The Inland Revenue Department is becoming more active in
monitoring when people leave New Zealand but maintain ties with
this country, Deloitte Dunedin associate tax director Phil
The outcome of a recent case involving a former soldier who
left New Zealand in 2003 to work in various jobs around the
world as a security consultant would provide momentum to the
The man, who had separated from his wife before he left,
continued to provide financial support to her and their
That included having his name on the title of a house his
wife purchased and meeting the mortgage payments.
He also had a financial interest in a rental property.
Returning to New Zealand from time to time, the man spent an
average of 42 days a year in the country.
Mr Stevenson said the key point for the Taxation Review
Authority to decide was whether the taxpayer had a permanent
place of abode in New Zealand.
A person was tax resident in New Zealand if they had a
''permanent place of abode'' in New Zealand, regardless of
the number of days spent here.
A New Zealand tax resident was liable to return their
worldwide income in New Zealand, although a credit could be
claimed for tax paid overseas.
A range of factors was considered to determine if a person
had a permanent place of abode in New Zealand.
Those included the availability of a dwelling, family ties,
economic factors and social ties, he said.
If a New Zealand tax resident was also a tax resident of a
country with which New Zealand had a double tax agreement,
there was a series of ''tie-breaker'' tests, to decide
whether a person was a tax resident of only one of those
In a recent draft interpretation statement, Inland Revenue
indicated a change in how those tests were interpreted, which
would result in more people being deemed to be a New Zealand
tax resident, Mr Stevenson said.
The court held the taxpayer had a permanent place of abode in
Particular weight was placed on the taxpayer being able to
ask his tenants to leave the rental property and move into it
- despite him never having lived in the property previously.
The court also held the taxpayer was liable for a 20%
shortfall penalty for an unacceptable tax position and the
taxpayer was also assessed for income tax for the years in
question, he said.
''This case demonstrates a person's links to New Zealand do
not need to be particularly strong for a person to have a
permanent place of abode in New Zealand.
"With people and capital being mobile, it is not unusual for
a person to have some investments in New Zealand, despite
living and working elsewhere.''
It was also not unusual for a person to have family ties in
Many people left New Zealand and retained residential
property in New Zealand or acquired rental properties while
they were away and still considered themselves to be
non-resident, Mr Stevenson said.
The case, and the recent draft interpretation statement
issued by Inland Revenue, meant they would need to reconsider
The main impact would be felt by taxpayers who lived and
worked in low-tax jurisdictions that did not have double-tax
agreements with New Zealand.
''They will need to return the offshore income in New Zealand
but will have little or not overseas tax credits to claim.
The taxpayer in the case was in this situation.''