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Thread: Declaring US retirement accounts (Roth IRA) for NZ taxes

  1. #1
    Join Date
    Apr 2016
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    New Zealand
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    7

    Default Declaring US retirement accounts (Roth IRA) for NZ taxes

    Hi all - I am nearing four years as an NZ tax resident, and am unsure how to go about declaring my (meager) Roth IRA for NZ tax purposes. I file my own US taxes/FBAR as I earn within the Foreign Earned Income Exclusion and don't own properties anywhere (or any other complicating matters). I am hoping to be able to file any NZ tax docs on my own after being taught. Can anyone recommend an NZ tax accountant who could walk me through how to approach?

  2. #2
    Join Date
    Jan 2007
    Location
    Chch, NZ
    Posts
    2,214

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    Quote Originally Posted by Harbinger3 View Post
    Hi all - I am nearing four years as an NZ tax resident, and am unsure how to go about declaring my (meager) Roth IRA for NZ tax purposes. I file my own US taxes/FBAR as I earn within the Foreign Earned Income Exclusion and don't own properties anywhere (or any other complicating matters). I am hoping to be able to file any NZ tax docs on my own after being taught. Can anyone recommend an NZ tax accountant who could walk me through how to approach?
    If your IRA accounts is less than $50K NZD in account value, then there's no tax requirement under IRD's FIF tax (apart from dividends and interest still have to be declared as income in NZ). If it's over $50K, then you'll need to declare under FIF (IRD's has an FIF handbook that you can follow to do your self declaration). What you won't like is the taxing of paper gains each year on the entire account value. Normally most under FIF use the 5% FDR rate. The greater problem for those caught under FIF is paying the tax obligation as their NZ income alone may not cover the FIF tax on their foreign investment. For eg. wealthy migrants with accounts over $1M under FIF would declare 5% of the account value or $50K as taxable income. If the person had no other source of NZ income, they would be forced to sell a portion of their investment account just to pay the tax liability. This IMO is no different to how mutual or hedge funds charge management fees; as in the investment work, high fees = lower compound returns on the portfolio and NZ's FIF does exactly that. Since NZ has no capital gains tax approach like the US does, you'll find the investors in NZ that invest for retirement in schemes like Kiwi Saver will have a much smaller nest egg than the US investors that pays tax on the capital gain AT retirement age (because it makes sense that at retirement, salary or wage income is little and the pensioner can structure an annuity from their investments to stay in the low income tax bracket). Unfortunately NZ's way of taxing in Kiwi Saver does not address age; meaning no matter what stage of life you're in, the Kiwi Saver investor that is rich or poor ends up having a Kiwi Saver fund that pays the same amount of tax (because under FIF, these managed funds are bound to pay the FDR rate regardless of the individuals income tax bracket).

    Any tax accountant will do if you search online ; just be prepared to pay a hefty price. We're not talking rates that you would see at H&R Block. lol.

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