Unwitting tax avoidance? Please help!

[PeterS]

Hi.

I am an ex-pat kiwi living in the UK. I have been here for 11 years. I have an EU passport and UK citizenship, am married to a UK local and even own a home here.

In NZ I have 2 children from a previous marriage and a house which I rent out on an ongoing basis. I also have a bank account there to manage the mortgage, insurance, rates etc.

I work in the UK as a PAYE and have been paying tax as normal. Each year I have also paid tax in NZ based on my NZ rental income, and I've been paying child support in NZ also based on my NZ rental income.

One of my children wants to apply for a student allowance in NZ, and I was asked to download and fill out a "two parent student allowance application form" which I did so. I was discussing the application form with a colleague at work and was telling him about my NZ income and how little it is (about $10k p/a) and that the application should be no problem and he told me that I should be declaring my UK income because I have an "enduring relationship" with NZ. So I looked this up and apparently if you do have an enduring relationship you must include income that you earn outside of NZ on your tax forms, and pay tax on it!

I've always assumed that because I earn and pay tax here that my NZ income tax is only based on my NZ income. To date, I have only ever paid this. I always fill out an IR3 every year, and it asks if you earned any money overseas and I've always said "no" thinking that referred to someone living in NZ earning money from overseas, perhaps working for an overseas company via the internet or something. He tells me that that's not the case at all! He reckons I've been "avoiding tax" (gulp!)

Now I'm REALLY worried. Have I been avoiding tax? Do I have an "enduring relationship" with NZ? If so, what do I do now? I guess the best course of action is to come clean with IRD? How do I do that? What will they say? If they want my income details for the past 11 years I wouldn't even know where to look. I've been with the same firm for 5 or 6 years now so that's easy, but what about before that? It all just doesn't make sense to me. Surely he must be wrong?

Somebody please help!

[ralf-nz]

This link might help: http://www.ird.govt.nz/income-tax-in...nz/double-tax/

And more specific is this one: http://www.legislation.govt.nz/regul.../DLM94689.html

[JandM]

Hello and welcome to the forum.

Sorry for all your worries.

[SueDonim]

I've been confused by this type of point (and I need to learn more). I constantly hear in the US that the US is the only country that taxes you on income earned elsewhere. But that either is wrong or is oversimplified as your example shows.

It's the same way with capital gains. I constantly hear there is no capital gains tax in NZ, but there is.

Obviously, I need to learn more. I guess I can't add anything helpful, but I understand your confusion, and personally appreciate and admire your moral misgivings about this accidental non-payment. Most people would just try to hide it. I appreciate your honesty (FWIW)

Good luck

[rupicola]

PeterS, I'm not a NZ taxation specialist, but what I understand of reading that Double Tax Agreement, you don't have to pay taxes on your income in New Zealand, but you do need to declare it to the NZ IRD. So I don't reckon you were "avoiding tax". If I were you, I would contact them, explain your situation and ask them what to do. It's always better to "confess" yourself than waiting for them to find out - and reading your post, I don't think you'd find any "moral peace" by just keeping still.

I'm not sure of the consequences for your child support payments though; I'd think this are calculated on the basis of your world income, not your NZ income.