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Moving to New Zealand

Planning Considerations for a Smooth Transition

Moving your family and your wealth to New Zealand gives rise to both complexities and planning opportunities. Advance planning can yield significant benefits.

Timing is everything. New migrants to New Zealand and New Zealanders returning after an absence of 10 years or more may be able to avail themselves of the benefits of the transitional resident exemption, which means foreign income can remain off limits to the New Zealand tax authorities for up to four years after you become resident in New Zealand.

To maximise the effect of the transitional resident exemption, care should be taken to ensure that the start date of your residence in New Zealand is not unintentionally triggered earlier than expected. A person becomes tax resident in New Zealand if they have a permanent place of abode in New Zealand or if they are personally present for an aggregate of 183 days in any 12 month period. Under the 183 day test you will be deemed to be tax resident in New Zealand from the first of those 183 days. A brief visit to New Zealand to attend a job interview or scope the housing market may result in backdating your residence start date.

The use of trusts as an asset protection tool is commonplace in New Zealand. Any person intending to become resident in New Zealand would be well advised to consider whether establishing a trust would be useful in their particular circumstances. Where it is intended to use a trust, thought should be given to whether a trust should be established while you are still based outside New Zealand. For a trust established outside New Zealand, it may be possible to utilise the transitional resident exemption for foreign sourced income derived by that trust, meaning you can obtain the asset protection benefits of trust ownership but still avail yourself of the exemption from tax on foreign income for four years, and in some cases up to five years where the trust election into the complying trust regime can be delayed.

If setting up a trust makes sense in your circumstances, you may be able to obtain an additional benefit by transferring assets to the trust before you bring those assets to New Zealand, and before you choose New Zealand as your place of domicile. In these situations, the impact of gift duty on such a transfer can be eliminated.

Please contact us for more information on these and other pre-migration planning issues.

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