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Topic # 62214 1-Jun-2010 14:33 Send private message

Hey everyone

I'm currently in Melbourne, but returning to Wellington in early July.  When I gave notice yesterday I was made an interesting offer....to continue my job in some regard, but to be based in Wellington and work remotely.  

I'm not adverse to the idea, but I am curious as to how the personal income tax would work in this situation.  I've read the info on the IRD website, and called them as well.  But with a 45 minute wait and calling from a mobile in Oz, I couldn't wait around to get through to them.  I emailed them as well so will see what they say.  

In the meantime I thought I'd check and see if anyone on GZ has any experience with an arrangement like I've been offered.  I understand NZ and Oz have a Double Tax Agreement, meaning I think I would only be taxed once...however I'm unsure which country is responsible for the taxation, etc.

If anyone can provide info based on their experience I'd appreciate it.

Cheers
G. 

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  Reply # 337048 1-Jun-2010 14:36 Send private message

If the agreement is like the one to the U.S. you would pay taxes in both countries. However what you pay in Australia would count towards what you have to pay here, so you may end up not paying anything here... But this you know already.

So yes, get a tax lawyer, accountant or call the IRD.






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  Reply # 337051 1-Jun-2010 14:37 Send private message

Oh I see what you're saying, so if the Australian tax ended up being 75% of what I would normally pay being employed in NZ, I would pay the extra 25% in NZ....?

(just pulling those figures out of the air for the example)

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  Reply # 337056 1-Jun-2010 14:49 Send private message

My understanding is that you have to pay tax to the country you reside in. However residing in one country and technically working in another is a new one.

Whatever works out, NZ & Aus have pretty robust agreements so I wouldnt think you'd get screwed.

I would think residing in NZ you would pay all tax to NZ.... Your not working IN Aus, just for a Aus employer..

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  Reply # 337057 1-Jun-2010 14:52 Send private message

I was in a similar situation with a UK company.
If you work most of your tax year in NZ and there's a dual-tax agreement (or something, can't remember the exact name for it) then you ONLY pay NZ tax.
Depending on what you will be doing, you may also not have to charge GST to your Oz employer, some things like IT development for overseas are rated as 0% GST, again this may only apply to certain countries.  So I would invoice the UK company with 0% GST and then pay all my taxes and ACC here in NZ to the IRD.

If I was you, like I did, I would talk to an accountant. 



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  Reply # 337060 1-Jun-2010 15:01 Send private message

Thanks, I'm just trying to get some initial understanding of the DTA before I go the whole hog and start talking to accountants, etc. My employer is yet to come to me with an official offer/package yet so once that happens I'll go further with it.

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  Reply # 337066 1-Jun-2010 15:17 Send private message

Hi gehenna

In New Zealand we pay tax on our worldwide income when you become a New Zealand Tax Resident. You become a New Zealand Tax Resident after being in New Zealand for 183 days in a 365 day period ...this is just one of the tests you also have a place of abode test i.e. you live here and have bank accounts etc.

New Zealand has a double tax agreement with Australia which does allow us to offset our New Zealand tax liability against the tax paid in Australia excluding your super payments (this is assuming that you are an employee and not a contractor ...this is another test that needs to be looked at for this as it has ramifications in relation to GST and claiming expenses because as an employee you are limited to very few deductions) but if you have paid more tax in Australia than you are liable for here in New Zealand you will not get it refunded.

I hope that this helps.

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  Reply # 337069 1-Jun-2010 15:20 Send private message

I would have thought you are an exporter. Don't see why you would pay any aussie tax at all. You do all your income generating work here.

But, i'm not an expert , best to check with one.

Let us know what you find :)



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  Reply # 337072 1-Jun-2010 15:32 Send private message

dipper: 
I hope that this helps.


Clear as mud thanks :)

 

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  Reply # 337076 1-Jun-2010 15:37 Send private message

You may be classified as an employee still; the rules to cover this look at the following:

§  The intention of the parties. Is there a written contract, for example?

§  The control test - does the employer direct the work to be done?

§  The fundamental test - is the employee in business on his/her own account? For example, does the worker provide his own equipment, hire his own staff, take some financial risk, have the ability to make a profit from good management?

§  The integration test - is the employee "his own man", or is he part of the organisation?

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  Reply # 337111 1-Jun-2010 17:37 Send private message

wreck90: I would have thought you are an exporter. Don't see why you would pay any aussie tax at all. You do all your income generating work here.

But, i'm not an expert , best to check with one.

Let us know what you find :)


Kinda of agree here.. Those agreements seem to be based on living abroad. I think all the responsibility lies with your employer to make sure they abide by the tax rules. 

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  Reply # 338424 5-Jun-2010 00:46 Send private message

I was in the same situation, my employer in Perth wanted me to work remotely once I moved to NZ. After speaking to an accountant in NZ the best solution was to act as a sole trader and just pay income tax in NZ, otherwise you have to first pay income tax in Australia and then if the taxes are higher in NZ pay the difference here (although with the upcoming tax rate changes in October this'll no longer be the case). I'd strongly recommend you speak to a NZ accountant, acting as a sole trader is very straight forward, you just need to register for GST and get a decent accounting package - I'd recommend Xero, it has great multi-currency support and handles your currency gains & losses with ease. I've been doing this for 18 months and it's pretty easy, you just have to be controlled about saving money for your tax payments!

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Reply # 338576 5-Jun-2010 17:59

Be careful.I believe that the amount of tax that you pay in Oz and then can claim as a tax credit on your NZ tax return is capped.I think it is capped at about $8000.

For example if you pay $NZD10 000 tax in OZ. Then your tax bill is $NZD10 000 after doing return in NZ including OZ earnings, you will then have to pay NZ IRD $2000 as only $8000 can be credited.
I'm only saying this is what happened to me when I contracted in OZ while still being based in NZ.
Or my accountant is an idiot.Either way I felt ripped off.

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