New Zealand

KiwiSaver scheme

KiwiSaver is a voluntary workplace-based superannuation savings scheme. It was introduced from 1 July 2007. The KiwiSaver scheme is voluntary for all employees over the age of 18, both full and part-time. All New Zealand residents over the eligible age are able to join KiwiSaver, but membership is not compulsory.

The minimum rate for both member and employer contributions is 3%.

Employers must contribute to KiwiSaver for those of their employees who are KiwiSaver members.

Employers must calculate employer superannuation contribution tax (ESCT) at a rate equivalent to an employee’s annual salary and wage plus the employer’s annual gross contribution.

Employer superannuation contribution tax (ESCT)

Employer contributions to approved superannuation funds (such as KiwiSaver) are subject to ESCT, formally known as ‘specified superannuation contribution withholding tax’. 

ESCT rates are based on the employee’s annual salary and wage, plus the employer’s gross contributions. Additionally, the method for determining the employee’s annual salary and wage is dependent on how long the employee has worked for the employer. 

Contributions to other funds may be subject to fringe benefit tax (FBT).

Accident compensation levies

A statutory-based scheme of accident insurance is funded in part by premiums payable by employers and employees.

Premiums paid by employers (including the self-employed) fund insurance for work-related accidents. Employers are liable to pay a residual claims levy and an employer levy. Premiums are payable at a rate set for the industrial category on leviable earnings up to these amounts.

Non-work accident insurance is funded by premiums paid by employees and the self-employed. 

Fringe benefits tax (FBT)

FBT is payable by employers when a fringe benefit (non-cash benefit) is provided to an employee or an associated person of the employee as a result of their employment relationship with the employer. The value of fringe benefits provided is not included in the gross income of employees.

The FBT quarters end with the last day of June, September, December, and March. Returns are due within 20 days of the end of the relevant quarter, except for the fourth quarter return (March), which is due 31 May. Any employer who has provided a fringe benefit is required to file a return setting out the fringe benefits received or enjoyed by employees in the quarter and a calculation of the amount of FBT payable on those benefits. 

Employers with pay-as-you-earn (PAYE) and employer superannuation contribution tax deductions not exceeding NZD 1 million per annum for the previous tax year can pay FBT on an annual basis, or if the employer was not an employer in the previous tax year. An income year basis is also available for a company that provides fringe benefits to shareholder-employees.

FBT rates

Changes to income tax rate brackets, which apply from 30 July 2024, will have consequential impacts on the FBT thresholds set out above. However, these changes are proposed to take effect from 1 April 2025.

Employers can pay FBT at either a single rate of 63.93% or use an alternate rate method (whereby benefits are attributed to employees). If the 63.93% single rate is used in all of the first three quarters, the employer may use an alternate rate calculation in the fourth quarter or continue to pay FBT at 63.93%. 

There are currently three alternate rate methods: the full alternate rate, the short-form alternate rate, and the new pooled alternate rate.

Under the full alternate rate method, the applicable FBT rate depends on the net remuneration (including fringe benefits) paid to the employee. For employees who received attributed fringe benefits in any quarter during the year, the employer must calculate the employee’s fringe benefit inclusive of cash remuneration. The attribution calculation, which is performed in the fourth quarter, treats the fringe benefit as if it was paid in cash and calculates FBT as the notional increase in income tax that would otherwise have arisen.

The short-form alternate rate applies at a rate of 49.25% to all non-attributed benefits and a rate of 63.93% to all attributed benefits. In general, a benefit is attributable to an individual if it is principally assigned to, used, or available for use by that employee. However, there are other specific attribution rules to consider, such as the attribution rules for unclassified benefits.

The new pooled alternate rate calculation method has been introduced effective for the FBT year beginning 1 April 2021. The calculation of FBT to pay under this method is determined as follows.

• Attribute benefits are returned at:
  • 49.25% for employees who receive less than NZD 160,000 in gross cash pay and less than NZD 13,400 in attributed benefits.
  • 49.25% for employees who receive more than NZD 160,000 in gross cash pay or more that NZD 13,400 in attributed benefits but have 'all-inclusive pay' of under NZD 129,681.
  • 63.93% for all other employees.
• Non-attributed benefits are returned at 49.25% (or 63.93% for shareholder employees).

A de minimis exemption may apply to exempt unclassified benefits from FBT. The thresholds for exempting unclassified benefits under the de minimis exemption is two-fold: 

• NZD 300 per employee per quarter. 
• NZD 22,500 per employer per annum.

Where the NZD 22,500 threshold is breached, FBT must be returned on all unclassified benefits. Where only the NZD 300 threshold is breached, FBT needs to be returned only on those amounts. 

Examples of benefits subject to FBT are as follows:

• Motor vehicles available for private use.
• Employment-related low interest / interest-free loans.
• Employer contributions to medical insurance.
• Employer contributions to employee superannuation funds.
• Employer contributions to certain superannuation schemes (including foreign schemes).
• Free, subsidised or discounted goods and services.
• Unclassified fringe benefits.

Self-powered and low-powered vehicles, vehicle-share services for self-powered and low-powered vehicles, and public transport are exempt from FBT.

