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Where Taxpayers and Advisers Meet

Emigrating to NZ - moving money into accunts in NZ now. More tax?

RichardG
Posts:4
Joined:Wed Aug 06, 2008 3:32 pm

Postby RichardG » Thu Dec 08, 2005 2:22 am

Hi - myself and my wife are emigrating to NZ in PAril/May time. We have sold a business and have other assets which shouyld provide us with a decent income from the interest when it is all in one account. Given the poor performance of the exchange rate (high interest rates in NZ) we have got together as much money as we can now and have set up a savings account in NZ. We have all of the required residence visas and work permits and assuming we work for three months when we get there, our long term residence permits will be granted.

We have set up a savings account with Westpac and elected to pay tax on it - which is 10% of earnings until we get there, then 39% when we arrive.

Myself and my wife are both 40% tax payers. One or two people have suggested we will need to pay tax in the UK on the interest we are making in NZ, even though we are paying tax there as well.

Westpac do not ebleive we need to pay tax twice, but I'm not so sure.

Help.

Thanks,

Richard

tax me less!
Posts:983
Joined:Wed Aug 06, 2008 3:29 pm

Postby tax me less! » Thu Dec 08, 2005 2:36 am

Richard

As you are domiciled within the UK you both are subject to UK tax on worldwide income until April/May 2006 when you leave the UK.

Therefore you will be subject to UK tax on the interest credited by Westpac until then. You will however be able to claim credit for the 10% NZ withholding tax, so the net amount payable in the UK will be no more than 30%.

In addition to income tax, you may also want to review inheritance tax planning because both of your estates will continue to be subject to UK inheritance tax in the unfortunate event of death even after you have moved to NZ.

Good luck with the move.

RichardG
Posts:4
Joined:Wed Aug 06, 2008 3:32 pm

Postby RichardG » Thu Dec 08, 2005 4:30 am

Thanks for the advice. Would it be possible do you think, for the NZ bank to accrue the interest up to and beyond our permanent departure date.Do you think this will avoid the complication of having to declare the interest over here?

RichardG
Posts:4
Joined:Wed Aug 06, 2008 3:32 pm

Postby RichardG » Thu Dec 08, 2005 5:15 am

ie not post the interest to the account until after we arrive there. Hopefully avoiding the need to declare it?

Adam
Posts:19
Joined:Wed Aug 06, 2008 3:06 pm

Postby Adam » Thu Dec 08, 2005 7:19 am

Until you become resident in NZ you can also elect to pay AIL (approved issuer levy) tax which is only charged at 2% of interest. You will need to change to resident Witholding Tax once you actually arrive.

Why not put you money into a term investement that is due the day you spend in transit in Singapore or whatever your stopever is? Then you dont need to pay in NZ or UK (as you only have a liability from the date of arrival). You can specify the exact number of days you want your money on a term deposit for to make this work to your advantage. You don't want the interest paid after you arrive because at the end of the year you'll need to declare it and pay the difference between the 2% (or 10%) and the 33/39% tax you pay as a resident anyway.

You have other options like www.unitedfinance.co.nz which offer 1st rate debenture stock offering a lot higher rates. If you want a bank ASB "FastSaver" or SuperBank offer superior rates than WestPac.

WestPac is largely a "S*it" bank - like Lloyds and Barcleys in the UK.

Banking Terms are a little different in NZ and you have greater choice. Enjoy the Bank Fees on everything when you arrive!

Don't use the ANZ or BNZ they are the worst banks together, then WestPac in my opinion. ASB and Taranaki Savings Society always rate well.

Rgds (A Kiwi with local knowledge)
Adam.

tax me less!
Posts:983
Joined:Wed Aug 06, 2008 3:29 pm

Postby tax me less! » Thu Dec 08, 2005 8:07 am

In my opinion choosing specific banks as Adam appears to be recommending is providing investment advice which is something not possible on this board.

Adam is correct that you could theoretically deposit money in a third territory which matures during a window period.

This has always been fashionable for the ultra-wealthy but is very difficult for most of us to arrange.

You will of course need to satify the know your customer rules of the bank you choose to deposit with and satisfy yourself of the investor protection rules of the jurisdiction (in case the bank goes bust) before depositing your savings.

RichardG
Posts:4
Joined:Wed Aug 06, 2008 3:32 pm

Postby RichardG » Thu Dec 08, 2005 8:15 am

WestPac do offer term deposits. Without going into the details, we have an account with them, so presumably if we can, we should change the account from what we have to a (short) term deposit to mature after we get there (I don't know if we can be that specific at this stage about dates, so wouldn't want to risk an 'in transit' approach) would limit the tax to 10% NZ only for the interest gained. And more importantly, no need to involve the Revenue here? Therefore the way to go?

Can I be clear I'm not looking for investment advice or advice on rates. I have done all of that research and arrived at my own decisions already. I guess it's just the fact that paying tax twice will make me very unhappy! Besides which it does seem a tad unfair!

Adam
Posts:19
Joined:Wed Aug 06, 2008 3:06 pm

Postby Adam » Fri Dec 09, 2005 1:30 am

Please don't take any of my bank recommedations at more than discussion level. I was just trying to make a point that there were a number of banks to choose from and alternatives and that WestPac is similar to Lloyds and Barclays. Just keep an open mind and bank with whoever you are happy with. Have a look at www.interest.co.nz - this lists all financial institutes in NZ and the rates they have on offer constantly updated and independent.

One thing I will say RichardG is you are only looking at half the picture. You are wanting interest paid at 10% in NZ after you arrive so you don't need to declare in the the UK.

You forget you need to declare all worldwide income in NZ from the date you arrive. So even if you get the interest with only 10% tax taken off in NZ (or 2% if you ask for AIL) you will still need to pay full tax on that interest (up to 39%) at the end of the year when you do your NZ tax return.

Enjoy your trip.


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