Opening a Bank Account & Managing Your Taxes in New Zealand

How to Open a Bank Account in New Zealand

Wondering how to open a bank account in New Zealand as a non-resident? You will be glad to know the process is fairly simple. You can set up a New Zealand bank account from your own country before you move. In fact, this is even advised, since it may cost you less to transfer the funds from overseas to your new account, than if you do it once in New Zealand. Just keep in mind that visiting a branch as soon as you arrive in the country is usually necessary to have full use of your account.

As a foreigner, you can open a bank account in New Zealand if you have a visa that allows you to stay in the country for some time—this could be a work, residence, or student visa.

EFTPOS Cards and Debit Cards: What is the Difference?

When dealing with banking in New Zealand, you will soon come across the term Electronic Funds Transfer at Point of Sale (EFTPOS) cards, which are commonly offered as part of your account. These cards are similar to debit cards, as they both use funds from your existing bank account. However, EFTPOS is a payment system native to Australia and New Zealand, which means you would have difficulty using it outside of these countries.

Another difference is that while some debit cards allow you to pay online, EFTPOS cards do not let you do so. It does not have a contactless option either. The advantage of these cards is that they are free of charge. If you plan on using a Visa or MasterCard credit or debit card, these usually have a one-time cost of around 10 NZD (6,50 USD). Still, if you choose a bank account with an EFTPOS card instead of a debit card, make sure you only plan on using it in New Zealand or Australia, and that you have no need to use it for online transactions.

Requirements to Open a Bank Account as a Non-Resident

To open a bank account in New Zealand, you will need an ID and a permanent address in New Zealand. You can open a bank account without an address in the country if you are not in New Zealand yet, but you would be asked for one as soon as you are there in order to activate your account.

As a non-resident, opening an account in New Zealand would require:

• An identity document: a New Zealand ID or your passport;
• Proof of address: this could be your current address overseas, but you will need to provide a permanent address in New Zealand;
• A New Zealand IRD number: if you do not have one yet, you can use your tax number or tax declaration from your country of origin;
• Proof of your visa: this could be a work, residence, or student visa.

Opening an Account from Overseas

It is recommended that you open a bank account while still outside New Zealand, as this would make the process of getting your first paycheck easier. You may be able to use your account for bank transfers and other payments while overseas, depending on the conditions of your account.

If you choose to open your account before entering New Zealand, give it at least ten days for your account request to be processed.

Once you are in the country, you would need to activate your account by visiting a branch and verifying your identity and permanent address. Each bank might have its own requirements, such as a migrant banking application form, so check with your preferred bank individually.

Best Banks and Bank Accounts for Expats in New Zealand

There are many options for banks in New Zealand, with adequate offers for expats. The main ones are ANZ, ASB Bank, BNZ Bank, Kiwibank, and Westpac. These offer some of the best online banking options in New Zealand, as well as no-fee bank accounts.

You will find no-fee banking options, but the bank may still charge 15 NZD (10 USD) for transferring your money from your current account abroad to your new account.

If you are looking for alternatives, you will also find credit unions and building societies as adequate banking options. Although these are not traditional banks, they are supervised by the Reserve Bank of New Zealand, which is where all bank institutions should be registered.

International Banks in New Zealand

You may also opt for international banks in New Zealand. Although many of the popular banks in the country are national, you may still find the following international or foreign banks in New Zealand:

• Banque Nationale de Paris
• Barclays
• Citibank, N.A.
• Deutsche Bank AG
• The Bank of Tokyo-Mitsubishi UFJ

For a complete list of all the banks registered in New Zealand, refer to the Reserve Bank of New Zealand.

Bank Fees and Minimum Deposits

There are usually some fees which you will not be able to avoid.

• With a New Zealand account, you will typically pay fees overseas for using ATMs and EFTPOS facilities.
• You may also pay a one-time fee for the alteration of services, such as setting up automatic payments.
• You may be charged as well if the bank cannot process one of your cheques or electronic payments.

Minimum deposits will typically vary between banking products and can go anywhere from 100 to 1,000 NZD (66 to 660 USD). However, most banking options have no minimum deposit.

What is the Tax System in New Zealand?

Whether you plan on having an accountant do your taxes or doing them yourself, it is always best to know beforehand what the tax system in New Zealand is like. This could not only speed up the process of having all your formalities in order but also help you avoid wrong taxations and other mistakes.

The New Zealand Tax System Explained

The tax system in New Zealand is quite simple compared to many countries. It is mostly based on personal income tax, and Goods and Services Tax (GST). New Zealand does not have inheritance taxes, local or state taxes, payroll taxes (taxes on salary), social security taxes, general capital gains (except for specific investments), or even healthcare taxes (except for a low levy for the ACC).

In general, you do not have to file a tax return every year in New Zealand, and in case you do, the Inland Revenue Department (IRD) will notify you. New arrivals will typically need to file a return in their first year. If you earn income from overseas or you arrive in New Zealand in the middle of the tax year, you will also need to file a personal tax return.

The tax year starts on 1 April and ends on 31 March. The tax rates are progressive, which means the more you earn, the more taxes you pay, and they are typically retained at the source. You can read more on New Zealand taxes on the Inland Revenue website.

