Australian expats and migrants who are NZ tax residents need to return overseas sourced income except if they qualify for transitional residency status (i.e. four-year foreign income exemption – find more information here).

Foreign employment and foreign personal services income are, however, two exemptions to the transitional residency rule. This means, if the Australian expat/migrant continues to get Australian employment or personal services income after arriving in the country, they may still need to return this income in their NZ income tax return.

Additionally, the NZ income tax treatment for foreign-sourced income can be different to the income tax treatment of NZ sourced income. The following are a few examples:

• Interest expense limitation on residential rental does not apply to Australian properties
• Australia superannuation withdrawal may be subject to the foreign superannuation withdrawal rules
• Foreign dividends may be taxed under the foreign investment fund rules. Note there may be an exemption for Australian shares.
• Foreign denominated loans may be subject to the financial arrangement rules

Suppose foreign income had been omitted in historic years. In that case, the return of foreign income to IRD for the relevant period may result in IRD imposing both uses of money interest and penalties.

We can find out the Australian expat/migrant has NZ income tax filing obligations and whether he/she qualifies for the four-year foreign income exemption.

We can advise whether a double tax treaty exists for the relevant country to eliminate double taxation on the same income if the Australian expat/migrant has an NZ income tax filing obligation. If a double tax treaty exists, we can help get the most out of it by considering and applying the relevant article(s) and advise which country has the first taxing right and which country should claim the foreign tax credits. We are also able to consider the foreign tax paid and calculate the maximum foreign tax credits claimable in your NZ income tax return to ensure you are not overpaying NZ tax.

If the Australian expat/migrant qualifies for the four-year foreign income exemption, we can assist with tax planning so an informed decision can be made to keep or dispose of the foreign assets and investments before transitional residency status expires.

Where foreign income had been excluded in past years, we can help with the preparation and submission of a voluntary disclosure letter to the Inland Revenue and request for the remission of penalties and possibly interest dependent on the circumstances of the case.

If you need assistance with tax implications on foreign income, tax planning before foreign income exemption expires or “catching-up” omitted overseas income in past years, get in touch with our team, who can advise how we can assist and add value.

Please refer to our people for more information on who we are, our experience and how we can help.

We offer a free no-obligation consultation where we can discuss

• Your overseas income and investments;
• highlight issues and opportunities; and
• how we can add value and assist.