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I live in New Zealand. I'm doing freelance work for an Australian company. They are not very open-minded in relation to new transfer money methods, they only do it with PayPal or international money transfer via some bank. These are expensive.

I was informed I could open a bank account in Australia, so my plan was to make them pay to my soon-to-be account in Australia and then I would use my favourite transfer method (TransferWise). But now it occurred to me that if I receive the money in Australia I might be obliged to pay taxes for Australia.

Is that true?

I know New Zealand and Australia have a double tax agreement, but my understanding is that I could claim the money back in New Zealand after paying Australia. I don't want to go through this hassle, having more work and probably having to pay for an accountant in Australia.

I'm a Sole Trader now and my accountant is the one who thinks I should pay Australian tax, which I didn't believe.

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Because you actually reside in New Zealand, your income taxes will be paid in New Zealand.

However, as a non-resident of Australia you will have tax withholding on all of the interest you earn in an Australian bank account. Obviously, because that tax is paid to Australia, that will not be counted against your New Zealand income taxes due to the taxation agreement between those countries.

You should still discuss this with an accountant in New Zealand and consider acting as a sole trader. Since you are doing freelance work, that seems like the most logical setup anyway.

  • Hi. I'm a sole trader now and my accountant is the person who said I should pay for Australia. I want the money to go straight to NZ after I receive it in my Australian account, so no interest, but thanks for the tip. But I'm still not sure about not having to pay Australian tax. They will see money coming and going... How do I prove them that the money is going to a country with double tax agreement, for example? – Roberto Mar 11 '17 at 1:56
  • @Roberto They will see that it is being wire transferred to NZ, I think it's common enough to have NZ exporters that own Australian bank accounts that this arrangement shouldn't raise any flags. – Nathan L Mar 11 '17 at 3:37
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+50

After reviewing the tax treaty between New Zealand and Australia, I think the issue is whether or not you have an interest in a "permanent establishment" in Australia where you do business. The bank is not relevant as it is merely the vehicle by which you collect payment and would only come into the picture if you had an income bearing account (which you have indicated you do not).

Even if you work out of the offices of the Australian company, you do not have a financial interest in their offices and as such, would pay taxes on the income in New Zealand (see documentation below).

https://www.ato.gov.au/business/international-tax-for-business/foreign-residents-doing-business-in-australia/tax-on-income-and-capital-gains/#permanentestablishment

  • Thanks for you answer! The source you posted says "If you provide services as an individual you will need to pay income tax on the earnings if the income is attributable to your fixed base or if you were present in Australia for more than 183 days." I don't really understand what that means, specially the part saying "if the income is attributable to your fixed base". Could you please explain me? – Roberto Mar 16 '17 at 17:15
  • The term "fixed base" is equivalent to the concept of "permanent establishment" and are effectively interchangeable. I'm not sure why they use both of them, but it's common treaty language in almost all countries. – mikeford Mar 16 '17 at 18:47
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If you are a resident of New Zealand for tax purposes, you will be taxed in New Zealand on all of your "worldwide income". This is income derived from New Zealand as well as income derived from all other countries

Source: http://www.ird.govt.nz/international/nzwithos/income/overseas-income-index.html

Another link that will be of use is this:

https://www.ato.gov.au/individuals/international-tax-for-individuals/work-out-your-tax-residency/

This is Australia's rules on if you qualify as a resident for tax purposes.

I am not an accountant or a lawyer but my reading of this is you actually have to reside in Australia to be considered a resident - whether or not you have a bank account there doesn't appear to play into it.

Additionally, Australia and NZ have a "double taxation agreement", explained here:

http://www.ird.govt.nz/yoursituation-nonres/double-tax/

So this should prevent you from being taxed in both places.

  • Hi. I saw the double tax agreement before but my accountant said it just means I pay tax to Australia and then I claim it back in NZ. – Roberto Mar 11 '17 at 16:05
  • Your account is FOS. – mikeford Mar 16 '17 at 1:43

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