Q I am a Kiwi who has been been living in Dubai for more than 10 years now. I am non-tax resident in New Zealand. I joined KiwiSaver while I was still in NZ. Since then I have been making voluntary ad hoc contributions as it seems like a good investment. The question I have is, given I am a non-tax resident, would making any contributions to my KiwiSaver plan put at risk my non-tax residency status? If I do end up going back to NZ one day, would IRD come knocking on my door asking for any back tax on income earned while overseas? I have asked my provider and my accountant this question, both said in loose language that it would not impact my non-tax residency, I would however like a definitive answer please.
A You ask a good question. There can be quite a difference in the way some countries treat their citizens living abroad. For example, if you are a US citizen or resident alien, the rules for filing income, estate, and gift tax returns and paying estimated tax are generally the same whether you are in the United States or abroad. New Zealand takes a different approach. Your income tax obligations change when you stop being a New Zealand tax resident and become a non-resident taxpayer. Under the New Zealand tax system, non-residents are taxed only on their New Zealand-sourced income. To cease to be a New Zealand tax resident a person must be absent from New Zealand for at least 325 days in any rolling 12-month period, and also have to cease to have a permanent place of abode in New Zealand.
With regard to your ongoing KiwiSaver contributions, I asked Inland Revenue to comment on your situation. A spokesperson provided this answer: "Inland Revenue believes that merely continuing to make investments from overseas, in to a KiwiSaver, would not be enough to make a person a New Zealand tax resident. A person who has been living overseas for over 10 years but makes payments to their KiwiSaver account is very unlikely to have the necessary 'permanent place of abode' here for them to be considered a New Zealand tax resident.
"To have a permanent place of abode would generally require the person to return to New Zealand for reasonable periods of time, to have a dwelling to live in here plus other ties such as close family and social connections, employment, business or economic interests. If your reader wants to enquire further they can contact Inland Revenue, preferably through the myIR Secure Online Services system, or refer to the guidelines on the IRD website.
"And we think it is also worth mentioning that overseas Kiwis should tell IR and their KiwiSaver provider they are overseas and provide contact details. It would also be worth them checking they are using the correct prescribed investor rate (PIR). Inland Revenue's website has details on PIR rates."
