyWatch Date: 14 October 2010

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Taxation in New Zealand is both direct and indirect. The government of New Zealand utilizes the tax revenue to meet the expenditures of the government.

Taxation in New Zealand: Departments

The arrangement of taxation in New Zealand is administered by the Department of Inland Revenue (IRD). This department is responsible for collecting tax payments from the people in New Zealand. Taxes are also collected by New Zealand Customs. The individuals in New Zealand must have an IRD number to open a bank account or start a new business.

Types of Taxable Income: An Outline

The government of New Zealand levies taxes on the following taxable incomes:

Salary and wages
Income earned from business and self-employed income
Income from investments (examples: interest, dividends )
Income from rental services
Income earned from overseas services

Rate of Income Tax

The rate of income tax in New Zealand varies according to the levels of income in a particular tax year.

Tax year: 1st April 2006 to 31st March 2007

Income upto $38,000: 19.5%
Income from $38,001 to $60,000: 33%
Income over $60,000: 39%
No declaration form (IR330): 49%

Dual Tax Residency: An individual can be a dual tax resident in New Zealand and another country. The Government of New Zealand is related with other countries through double tax agreement to decide the mode levying taxes on income.

The leading countries that are related as double tax agreement with New Zealand are as follows:

Australia, Sweden, Indonesia, Ireland, Switzerland, Belgium, Taiwan, Canada, Italy, China, Japan, Thailand, Denmark, Malaysia, Netherlands, Fiji Norway, Philippines, Finland, Republic of Korea, United Arab Emirates, France, Russian Federation, United States of America,United Kingdom, India, Germany, Singapore, South Africa, Austria, Mexico, Poland and Spain

Resident Withholding Tax

On the occasion, an individual gets interest from any person or organization, the Resident Withholding Tax (RWT) will be deducted before the interest is credited to the individual.

The rate of RWT deduction from one's interest depends on the following factors:

The date of interest payment
Individual's income level
The rate of Resident Withholding Tax

Tax Rate (RWT)

Income up to $38,000: 19.5%
Income from $38,001 to $60,000: 33%
Income from $60,001 and over: 39%

Goods And Services Tax

One of the major types of tax in New Zealand is Goods and Service Tax (GST), which is an indirect tax. As on September, 2003, the GST rate in New Zealand is 12.5%

Fringe Benefit Tax

Employers in New Zealand need to pay Fringe Benefit Tax (FBT) of 49% on any non-cash benefit the employers provide to employees. The benefits are as follows: