If an individual is a New Zealand (NZ) tax resident
they will be taxed on their worldwide income.
Conversely, if a person is non-resident they will only
be taxed on their NZ sourced income. This makes it
important for a person to confirm their tax residency
when they leave the country as it determines the
extent of their continuing NZ tax liability.
A person is a NZ tax resident if they are either in NZ
for more than 183 days in a 12 month period or if
they have a ‘permanent
place of abode’ in NZ. A
person will be nonresident
once they are absent from NZ for more than 325 days in a 12
month period and they do not have a permanent
place of abode in NZ.
The concept of a permanent place of abode is not
defined under the legislation. But the courts have
considered the issue on a number of occasions.
One recent case has arguably shifted ‘the line’.
The Taxation Review Authority recently considered
whether a taxpayer was a NZ tax resident over the
four year period to 31 March 2007. The taxpayer
had worked for the NZ Army for 25 years. After he
retired in 2003 he left NZ to work in Papua New
Guinea on a 12 month contract providing personal
The taxpayer gave evidence that when he left NZ in
2003 he had no intention of returning to live here.
After the contract finished in Papua New Guinea, he
spent approximately four months living in
Queensland, before he began working in Iraq. In
Iraq he also provided security services, completing a
number of contracts up until April 2012, when he
moved back to Australia.
Despite such a lengthy absence, the individual was
found to be a NZ resident (and liable for tax on his
worldwide income) because he was deemed to
have a permanent place of abode here. The
following factors were relevant to the decision:
The taxpayer separated from his wife in 1994
and they had four children together. The
taxpayer maintained close family and financial
ties to his ex-wife and his children, and he
provided financial assistance to them.
Although absent from NZ for the majority of the
time, between July 2004 and March 2007
(covering the period in dispute), he visited NZ
every five to six months, with an average time in
NZ of 42 days per year.
The taxpayer owned rental properties in NZ with
his ex-wife (personally and then through a
company) that would have been available to him
if he served the required notice under the
Residential Tenancies Act 1986. Those
properties were in the same locality as his exwife
The taxpayer’s ex-wife had a debit card to
access his US based bank account, to pay
property and family related expenses.
Looking at the overall circumstances, the TRA found
that the taxpayer continued to have a strong and
enduring relationship with NZ, deeming him to be a
NZ resident during the four years in dispute. The
taxpayer was also deemed to have taken an
“unacceptable tax position”, which is subject to a
shortfall penalty based on 20% of the tax shortfall.
The IRD has also recently issued an Interpretation
Statement (IS 14/01) that came into effect on 1 April
2014, that sets out its view on how to determine
whether a person is a NZ tax resident. The effect of
the TRA decision has been taken into account in
preparing the Interpretation Statement, namely the
permanent place of abode test requires that a
dwelling is available that can be used by the person
This does not necessarily mean ownership or
control over a dwelling. If a person is able to use a
property as a place to live on an enduring basis,
then it can still be their permanent place of abode
irrespective of whether the property is rented to
someone else while the person is residing overseas.
Whether someone has a permanent place of abode
is not easily determined. It takes judgement to weigh
the particular facts and independent professional
advice should be obtained.