How Brits in New Zealand benefit from being transitional tax residents

Transitional residents who transfer their foreign superannuation to New Zealand are not taxed on the transferred funds. This is because they are only taxed on foreign employment income or foreign personal services income. All other foreign income is not taxed during the transitional residency period.

Are you a transitional resident?

Transitional residents and their spouses are not eligible to receive family assistance payments. No deductions or losses can be taken against exempt income. For example, if you have a rental property in the UK and unexpected maintenance expenses resulted in a loss on that investment, you cannot offset that loss against your earned income in NZ if you are a transitional tax resident.

Foreign superannuation, dividends, interest, royalties and rental income are exempted from tax for the first four years for transitional tax residents (who can be new migrants and returning New Zealanders).

If you receive a lump sum within the first four years of becoming a New Zealand tax resident, you won't have to pay tax on the amount you receive. The four-year lump sum exemption period generally applies to lump sums received on or after 1 April 2014, if you have not previously had an exemption period. The exemption period starts from the date you become a New Zealand resident. It runs until the end of 48 months from the beginning of the month after the one in which you become a New Zealand resident. 

The residency test defines you as a NZ resident if you have lived for 183 days or more in New-Zealand in any 12 month period. If you have breached the 183 days test in any 12 month period before moving, you will not qualify as a transitional resident.

After your transitional residency ends, you will have to pay tax on your foreign pension when you bring it to New Zealand. The longer you are in New Zealand before you transfer, the more tax you will have to pay. Ultimately, if you elect to receive a pension payable from the UK, 100% of your pension income will be taxed.