Taxation in New Zealand
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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 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:
- Loans with low interest
- Owning a motor vehicle for private use
- Subsidized transport for public transportation business
- Goods and services discount
- Financial contributions to unregistered superannuation funds
- Non-financial contributions to superannuation funds
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