IRD: New Zealand’s Tax Number and How to Apply

In order to pay taxes in New Zealand, you will need to get an IRD number, the tax number in New Zealand.

To apply for an IRD you will need to gather all the required documents, apply either online or in person, and wait to receive your IRD.

To apply for an IRD on a residence visa, you will need:

• Your passport details
• the Immigration Application Number (which can be found on the visa approval letter from Immigration New Zealand)

If you have a work visa, you will also need:

• The most recent tax number from overseas (if it applies)
• Proof of having a bank account in New Zealand, containing your name and account number

Once you have all the required documents with you, you can complete the online application form or the equivalent physical copy (form IR742) in New Zealand post offices (PostShops). Once your application is processed, you will receive your IRD number within two (by email or text) or twelve (by mail) days.

What Types of Taxes Are There in New Zealand?

Taxes in New Zealand apply to personal income, company income, social security and insurance levies, capital gains on foreign debt and equity investments, and sales and excise tax (GST), among others.

These are the different types of taxes in New Zealand, and their corresponding rates:

• Personal income: Progressive rate tax brackets apply (from 10.5 to 33%)
• Company income: Applies 28% rate
• Tax credits: “Working for Families” credits granted for low- and middle-income earners.
• Accident Compensation Corporation (ACC): Applies 1.39% rate up to a maximum of 126,286 NZD (83,780 USD) in earnings.
• Capital gains: Only applies to foreign debt and equity investments.
• Dividends: Imputation system is implemented to avoid double taxation.
• Tax on savings: Little tax relief on contributions to New Zealand retirement schemes, but saving is not compulsory. Taxes are paid at normal income levels at source, but distributions are tax free. No mortgage interest tax benefits, except for investment property.
• Fringe Benefit Tax (FBT): Paid by employers, goes up to 49.25%.
• Sales & Excise Tax: Goods and Services Tax (GST) of 15% applies to most things. Excise tax is paid on petrol, tobacco, alcohol.
• Other: Motorists pay a levy with their annual car registration. Employers pay insurance cover based on industry risk.

Income tax in New Zealand: Tax Codes and Tax Rates

Income in New Zealand is taxed on a pay-as-you-earn basis. If you do not have an IRD (New Zealand’s tax number), you will be paying tax at the highest rate.

Generally, taxes apply to the following types of income:

• Salary and wages.
• Compensation by the ACC for the loss of earnings.
• Some bonus payments, which are taxed differently depending on whether you receive them in a lump sum or in regular payments.
• Allowances, given to you by an employer, corresponding to traveling, accommodation or relocation costs.
• Payment for jobs done in New Zealand for overseas employers.

Two types of taxes are calculated based on your financial situation: tax codes and tax rates.

Tax Code

Your tax code is calculated based on the type and amount of income you receive, any secondary income, and whether or not you have student loans. It applies to every one of your income sources.

Tax codes tell your employer how much they need to deduct from your salary. You will need to inform your employer of your correct code, otherwise, you will be charged the higher non-declaration rate of 45%.

Tax Rate

Tax rates are the percentages of taxes you must pay. These are calculated based on your yearly income on a given tax year.

Since some of your income is already being taxed, such as your salary, you might not have to pay taxes at the end of the year, or you might even be refunded. If you are an employee using the right tax code for all of your income, you shouldn’t have to file a tax return at the end of the year. In case you do, the IRD will contact you to inform you.

What is the Income Tax Rate in New Zealand?

The rates on personal income are the following:

Taxes for Self-Employed in New Zealand

Self-employed workers in New Zealand are taxed as individuals. This includes contractors, freelancers, sole traders, and small business owners.

As a self-employed worker, you pay taxes on your net profit by filing an individual income return at the end of the tax year. For tax purposes, you will be considered a one-person business. Keep in mind that if you earn more than 60,000 NZD (39,800 USD) a year, you have to register for Goods and Services Taxes.

To manage your taxes, make sure you:

• Keep records
• Claim your expenses
• Charge GST if you needed

How to Complete Your Individual Tax Return as Self-Employed

To complete your individual tax return at the end of the year, you need to log in to myIR. Have your necessary documents at the ready. These are:

• Your IRD number
• Details of your income for the current year
• Details of expenses you wish to claim

If you have income from other sources, you may also need the following:

• details about any untaxed income such as from your business, rental property or overseas.
• property sale information (form IR833) for any income from a taxable property sale.
• details about any adjustments to your income if you received Working for Families payments or have a student loan.

This return should be sent by 7 July. Other timings could apply if you have a tax agent or are entitled to an extension of the time. If you submit your taxes late, you may have to pay a fine.

After you submit your return, you are informed by the IRD of any amount you may have to pay or receive. You’ll be glad to know any mistakes can be fixed after filing your return. You can also read the individual tax return guide (the IR3G) if you need assistance with your taxes.

Which Tax Rates Apply for Businesses?

Businesses are also taxed on their income, minus expenses. In the first year, this would pay taxes in a lump sum. The following years, taxes are paid in installments during the year, called the provisional tax. These payments tend to be combined with GST payments.

Here are the tax rates that apply to businesses:

• Self-employed: tax rate for individuals
• Most companies: 28%
• Non-profit organizations: 28%
• Trust and trustees (initial amount of money put into a trust): None
• Trust (any income the trust earns): 33%