FBT also applies to benefits received by an employee from a third party where there is a special arrangement between the employer and the third party. Generally, FBT does not apply to discounted goods or services received by an employee from a third party if the price paid by the employee is not less than the price that would be charged to other groups of people.

Benefits that are not subject to FBT include specified superannuation contributions (which are separately taxed), the provision of accommodation by an employer (which is subject to PAYE), and the use of a business tool such as a mobile telephone or laptop (provided the tool is used primarily for business purposes and the cost of the tool does not exceed NZD 5,000, GST inclusive). 

FBT is generally a tax-deductible expense. The effective FBT cost is intended to align with the receiving employee’s marginal tax rate.

Consumption taxes

Goods and services tax (GST)

A form of value-added tax (VAT), GST applies to most supplies of goods and services. The narrow category of exempt supplies includes financial services and residential accommodation. The rate applied to taxable supplies is 15% or 0%. The 0% rate applies to only a few supplies, including exports.

A ‘reverse charge’ mechanism requires the self-assessment of GST on the value of services imported by some GST registered persons. Financial services supplied to other registered businesses can be zero-rated under the GST business-to-business (B2B) regime.

Compulsory zero-rating (GST at 0%) applies to any supply involving land between two GST-registered parties if:

• the purchaser acquires the land with the intention of using it to make taxable supplies, and
• the land is not intended to be used as a principal place of residence for either the purchaser or an associate.

From 1 April 2024, existing GST rules for electronic marketplaces (that currently apply to remote services and low-value imported goods) were extended to taxable accommodation, ride-sharing, and food and beverage delivery services that are provided through electronic marketplaces. This means that electronic marketplace operators facilitating these services via their platform are required to collect and return GST at the standard rate of 15% when they are performed, provided, or received in New Zealand.

Property taxes

Local authorities levy tax known as 'rates' on land within their territorial boundaries. Rates are levied on properties based on the properties' rateable value.

Residential land withholding tax (RLWT)

RLWT applies to the sale of residential land in New Zealand by an 'offshore RLWT person'. RLWT applies in relation to land that was:

• sold within five years for property acquired on or after 29 March 2018 and sold before 1 July 2024, or
• sold within two years of acquisition for property sold on or after 1 July 2024.

An RLWT offshore person includes all non-New Zealand citizens and non-permanent residents. It also includes a New Zealand citizen who is living overseas if they have been overseas for the last three years. A holder of a New Zealand residence class visa may be an offshore person if they are outside New Zealand and have not been in New Zealand within the last 12 or more months continuously. New Zealand trusts and companies may also be 'offshore persons' if there are significant offshore interests in them.

The amount of RLWT to be deducted is the lesser of:

• 10% of the current purchase price
• the gain on sale x the RLWT rate (39% for taxpayers that are not companies, such as individuals, and companies acting as trustees of a trust), or
• the current purchase price less outstanding local authority rates or less security discharged amounts, depending on which party is withholding the tax.

Administrative property tax rules

Buyers and sellers of property must provide their Inland Revenue number at the time of property transfer. Those who are tax residents in another country will also have to provide their Tax Identification Number (TIN) from their home jurisdiction. There is an exemption for New Zealand residents' main home.

Offshore persons must have a New Zealand bank account in order to get a New Zealand Inland Revenue number. This also applies to New Zealanders who have been out of the country for three or more years.

Purchase price allocation

Special purchase price allocation rules apply to sale and purchase agreements entered into from 1 July 2021. These rules govern the way parties to a transaction must allocate a transaction price across different classes of assets. The rules cover the situation where the transaction parties agree to an allocation, and also provide a default mechanism if no agreement is reached. In both instances, the allocation must ascribe relative market values to the assets, and the Commissioner of Inland Revenue may require the parties to adopt a different allocation if she considers that the allocation does not reflect market value.

Where the vendor and purchaser have agreed and documented a purchase price allocation before filing their respective income tax returns incorporating their tax position in relation to the transaction, the Income Tax Act 2007 now states that the parties must file in accordance with the agreed allocation. Agreement between the parties made within this timeframe will override any allocation made by the parties under the mechanisms outlined below.

Where the vendor and purchaser have not agreed to an allocation before filing their tax position in relevant returns, the Income Tax Act contains three mechanisms to give an allocation for the parties to use. These mechanisms are: (i) vendor allocation, (ii) purchaser allocation, or (iii) no allocation. If no allocation is made by the parties within six months of the change of ownership in the assets occurring, the Commissioner may allocate the purchase price across the assets at what she considers to be ’market value‘, and the vendor and the purchaser are treated as disposing and acquiring the property for this deemed market value.

Until an allocation is made by one of the parties (and notified to the Commissioner), or by the Commissioner, the purchaser will be treated as having no cost base in the assets acquired. Deductions disallowed as a result of this rule are intended to be deferred rather than denied.

Luxury and excise taxes

Excise duty is levied, in addition to GST, on alcoholic beverages (e.g. wines, beers, spirits), tobacco products, and certain fuels (e.g. compressed natural gas, gasoline) under the Customs and Excise Act 2018. The excise duties are levied item-by-item at rates that vary considerably.

In addition, a duty is imposed on all gaming machine operators for the payment of gaming duty on the proceeds of a gaming machine under the Gaming Duties Act 1971.