Income tax in New Zealand
Taxation Researcher | October 25, 2020
Tax residents are taxed on their worldwide income. Married couples are separately assessed and taxed on their income.
The tax period in New Zealand is from 01 April of the current year up to 31 March of the succeeding year. The tax year 2020-2021 is from 01 April 2020 to 31 March 2021.The tax year 2021-2022 is from 01 April 2021 to 31 March 2022.
There are several categories of income: (1) salary and wages, (2) business and self-employed income, (3) most social security benefits, (4) rental income, and (5) profits from selling capital assets (although this does not usually apply to personal assets).
Taxable income is computed separately for each category by deducting income-generating expenses, tax credits and tax rebates from the gross income. Net income from different categories are then aggregated and taxed at progressive rates.
The tax period in New Zealand is from 01 April of the current year up to 31 March of the succeeding year. The tax year 2012-2013 is from 01 April 2012 to 31 March 2013. The tax year 2013-2014 is from 01 April 2013 to 31 March 2014.
INCOME TAX 2019-2021
|TAXABLE INCOME, NZD (US$)|
|Up to 14,000 (US$9,333)||10.50%|
|14,000 - 48,000 (US$32,000)||17.50% on band over US$9,333|
|48,000 - 70,000 (US$46,667)||30% on band over US$32,000|
|Over 70,000 (US$46,667)||33% on all income over US$46,667|
|Source: Global Property Guide|
New Zealand offers a lot of tax rebates and tax credits that can be deducted from the gross income. Taxpayers must satisfy some conditions before they can avail of various tax credits. Some tax credits available to residents are:
- Tax credit for donations to charitable organizations
- Tax credit according to the taxpayer´s personal circumstance: family tax credit, in-work tax credit, minimum family tax credit, parental tax credit
Various expenses can be deducted from gross rental income, such as: rates (municipal land tax) and insurance; interest payments on mortgage to finance the rental property; agent´s fees for maintenance, collection of rent, and search of tenants; repairs and maintenance that is not considered as capital improvements on the rental property; motor vehicle expenses; legal fees incurred in arranging mortgage and drawing up a tenancy agreements (legal fees related to the buying and selling of the property are not deductible); accountant´s fee for the preparation of accounts; depreciation allowance to cover the cost of wear and tear and general ageing of the building and its contents.
Assets include buildings, capital improvements and chattels (furnishings, etc), which can be depreciated through either diminishing or straight scale. Buildings can either be depreciated by 4% (diminishing line) or 3% (straight line). Assets can be depreciated individually or in a group (pooled). Pooled assets can only be depreciated using the diminishing method, using the lowest depreciation rate in the group.
Gains resulting from the sale of real property are not normally taxed in New Zealand.
They are taxed at normal income tax rates only under the following circumstances: the business of the taxpayer consists of dealing in such property, the property was acquired for the purpose of selling the property and the profits or gains were derived from the carrying out of an undertaking scheme for the purpose of making a profit.
There are no real estate taxes in New Zealand.
Income and capital gains earned by companies is subject to corporate income tax at a flat rate of 28%. Income-generating expenses are deductible when calculating taxable income.