Auckland

๐Ÿ’ฐ

Taxes and KiwiSaver

Sections

1. Taxes in Auckland, New Zealand

New Zealand has a straightforward tax system, and Auckland, as the largest city, follows the same national tax regulations. Hereโ€™s what you need to know:

a. Income Tax

  • Tax Residency:
    • You are considered a tax resident if you are in New Zealand for more than 183 days in any 12-month period or have a permanent place of abode in the country.
    • Non-residents are taxed only on their New Zealand-sourced income.
  • Tax Rates (as of 2023):
    • Up to NZD 14,000: 10.5%
    • NZD 14,001 to NZD 48,000: 17.5%
    • NZD 48,001 to NZD 70,000: 30%
    • NZD 70,001 to NZD 180,000: 33%
    • Over NZD 180,000: 39%
  • No Tax-Free Threshold: Unlike some countries, New Zealand does not have a tax-free income threshold. All income is taxed from the first dollar earned.

b. IRD Number

  • To work in Auckland, you must have an IRD (Inland Revenue Department) number, which is your tax identification number.
  • How to Apply:
    1. Complete the IRD number application form (IR595) online or in person.
    2. Provide proof of identity (e.g., passport, visa, or New Zealand driverโ€™s license).
    3. Submit the form to Inland Revenue or through a local PostShop.
    4. Processing time: Typically 8-10 working days.
  • Without an IRD number, your employer will deduct tax at the no-declaration rate of 45%, which is significantly higher.

c. PAYE (Pay As You Earn)

  • Most employees in Auckland are taxed under the PAYE system, where your employer deducts income tax and ACC (Accident Compensation Corporation) levies directly from your salary.
  • ACC Levy: This is a mandatory insurance levy for workplace and non-workplace injuries. The rate is approximately 1.53% of your income, capped at a maximum income threshold.

d. Filing Taxes

  • For most employees, taxes are automatically deducted, and you donโ€™t need to file a tax return unless:
    • You have additional income (e.g., rental income, investments).
    • You are self-employed or a contractor.
    • You want to claim tax credits (e.g., for donations or working for families tax credits).
  • Tax returns can be filed online through the myIR portal on the Inland Revenue website.

e. GST (Goods and Services Tax)

  • GST is a 15% tax applied to most goods and services in New Zealand, including in Auckland.
  • If you are self-employed or running a business, you must register for GST if your annual turnover exceeds NZD 60,000.

f. Tax Treaties

  • New Zealand has tax treaties with many countries to avoid double taxation. If you are a foreign worker, check if your home country has a treaty with New Zealand to reduce your tax burden.

2. KiwiSaver

KiwiSaver is New Zealandโ€™s voluntary, government-supported retirement savings scheme. It is widely used by employees in Auckland and offers significant benefits for long-term savings. Hereโ€™s what you need to know:

a. How KiwiSaver Works

  • KiwiSaver is a workplace-based savings scheme where contributions are deducted from your salary and invested in a fund of your choice.
  • Contributions are made by:
    • You (the employee): A percentage of your gross salary.
    • Your employer: A mandatory contribution.
    • The government: An annual contribution (if eligible).

b. Contribution Rates

  • Employee Contributions: You can choose to contribute 3%, 4%, 6%, 8%, or 10% of your gross salary. The default rate is 3%.
  • Employer Contributions: Employers are required to contribute at least 3% of your gross salary (less tax).
  • Government Contribution: The government contributes up to NZD 521.43 per year if you contribute at least NZD 1,042.86 annually.

c. Joining KiwiSaver

  • You are automatically enrolled in KiwiSaver if you are a new employee aged 18-65 and meet the eligibility criteria. However, you can opt out within the first 8 weeks.
  • If you are not automatically enrolled, you can join by:
    1. Signing up through your employer.
    2. Applying directly with a KiwiSaver provider.
    3. Registering through Inland Revenue.

d. KiwiSaver Providers

  • KiwiSaver funds are managed by private providers, such as banks and investment companies. Popular providers in Auckland include:
    • ANZ
    • ASB
    • Westpac
    • Fisher Funds
    • Simplicity
  • Funds range from conservative (low risk, lower returns) to growth (higher risk, higher returns). Choose a fund based on your risk tolerance and retirement goals.

e. Withdrawals

  • KiwiSaver is primarily for retirement, and you can access your funds when you:
    • Turn 65 years old.
    • Have been a KiwiSaver member for at least 5 years (if you joined after age 60).
  • Early withdrawals are allowed in specific circumstances:
    • First Home Purchase: You can withdraw most of your KiwiSaver savings to buy your first home.
    • Significant Financial Hardship: Requires proof and approval.
    • Permanent Emigration: If you leave New Zealand permanently (except to Australia), you can withdraw your funds after 1 year.
    • Serious Illness: Requires medical evidence.

f. Costs

  • KiwiSaver funds charge fees, which vary by provider and fund type. These include:
    • Management Fees: Typically 0.2% to 1% of your balance annually.
    • Administration Fees: A flat monthly fee (e.g., NZD 1-3).
  • Compare fees and performance when choosing a provider.

g. Tax on KiwiSaver

  • KiwiSaver earnings are taxed under the PIE (Portfolio Investment Entity) tax regime, which is based on your Prescribed Investor Rate (PIR):
    • 10.5%: If your income is up to NZD 14,000.
    • 17.5%: If your income is between NZD 14,001 and NZD 48,000.
    • 28%: If your income is over NZD 48,000.

3. Practical Tips and Local Considerations

  • Understand Your Tax Code: Ensure your employer uses the correct tax code to avoid overpaying or underpaying taxes. For example:
    • M: Main income.
    • ME: Main income with no student loan.
    • S: Secondary income.
  • Track Your KiwiSaver Contributions: Use the myIR portal to monitor your contributions and ensure your employer is making the correct payments.
  • Seek Financial Advice: If youโ€™re unsure about which KiwiSaver fund to choose or how to optimize your tax situation, consult a financial advisor.
  • Plan for First Home Withdrawal: If youโ€™re planning to buy a home in Auckland, start contributing to KiwiSaver early to maximize your savings.
  • Stay Updated: Tax rates and KiwiSaver rules can change. Regularly check the Inland Revenue and KiwiSaver provider websites for updates.

By understanding these systems, youโ€™ll be well-prepared to manage your finances and retirement savings while living and working in Auckland. Let me know if you need further clarification or assistance!