Tax Traps For New Migrants

Given the growing number of overseas families settling in Devonport, especially from the UK, I’d thought I’d seek specialist advice and approached the partners of Jones Law.

The partners of Jones Law are Kevin Jones and Amber Nell, who are internationally qualified and practise in the areas of cross-border tax planning, estate planning and acquisition structuring.

I have asked Kevin and Amber to highlight some of the issues faced by UK and other migrants to New Zealand. In this article, the risks of holding foreign currency onshore are explored.

With the increasing strength of the New Zealand dollar, it may be tempting to hold on to your foreign currency, hoping for an improvement in the conversion rate. In response to the desire to defer converting currency, foreign currency deposits are sometimes used as collateral to support New Zealand dollar borrowings.

Unfortunately, a gain realised on foreign currency conversion or foreign loan repayment will usually be taxable under the financial arrangements rules. Depending on the size and nature of the deposit or foreign currency mortgage obligation, foreign currency movements may even be taxable annually on an unrealised basis.

For those families recently arrived in New Zealand, a four year tax holiday on foreign sourced income may apply. Where the Kiwi dollar gain is realised onshore, this is not an exempt gain and is subject to New Zealand tax. In these cases, it is tax efficient to be holding the foreign currency offshore so that the exemption applies to any gains made.

Be sure to seek professional advice if holding substantial foreign currency investments or borrowings.

The above article is provided for general information purposes and does not constitute legal advice. We invite you to contact us at This e-mail address is being protected from spambots. You need JavaScript enabled to view it to discuss your specific circumstances.