A cautionary word of advice for people leaving New Zealand – be sure to leave nothing that binds you to the country country for tax purposes.

That house you couldn’t sell and had to rent out, or the family you still send money back to, could possibly make you a resident for tax purposes.

With a little over 4 million residents, Middle Earth is keen to raise as much precious revenue as it can, be sure that none of it comes from you.

Here’s the story:

Kiwis with rental property and strong family links back home are being warned of a court decision that could have tax implications for them.

Rebecca Armour, head of KPMG’s international expatriate services tax team, said a recent ruling from New Zealand’s Taxation Review Authority had found that a man who had been out of the country for 10 years was still considered a resident for tax purposes.

The case involved a former soldier who left New Zealand permanently in 2003 to work as a security consultant.

He had separated from his wife a decade earlier and later divorced, but continued to visit and financially support his children in New Zealand.

The authority has ruled that the man’s family links and some property investments he kept in New Zealand counted against him.

He is now liable for the outstanding tax, 20 per cent penalties and “use of money” interest, in addition to the tax paid in the countries he worked in.

So whatever happened to New Zealand’s international double taxation agreements?

To escape the grasp of the Kiwi taxman you will need to be out of the country for 325 days in a 12 month period

In the security consultant’s case, one of the houses he jointly owned with his ex-wife was rented out on a periodic rather than a fixed term basis.

The authority said that theoretically, the house was available for the consultant to live in at short notice, even though he had never lived there…

The ruling is likely to have an effect on thousands of expat Kiwis who rent out property and still have family ties back to New Zealand.

If you think this may affect you, read the full article here. We also recommend that you also seek professional financial advice.

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