This article was originally created for Hayes Knight (now Nexia Auckland).

7 September 2016
|Tax Advisors
By Shelley-ann Brinkley – 7 September 2016 – 1 comment

Inland Revenue has once again changed its mind on who is a New Zealand resident.

In its 2014 Interpretation Statement (IS 14/01) on tax residency, Inland Revenue set out their revised view on what constituted a ‘permanent place of abode’ for the purposes of determining whether an individual was tax resident in New Zealand.

This revised view represented a significant shift from the historical position and potentially widened the net of who could be a New Zealand tax resident.

Inland Revenue has now changed its interpretation of what constitutes a permanent place of abode and have published their final view in an exposure draft (PUB 00276) released in June 2016.  This was as a result of the Court of Appeal’s decision in December 2015 on the much awaited Diamond case.

The Inland Revenue’s final view has narrowed the scope of what constitutes an individual having a permanent place of abode and provides tax advisors with greater certainty on determining a client’s tax residency status; certainty that has been lacking since the Interpretation Statement was issued in early 2014, given the conflicting views coming out of both the High Court and Court of Appeal.

So what is the Inland Revenue’s final view on permanent place of abode and why is it so important?

Permanent place of abode is used to determine whether or not an individual is tax resident in New Zealand. Tax residency is important because it dictates whether an individual will be taxed in New Zealand on their worldwide income, or only on their New Zealand sourced income (subject to any double tax agreement).

Tax residency is relevant for those individuals migrating to live in New Zealand and who will continue to receive income from overseas.  For these individuals, they will be a New Zealand tax resident if:

  • they have a permanent place of abode in New Zealand; or
  • they are in New Zealand for more than 183 days in total in any 12-month period

This means, an individual could be tax resident in New Zealand, and therefore taxable on their worldwide income, even if they have not been in New Zealand for more than 183 days, simply because they have a permanent place of abode in New Zealand.

Tax residency is equally important for individuals immigrating from New Zealand to live overseas and who will be earning overseas income.  For these individuals, they will no longer be tax residents if they have been out of New Zealand for more than 325 days in any 12-month period  they no longer have a permanent place of abode in New Zealand.

Again, this means, an individual could remain tax resident in New Zealand, and therefore be taxable in New Zealand on their worldwide income, simply because they have retained a permanent place of abode in New Zealand, even if they have been out of the country for more than 325 days.

Inland Revenue’s previous position: a recap

In 2014, Inland Revenue changed its interpretation of permanent place of abode to place greater emphasis on whether or not an individual had a dwelling available to them in New Zealand. Essentially, an individual just simply needed to have a dwelling available to them to trigger a permanent place of abode.

Hence the ‘net’ was cast extremely wide as Inland Revenue’s view was that an ‘available dwelling’ did not need to be readily or exclusively available to the individual at all times, and could therefore include a New Zealand property which had been rented out under a periodic or short-term fixed tenancy, and could actually include the home of a parent, friend or relative, or even property held in a trust.

This meant the 2014 position impacted individuals who had left New Zealand but had retained and rented out a property, including a house they had not lived in prior to leaving New Zealand.  As a result, the individual could unintentionally, retain a permanent place of abode in New Zealand and therefore remain a New Zealand tax resident (and ultimately continue to be taxed in New Zealand on their world-wide income).

The 2014 position also impacted those individuals migrating to New Zealand and who acquired a dwelling in New Zealand in the months leading up to their arrival.  In this situation, the individual could be deemed tax resident from the earlier date when the dwelling was acquired; rather than the later date when they permanently arrived in New Zealand.

New interpretation following the CIR v Diamond case

Following the Court of Appeal decision in the Diamond case, the Inland Revenue have now reduced the size of their ‘net’.  While the Inland Revenue continues to hold the view that a permanent place of abode can only arise if the individual has a dwelling in New Zealand, they now recognise that specific factors need to be present which cause that dwelling to be an individual’s permanent place of abode.

It is no longer enough that a dwelling simply be available for the taxpayer to live in, there must be additional facts which indicate that a particular dwelling is that individual’s permanent place of abode.  These would include the nature and quality of how the individual regularly used the dwelling.

As a consequence, a permanent place of abode will no longer arise if the only property an individual retains in New Zealand is an investment property that they have never lived in while overseas.  However, where an individual retains and rents out their family home, a permanent place of abode may continue to exist, but this will depend on the particular facts and circumstances.

We expect the exposure draft to be issued in its final form later this year.  In the meantime, Inland Revenue have advised that individuals who have previously relied on the 2014 Interpretation Statement, and have taken tax positions consistent with that view, can apply to Inland Revenue to amend those earlier tax returns in light of their revised view:

Determining tax residency can be complex and is dependent on an individual’s specific facts.  For assistance with determining your tax residency, or to amend a prior residency position, contact Shelley-ann Brinkley or Phil Barlow in the tax consulting team, or your Hayes Knight Advisor.

Great article, thanks. I take that to mean that all things being equal, if I sold my (previously lived in) property and brought the house next door, and rented that out; I would be not considered to have a PPoA due to the fact I hadn’t lived in it. Yet, if I rented out my original property that I did live in for simplicity, I would (probably) be considered to have PPoA… seems like typical IRD logic.


Hi Joseph – yes correct on the first part. If you sell the house you lived in and the only property you own in NZ (once you have left NZ) is a rental property then the rental property itself will not give rise to a PPOA. On the second part, this depends on your specific circumstances. In simple terms, if you retain the house you lived in and rent it out (once you have left NZ), generally the house will not cause you to retain a PPOA because you will not be habitually residing in the house. If however you return to live in the house from time to time and have other connections to NZ, then there is the possibility that the house could cause you to have retained a PPOA.


Ask a question or leave a comment


Find updates

This article was originally created for Hayes Knight (now Nexia Auckland).