NZ Transitional Resident Calculator

Sections HR 8 and CW 27 of the Income Tax Act 2007 carve out a 4-year window where new migrants pay no NZ tax on most foreign-source income. The intent is to ease the transition for skilled migrants who arrive with offshore investments, foreign pensions, or foreign employment that continues briefly after arrival — without giving them an indefinite tax-free zone.

The exemption is automatic — no application required. You file IR3 like any NZ tax resident, but only declare your NZ-source income and the carved-out non-exempt streams (royalties, remote-from-NZ employment for foreign employers). Foreign income that's covered by the exemption is simply not declared during the TR window.

Exempt during TR (most overseas income):

• Foreign dividends from non-NZ companies
• Foreign bank interest, bond coupons, and managed-fund distributions
• Foreign rental income (less expenses) — and ring-fencing doesn't apply to overseas rentals anyway
• Foreign realised capital gains (NZ has no general CGT, so this is mostly redundant)
• FIF income (FDR or CV) on foreign shares — the biggest TR benefit for portfolios over $50k cost basis
• Foreign private pension / 401(k) / SIPP / Australian super distributions
• Distributions from foreign trusts (subject to anti-avoidance rules — get advice)
• Salary or wages from a foreign employer for work physically performed overseas before/after arriving

NOT exempt (taxable from day 1 of NZ residence):

• NZ-source salary, wages, dividends, interest, rental, business income
• Royalty income — explicitly carved out of the exemption regardless of source
• Salary or wages for personal services performed IN NZ — regardless of who pays you. Remote workers continuing to "work for" their old foreign employer from NZ are taxable on that income.

To qualify, you must not have been a NZ tax resident at any point in the 10 years before becoming resident again. The window resets — if you spent 9.5 years overseas after a previous NZ stint, you don't qualify. You'd need to wait another 6 months (assuming you stay non-resident the whole time) to clear the 10-year mark.

Tax residence is fact-specific (183-day day count, 325-day non-residence count, plus the "permanent place of abode" test) — leaving NZ is easier than people assume because keeping a NZ home and intending to return can mean you've never actually broken residence even if you've been physically overseas.

The TR window is the right time to:

• Realise overseas capital gains — sell appreciated foreign shares and rebase before the FIF rules kick in, lock in gains tax-free.
• Take foreign-pension lump sums — the foreign superannuation withdrawal regime uses an inclusion-rate scheme that grows over time post-TR, so withdrawing during TR is the cheapest moment.
• Sell, buy, or restructure foreign investment portfolios — shift between funds without triggering NZ tax on the realisations.
• Settle pre-existing employment relationships — bonuses earned for overseas work paid post-arrival can fall within the exemption.

It's NOT the right time to:

• Continue working remotely for an overseas employer from NZ — this income is taxable from day 1 anyway, and may also create a NZ permanent establishment for the employer.
• Generate royalty income — explicitly carved out.
• Elect out for trivial reasons — election is irrevocable, and most migrants benefit from the default TR coverage.