"The acknowledgement from the Commissioner of Inland Revenue that long term investment properties and holiday homes would not normally constitute a permanent place of abode, but need to be considered with all other circumstances, is reassuring."
The TRA decision arose from the case of an expatriate New Zealander fulfilling security contracts offshore, whose children and ex-wife continued to live in a house in which he had an interest.
His circumstances were "certainly ... more of an exceptional set of circumstances than a common sense set of circumstances."
However, KPMG tax director Rebecca Armour warned the new determination was not cut and dried.
"Inland Revenue's position for any specific person must be predictable at the time decisions need to be made (about tax residency)," said Armour. "In this respect, the Inland Revenue operational guidance is unhelpful."
Even if they had already received confirmation of their tax residency status, expatriate New Zealanders should review their positions, especially if they were relying on the fact they had been out of New Zealand for more than three years to establish non-resident status for tax purposes.
"No comfort has been provided that their previously approved positions will not be challenged," said Armour.
Employers should also be alive to the potential for offshore staff to run into tax residency problems, and the potential obligation to deduct PAYE, ACC and fringe benefit tax on their behalf.
"The tax costs associated with an employee will impact on the cost of remuneration, the pricing of contracts, and how competitive New Zealand tenders are for overseas projects," KPMG said.