Several Ways Taxpayers Can Get Caught Out

Taxpayers who earn income from various sources may get caught short if they don’t plan ahead. This could come about in various ways:

  • Airbnb
  • Overseas rental properties
  • Overseas trusts
  • Shares in an overseas company

Airbnb income
If you rent rooms or homes through Airbnb, you may not realise that Inland Revenue considers you to be a landlord and your rental income must be included in a tax return.

If you’re unsure of your tax obligations please consider seeking our professional advice.

Overseas rental property
If you are a New Zealand tax resident, then you must declare in your tax return any rental income you derive from overseas properties. You can claim deductions for rental-related expenses, and you may also be able to claim a credit for tax paid in the other country.

Further complexities can arise if loans and mortgages are held overseas.

Please call us if this applies to you.

Overseas trusts
Under New Zealand law, trust income tax matters are settlor-based. This means New Zealand tax treatment of the trust depends on where the settlor of the trust lives. As a trust does not have a legal personality, there is no concept of residency for trusts. However, a trust is recognised as a taxpayer, so New Zealand generally verifies the residency of the settlor to determine which income of the trust is subject to New Zealand tax.

If you own shares in a foreign company
You will have to pay tax in New Zealand on dividends derived from foreign shares unless:

  • you are a transitional resident, or
  • you are a non-resident of New Zealand, or
  • the shares are subject to the foreign investment fund or controlled foreign company rules.

The rules surrounding Foreign Investment Funds and Controlled Foreign Companies are complex and you should seek professional advice on the taxation of offshore investments.

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