Taxpayers who earn income from various sources may get caught short if they don’t plan ahead. This could come about in various ways:
• Airbnb
• Overseas investment
• Shares in an overseas company
If you rent rooms or homes through Airbnb, you may not realise that the IRD considers you to be a landlord. Your rental income must be included in a tax return.
If you’re unsure of your tax obligations please consider speaking to one of our tax experts.
OVERSEAS RENTAL PROPERTY
You must declare any rental income you get from properties overseas. You can claim deductions for rental-related expenses, and you may also be able to claim a credit for tax paid in the other country on that income.
Complexities can arise when loans and mortgages are held overseas. Call us if this applies to you.
OVERSEAS TRUSTS
Under New Zealand law, trust matters are settlor-based. This means New Zealand tax treatment of the trust depends on where the settlor of the trust lives. As a trust does not have a legal personality, there is no concept of residency for trusts. However, a trust is recognised as a taxpayer, so New Zealand generally verifies the residency of the trustee to determine which income of the trust is subject to New Zealand tax.
IF YOU OWN SHARES IN A FOREIGN COMPANY
You will have to pay tax in New Zealand on foreign share dividends unless:
• You are a transitional resident, or
• The shares are subject to the foreign investment fund or controlled foreign company rules.
Dividends paid by overseas companies to transitional residents or non-New Zealand tax residents are not taxable in New Zealand for the transitional period.
The rules surrounding Foreign Investment Funds and Controlled Foreign Companies are complex and you should get professional advice on the taxation of offshore investments, whether from us or your financial advisor.
OVERSEAS-ISSUED CREDIT/DEBIT CARD
Having an offshore credit or debit card may or may not trigger New Zealand tax obligations. Note, though, that even if foreign withholding tax has been deducted on foreign income, that does not necessarily mean the income is no longer taxable in New Zealand.
It can be tricky to work out your tax position. Call us if you’re not sure, we’re here to help.