Coming Home to NZ
Moving back to New Zealand after years away is mostly a logistics problem, right up until the first tax year ends and something expensive turns out to have been decided months earlier without anyone mentioning it.
There is a genuinely valuable concession for people in your position, worth about four years of tax-free foreign income. There is also a choice attached to it that catches almost everyone, because taking the concession can mean giving up Working for Families. Getting that decision right is worth more than everything else on this page combined.
The three things to remember
The transitional resident exemption runs for up to 48 months. You qualify only if you have not been a New Zealand tax resident for 10 years, and you can only ever get it once.
If you are a new or returning resident after 10 years away, you must choose between receiving Working for Families payments, including Best Start, and keeping the temporary tax exemption on your foreign-sourced income. It is one or the other. A family with children and modest foreign income is often better off taking Working for Families; a family with substantial offshore investments is usually not. Do the arithmetic before you claim anything, because claiming is the choice.
What the exemption actually covers
| Foreign income | Exempt during the period? |
|---|---|
| Overseas interest | Yes |
| Overseas dividends | Yes |
| Foreign investment fund income | Yes |
| Overseas rental income | Yes |
| Employment income earned overseas | No |
| Income from personal services performed overseas | No |
| Any New Zealand-sourced income | No, taxed normally throughout |
That employment row is the one people misread. The exemption is for passive foreign income, not for work. If you come home and keep doing contract work for an overseas client, that income is taxable here from day one, and the rules for it are covered in working remotely for an overseas employer.
How long you actually get
The period runs for up to 48 months from the end of the month in which you satisfy the requirements, starting from your first day of New Zealand tax residence. Because it runs from the end of that month rather than the day itself, arriving early in a month gives you a few extra weeks at no cost.
Two conditions gate it. You must not have been a New Zealand tax resident at any point in the previous 10 years, and you must never have been a transitional resident before. That second one matters for people who have come and gone more than once: the concession is available exactly once in a lifetime.
You become a New Zealand tax resident on the earlier of passing 183 days here in any twelve month period, or acquiring a permanent place of abode. Buying or moving back into a house can trigger the second test well before the day count is reached, and the clock on your 48 months starts then, not when you decide you have settled.
The choice, in numbers
The trade-off is between four years of tax-free foreign passive income and up to four years of Working for Families. Which wins depends entirely on how much foreign income you have.
Work out your own position rather than assuming. The Working for Families calculator gives one side of it, and the tax on your foreign income at your marginal rate gives the other.
What happens when the exemption ends
This is the cliff nobody diarises. On the day the 48 months expire, every foreign investment you hold becomes fully taxable, and the foreign investment fund rules start applying to offshore shareholdings.
Because foreign super is taxed by reference to time since return, the exemption period is often the cheapest window in which to deal with a UK or Australian pension. That is a decision with a deadline attached, and it is worth advice rather than a guess. Australian shares and franking credits covers the trans-Tasman side, and the FIF calculator shows what the rules produce once they apply.
Student loans
If you left with a student loan, coming home changes the basis on which it is repaid. An overseas-based borrower pays fixed instalments regardless of income and is charged interest. A New Zealand-based borrower repays a percentage of income above the threshold and is generally not charged interest.
Tell Inland Revenue when you return. Borrowers who do not are assessed on the overseas basis for longer than necessary, which is both more expensive and, where arrears have built up, a reason people are stopped at the border. The student loan repayment calculator shows the New Zealand-based position.
The rest of the checklist
| Do this | Why it matters |
|---|---|
| Tell Inland Revenue you are back and confirm your residency start date | It sets the clock on everything above |
| Set your RWT rate and PIR | A wrong PIR is either an overpayment you may not get back or a bill you did not expect |
| Re-join or start KiwiSaver | Employer contributions and the government contribution only accrue once you are in |
| Check the residency requirements for NZ Super | Years spent overseas can affect entitlement decades later |
| Sort health cover and enrol with a GP | Eligibility for publicly funded care depends on your status, not your passport |
| Review insurance written offshore | Cover bought elsewhere often will not respond to a New Zealand claim |
| Get NZ wills and enduring powers of attorney | Foreign documents may not be effective here |
Transferring savings home is usually the largest single currency conversion of your life, and the margin on the exchange rate matters far more than any fee. A 1% margin on $200,000 is $2,000, which no transfer fee comes close to. Compare on the all-in rate rather than the advertised fee, and consider whether moving in stages suits you better than one transfer on one day's rate.
What this guide does not cover
Migrants arriving in New Zealand for the first time share much of this but not all of it, and immigration status raises questions this guide does not touch. Double tax agreements, foreign trusts, and the detail of foreign superannuation transfers each need advice specific to the country you are leaving. Working holiday visitors and non-residents are in a different position entirely. This is general information rather than tax advice, and the Working for Families choice in particular is worth modelling properly before you claim anything.
Test Your Knowledge
Ten questions on moving your money home.
Sources: Inland Revenue on the temporary tax exemption for transitional residents, Working for Families for new or returning residents, tax residency status for individuals, and the foreign investment fund rules. The choice between the exemption and Working for Families is set out by Inland Revenue and should be modelled on your own figures before claiming.