When Do I Need To File an IR3 / Tax Return

There are several reasons why you have to file a New Zealand tax return (IR3).


NZ Tax Options

Generally, a full tax return (IR3) is required if you receive income other than from employment, New Zealand interest, or New Zealand dividends during a tax year.

You have only a few months from the end of the tax year to file your tax return so it is a good idea to be organised and keep good records.

When Must I File My Tax Return?

Your tax return is due by July 7. Any income tax is payable at the latest by the 7th of February following the end of the tax year. For example, for the 2016 tax year ending on 31 March 2016, income tax must be paid by 7 February 2017.

If you have filed previous returns, you may be asked to make two ‘provisional’ part-payments during the tax year based on your previous tax return.

If you use a registered tax agent, you may have longer to file your return and to pay your income tax.

Tax Residence

If you are a New Zealand tax resident, you must pay tax on your worldwide income as well as any income earned in New Zealand.

You may benefit from the many double taxation agreements that New Zealand has with other countries. Generally, these treaties prevent you paying tax twice on the same income.

Reasons To File A Tax Return (IR3)

  1. Self-Employed Income
    If you are self-employed you will need to fill in a tax return. You are required to keep records detailing your income and your expenses during the year. You can use these to help you complete your tax return at the end of the tax year.

    Even if you have made a loss, your expenses and income need to be recorded by Inland Revenue (IRD). This will enable you to carry your loss forward and offset it against any profit you may make in the following years.

  2. Rental Income
    If you receive rental income from property in New Zealand or overseas, then you must declare this income on your tax return.

    There are many expenses that can be deducted from your rental income. This reduces the amount of tax you pay.

    Allowable expenses include the cost of repairs, rates, insurance and management fees.

  3. Overseas Income
    If you receive overseas income then you may have to file. Overseas income includes:

    • pensions
    • rental income
    • untaxed interest or dividends
    • interest and dividends worth more than $200 which have already been taxed

    Overseas gifts of money are not taxable and do not need to be declared.

    You are not required to file if your only overseas income is from interest/dividends worth $200 or less which have already been taxed.

    Arrived or left New Zealand part way through a tax year

    If you would normally receive a personal tax summary, but have arrived or left New Zealand part way through a tax year you will need to file a tax return.

    For example if:

    • you are in work, and
    • you have received family assistance, and
    • you have arrived or left New Zealand during the same tax year,

    then you and your partner will be required to file an IR3.

    Other reasons to file an IR3 include:

    • you received income from cash jobs
    • you received royalties
    • you received more than $200 of schedular payments (formerly withholding payments)
    • you received estate, trust or partnership income
    • you received income without PAYE deducted, such as shareholder-employee salary
    • you have losses to claim or have losses brought forward from the previous year
    • you were declared bankrupt part-way through the year
    • you changed your balance date part-way through the year.
    • (For a complete list of reasons see Required to file.)

    Avoid Tax Return Mistakes

    Clearly, it is best to avoid making mistakes on your tax return. It can be costly as Inland Revenue can check assessments several years after they have been filed and penalties can build up.

    Here is a list of some of the most common mistakes that are made with tax issues:

    1. Not filing when you are required to file a tax return
      Check carefully to see if you are required to file, and make sure you file your tax return on time. If you don’t, you will get a late filing penalty, and if there is any tax to pay, you may have to pay interest and penalties too.
    2. Keeping inadequate records
      Keep all details of income and expenditure for a business or rental property. Failing to keep good records may mean, for example, that your tax deduction for expenses may be disallowed.
    3. Omitting income
      Make sure that you have included all sources of income in your tax return. If you keep good records, you will have all your income details conveniently to hand including any overseas income, interest and dividends.
    4. Calculation errors
      Double check your figures carefully and consider filing online, where there are calculators to help you avoid making transposition errors.
    5. Claiming a full deduction for capital expenditure
      Unless the capital expenditure is very small ($500 or less), you may not fully deduct capital expenditure. Instead, you are permitted a depreciation rate set by Inland Revenue. Check the rate yearly with Inland Revenue in case it has changed.
    6. Lack of knowledge about tax legislation
      Many mistakes happen because there has been a change in the tax law or a misinterpretation of what to do. Don’t guess. You can contact Inland Revenue for clarification or consider using a registered tax agent or accountant to help you.

Comments

  1. Justin harmon says:

    My wife and I are seriously considering migrating to New Zealand with the intent of staying there and raising a family there. We are both nurses in the U.S. with more than 3 years experience each. It looks like we will be earning somewhere between 54k and 64k NZD a piece, a total combined income of about 110,000 NZD before taxes. Will this income be taxed in the U.S. as well? Seems unfair if we’re permanently residing in NZ and have no investments in the U.S. I’ve heard about the Foreign Earned Income Exclusion ($95,100 for 2012), does this mean our combined income after 95,100 is taxed in NZ and the US? If so, should we file separately when we file there?

    • Hi Justin,

      Yes , there is a double tax agreement (DTA) between New Zealand And the United States. In general, these agreements avoid you paying tax twice on your income.

      Employment earnings in New Zealand will be taxed in New Zealand. Whether or not you also have to declare this income for USA taxes will depend on the details of the DTA. If you do have to declare this income in America, then it is likely you will get a tax credit for the taxes you have paid in New Zealand.

      I suggest you contact a tax agent or accountant in New Zealand to help you as the DTA can be quite complicated to understand.

      Here is a link to the USA double tax agreement with New Zealand and Article 15 which relates to salaries and wages. There have been several amendments to the DTA which makes it more difficult to interpret:

      Reference

      Article 15 says:

      Article 15
      Dependent Personal Services
      • 1. Subject to the provisions of Articles 18 (Pensions and Annuities) and 19 (Government Service), salaries, wages, and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State.
      • 2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if:
      o (a) the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in any consecutive twelve month period; and
      o (b) the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State; and
      o (c) the remuneration is not borne by a permanent establishment or a fixed base which the employer has in the other State.
      • 3. Notwithstanding the preceding provisions of this Article, remuneration derived by a resident of a Contracting State in respect of an employment as a member of the regular complement of a ship or aircraft operated in international traffic may be taxed only in that State.

  2. Maria Haussmann says:

    Hi,

    I’m from Chile and I just received a letter that says: “Overdue IR3 income tax return for year end 31 March 2014”.

    I’m really confused and scared at the same time, because i left New Zealand on September 2012. I worked there till July 2012. I asked for my tax return of that period with mytaxreturn.co.nz and everything turned out just fine.

    Should I be worried? What should I do?

    Thank you very much,

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