New to NZ: transitional residents, the 4-year window and FIF

Most new migrants, and New Zealanders coming home after 10 years or more away, start as transitional residents. While that status lasts, foreign investment income, including FIF income, is exempt (IRD, 17 Jun 2026; IR461 p4). The window runs for about 4 years, ending at the end of the 48th month after the month you became resident. After that the normal rules, including the $50,000 threshold, apply from the next day.

Who is a transitional resident

Inland Revenue's exemption page lists three conditions. You are a transitional resident if you:

• are a new migrant or a New Zealander returning home,
• qualified as a New Zealand tax resident on or after 1 April 2006, and
• were not a tax resident at any time in the 10 years before you qualified.

IR461's glossary adds two more points: you must not have been a transitional resident before, and you must not have applied for Working for Families tax credits (IR461 p26). Applying for Working for Families ends the exemption (IR461 p22 note 3).

Three things often catch people out:

• Only once. IRD says plainly that "you can only get the exemption once". A second migration does not give you a second window.
• The 10-year gap. A New Zealander who has been away for 7 years is not a transitional resident on return. The FIF rules apply from the day they are resident again. (They may be able to use the revenue account method for some shares instead; see below.)
• Opting out is permanent. You can end the exemption by telling IRD. Including exempt income in your IR3 is also treated as that choice, and IRD says you cannot revoke it.

Our new migrants tool asks these questions and gives a date, which you should still confirm.

What the exemption covers, and what it does not

IRD's page says most foreign-sourced income is exempt for a transitional resident, naming overseas interest, dividends, foreign investment fund income and rent. IR461 puts the FIF side more directly: the rules apply to "New Zealand tax residents who are not transitional residents" (IR461 p4), and its first screening question asks whether you were a resident who was not a transitional resident at any point in the year (IR461 p10).

What is not exempt:

• Income you earn overseas from employment or personal services (IRD exemption page). A double tax agreement may still give relief.
• All your New Zealand income, such as salary from a New Zealand employer, NZ interest and NZ PIE income.

The foreign super row follows IR1024 (April 2026) and the IRD foreign superannuation page. It is a separate 4-year exemption with its own rules; our guides on UK pensions and US 401(k) and IRA accounts cover it.

How the 48 months are counted

The window starts on the first day you are New Zealand tax resident. IRD's exemption page says it ends 4 years after the end of the month in which you qualify as resident, by either being here more than 183 days in a 12-month period or having a permanent place of abode, whichever comes first. IR1024 describes the matching foreign super window as running "until the end of 48 months from the beginning of the month after the one in which you become a New Zealand resident". Both give the same date: the last day of the 48th month after your residence month.

Worked examples (from our engine's date function):

NEEDS CONFIRMATION. We have taken the counting rule from IRD's web page and IR1024 and have not yet checked every detail against the Act. Your residence start date is also not always the day you landed: it turns on the 183-day test and when you had a permanent place of abode. Confirm both with IRD or your accountant before you rely on a date.

When the window ends

From the day after the window closes you are an ordinary resident for FIF purposes. Three questions follow.

1. Are you over $50,000? The threshold is measured on the total cost of your attributing interests on any day of the income year (IR461 pp5 and 9). IR461 says a change such as "an exemption ceasing to apply" generally "results in a deemed disposal and acquisition at market values" (IR461 p22 note 8). On our reading, that means the market value on the day your exemption ends becomes your cost for the threshold, not what you paid years ago. That is our inference from note 8, not an IRD worked example; confirm it.

2. What happens in the part year? If your window ends partway through an income year, that year is a part FIF year. Under FDR, shares acquired during the year have a zero opening value (IR461 p22 note 6). If the deemed acquisition works like any other mid-year purchase, FDR income for the part year could be nil, with comparative value still available to individuals. IRD does not say this in IR461, our calculators do not yet model the part year, and you should treat it as needing confirmation.

3. Which method in the first full year? Most people then use fair dividend rate: 5% of the 1 April market value, plus any quick sale adjustment. Individuals may use comparative value instead in a year it gives less.

Worked example. Mei became resident on 15 March 2023, so her window ends on 31 March 2027. Her US shares cost $140,000 and are worth $200,000 on 1 April 2027. In 2027/28 her FDR income is 5% of $200,000: $10,000. With $90,000 of other income, the extra tax is $3,300.00 at 33%. We have used 2026/27 tax rates as an illustration; the 2027/28 rates are not set yet.

The revenue account method for some migrants

Since 1 April 2025 some new residents can use the revenue account method (RAM) for foreign shares they owned before arriving. It taxes dividends plus 70% of gains when you sell, rather than 5% a year. IR461 says you must "become a New Zealand resident (not transitional) on or after 1 April 2024, following at least five years as a non-resident" (IR461 p17). It covers unlisted shares, or all foreign shares for people taxed elsewhere on citizenship, such as US citizens.

Two points matter for transitional residents. While you are transitional, the FIF rules do not apply, so RAM is not needed yet. Whether someone who arrived as a transitional resident can use RAM once the window ends is not clear from IR461's wording; we flag it on our tool and suggest you confirm it. A lapsed bill would have dealt with transitional days in RAM explicitly; it is NOT LAW (see the proposal guide).

What to do before your window ends

• Write down your residence start date and how you worked it out (183 days or permanent place of abode). Keep travel records.
• Record market values of every foreign holding on the day the window ends and on the next 1 April. Those are the numbers your first FIF returns will need. Our record-keeping guide lists the rest.
• Decide on foreign super before the window ends: lump sums inside the window are generally exempt (IR1024).
• Check exempt holdings. Some ASX-listed Australian companies are exempt (IR461 p7); our is it a FIF? checker covers the common cases.
• Do not tick FIF income into an IR3 while transitional unless you mean to give up the exemption for good.

This is general information, not tax advice; check with your accountant, especially on residence dates. Rules checked 12 November 2026.

Questions

Does the exemption cover my NZ salary?

No. Only most foreign-sourced income is exempt, and even then overseas employment and services income is taxable (IRD exemption page).

I am a returning Kiwi who was away 6 years. Am I transitional?

No. You need 10 years as a non-resident before you qualify. The FIF rules apply from the day you become resident again, although RAM may be available for some shares (IR461 p17).

Can I end the exemption early to use a comparative value loss?

You can opt out by telling IRD, but IRD says the choice cannot be revoked, and a FIF loss under CV is reduced to zero for individuals anyway (IR461 p14).

Does applying for Working for Families affect it?

Yes. IR461 says the exemption ceases if an application is made for Working for Families tax credits (IR461 p22 note 3).