Your guide to paying inheritance tax in New Zealand
Living abroad means that your family is spread across the globe. It’s not surprising that some expats will eventually have to pay international taxes, even if they don’t live in the same country as their relatives.
If you’re dealing with taxes in New Zealand, you’re in luck. It was recently ranked second in the developed world for competitiveness and first for personal taxes, according to the US Tax Foundation rankings. Use this guide to help you navigate New Zealand’s inheritance and gift tax laws.
What is inheritance tax in New Zealand?
Strictly speaking, there’s no inheritance tax in New Zealand. New Zealand’s tax system is known for being relatively simple and predictable, with minimal loopholes. If you’re residing in New Zealand or dealing with the tax system, understand that you won’t be responsible for the following types of tax:
- inheritance tax
- social security tax
- general capital gains tax
- payroll tax
- Healthcare tax
(Source 21 Dec 2017)
Who has to pay inheritance tax in New Zealand?
Because of New Zealand’s simplified tax code, there’s no inheritance tax in New Zealand. However, if you’ve inherited an estate in New Zealand but you’re a resident of a different country, you may still be subject to your home country’s taxes.
(Source 21 Dec 2017)
What tasks should be completed for an inheritance in New Zealand?
If you’re inheriting an estate in New Zealand, the following tasks must be completed:
- The executor appointed in the will applies to the court to get approval for dealing with the property (a probate). If there’s no will the court will appoint a close relative as the administrator of the property, which means they have the right to manage the estate.
- The executor or administrator prepares the property to be distributed - they identify all assets, deal with any claims against the estate, like a relative left out of the will, as well as pay any outstanding debts.
- Distribute the property to the people entitled to it as set out in the will or according to the rules of intestacy.
(Source 21 Dec 2017)
Ownership of the property in New Zealand
When dealing with inheritance, it’s always optimal to have a will to serve as the guide for how to manage all remaining assets and property. However, sometimes the best-laid plans don’t work out. When an individual dies in New Zealand without a will, their property will be divided by local laws of succession. The basic order of distribution is:
- the spouse or partner
- children (regardless of whether the parents were married, includes minors)
- parents
- siblings
- grandparents
- uncles and aunts
The assets are divided differently among the surviving relatives according to the table below:
| Person legally entitled to the property in New Zealand | Share of the estate |
|---|---|
| Spouse and surviving parents, no children | The spouse or partner gets all personal belongings plus $155,000 (with interest) and 2/3 of anything left over, parents receive the remaining 1/3 |
| No spouse, no children, but surviving parents | 100% of estate’s value split equally, or if only one parent is alive, they receive the entire estate’s value |
| Children, no spouse | 100% of estate’s value, split equally, or if any have died, their children receive their share |
| Children and spouse | All personal belongings and 1/3 of estate value to spouse, 2/3 of estate split equally amongst remaining children |
| No spouse, no parents, but remaining siblings | 100% of estate’s value split equally, or if any of them have died, their children will receive their intended share |
| Surviving grandparents or uncles and aunts, only | ½ the estate for mother’s family and ½ the estate for father’s side, and if any uncle or aunt has died, his or her children receive their shares |
| None of the above | Everything may be passed onto the government, and dependents or anyone who could reasonably expect to benefit from the property can apply to the New Zealand Treasury, which may pay out a portion of it to them if they deem it advisable |
(Source 1 Source 2 21 Dec 2017)
What’s included in an estate in New Zealand?
In New Zealand, a deceased person’s estate refers to their property. Property can include personal possessions like clothing, jewelry, furniture, and other treasured items and heirlooms. It can also include money in bank accounts, insurance policy proceeds, shares in companies, or homes and other real property that they own. The deceased person’s estate won’t include any jointly-owned property because that property will go to the co-owner when one of them dies.
(Source 21 Dec 2017)
How do I avoid double taxation in New Zealand?
The New Zealand government has made an effort to minimise the possibility of double taxation. If you’re a foreigner that may be subject to tax in other countries, New Zealand provides credits for any tax paid on income that’s also subject to New Zealand tax. Additionally, there are 39 trading and investment partner countries that have formed agreements with New Zealand to minimise double taxation.
(Source 21 Dec 2017)
What constitutes a “gift duty” or “gift tax” in New Zealand?
A gift, rather than an inheritance of property, is an item specifically handed on to an individual. Before 2011, gift recipients were required to pay a tax on what they received, known as a ‘gift duty.’ In New Zealand, gift duties were charged at progressive rates, so individuals giving more than NZ$ 27,000 per year were required to pay the gift duty. Gifts of NZ$12,000 or more per year were also required to be recorded with the New Zealand government, even if they weren’t liable for gift duty.
However, in October 2011, some changes were made to the tax law, including the annulment of the individual gift duty. From 2011 onward, gifts are no longer liable for gift duty, and gift recipients don’t need to file any documents with the government.
(Source 1 Source 2 21 Dec 2017)
How do I pay taxes in New Zealand? Can I pay online?
While you don’t have to pay inheritance tax in New Zealand, you may be subject to other taxes. The New Zealand government makes it easy for you to pay online. You can pay through the New Zealand Inland Revenue Department, using a debit card, a credit card, or through online banking. If you’re paying from overseas, they offer links to several money transfer services.
If you’re paying from abroad, be careful. You may be subject to inordinately high exchange rates, foreign transaction fees, and other hidden charges. Even though the New Zealand system is relatively simple, if you’re not careful you could end up spending too much if you transfer internationally with your bank or pay with a card in another currency. That’s why you should consider using Wise to pay your foreign bills.
Wise always offers the mid-market exchange rate - the one you’d find on Google - so you won’t have to worry about artificially high exchange rates. They also only charge a small upfront fee, meaning you’ll save a fair bit of money when transferring between international bank accounts.
You can also take advantage of the new Wise borderless multi-currency accounts. They allow you to hold and manage your money in 28 different currencies, including the New Zealand dollar. There’s also a debit card attached to the account for convenience, which means you can access your money with ease wherever you are.
Inheritance laws can be confusing, however The New Zealand government has made an effort in recent years to simplify the system. That’s why you won’t have to pay tax on what you inherit in New Zealand, whether you’re a citizen, an expat, or a temporary resident.
It’s still a good idea to understand your rights and know which legal bodies you can consult if you have questions. Also, remember that you may be responsible for taxes in your home country after inheriting something from New Zealand. Good luck with your taxes!
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