If a NZ tax resident wants to cease NZ tax residence, they must satisfy two tests:

  • They must be physically outside of NZ for more than 325 days in a 12-month period, whereupon they may cease NZ tax residence from the first of those days. Note that the days of absence do not need to be consecutive, but even an hour in NZ on any day is counted as a day in NZ
  • They must cease to have a ‘permanent place of abode’ in NZ. This does not mean bricks and mortar as such although availability of residential property (whether or not owned) is an important factor.

People who should know better sometimes try to distill these down to simple concepts but there can be subtle issues in interpretation.

325 days outside of NZ

Inland Revenue has a web page dedicated to tax residence.


The page currently states:

Am I still a tax resident when I have left New Zealand? 

Yes until you have been out of New Zealand for 325 days in any 12-month period and you don’t have a permanent place of abode in New Zealand.

This could be construed as meaning the person ceases residence AFTER 325 days, whereas under that part of the test residence would cease at the FIRST day of absence in that 12 month period. 

In December 2019 we recommended IRD rewrite this page

Our suggestion is:

You will become non-resident of NZ at the later of:

  • Ceasing to have a permanent place of abode in NZ
  • The first day of absence in a 12 month period in which you are personally absent from NZ for more than 325 complete days, which need not be consecutive

That uses few more words and we consider is a lot clearer than the current text.  IRD has made it clear they are not prepared to change the wording.  Unfortunately, this is symptomatic of an underlying error in approach that ‘simplicity’ overrides technical correctness – even where the two don’t have to compete

Permanent place of abode

Whether or not someone has a permanent place of above is a much more complex matter than whether they have passed a threshold based on days of presence or absence – hence many expensive court cases on the issue.

We have struck clients who think that by transferring their residential home into a trust or a company or renting it out suddenly makes it unavailable for use.  That is not correct, and as noted a lot more factors can come into play in determining a permanent place of abode.

We recently handled a dispute between an accountant and a new lawyer who claimed the client was ‘clearly’ no longer NZ tax resident. The client had left NZ for a fixed temporary role for 2 years abroad, but retained significant connections and ties in NZ including:

  • Regular return visits back to NZ
  • A publicly documented intention to return to NZ at the expiry of the 2 year fixed term overseas
  • The previously occupied residential home still owned, rented out but with an ability to evict tenants
  • At least one dependent child
  • NZ bank accounts
  • A de facto spouse in NZ and availability of accommodation to the client through living with that partner in his home as occurred before departing NZ and on each return visit.

Despite all the above their new lawyer claimed that:

  • The above did NOT constitute a Permanent Place of Abode; and further that, even if they did constitute a Permanent Place of Abode, then:
  • Temporary accommodation abroad provided by their employer and with availability conditional on employment somehow overrode NZ tax residence (which would require the accommodation to itself be a ‘permanent home’)

The lawyer claimed for their ‘costs’ in preparing advice, for mounting a challenge to IRD’s assessments, any tax that was ‘overpaid’ and not returned by Inland Revenue and other open-ended claims.

They also claimed they would assist the client to take the matter to a Disputes tribunal (from which in fact lawyers are excluded), and the client would ‘have nothing to lose’ so ‘might as well have a go’.

We suspect (and hope) that this lawyer is a little more knowledgeable and skilled than the above claims would indicate, and that the key issue is in fact one of ensuring all the relevant background information is obtained from clients.

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