New Zealand exempts most foreign income of newcomers for about 4 years

Canada, Australia and New Zealand tax residents on income from anywhere, but treat a family’s first years differently. Only New Zealand exempts most foreign income under a rule with no visa condition, for about four years, for people non-resident for the previous ten years who have not had the exemption before.

Australia’s exemption applies only to certain temporary-visa holders. Canada has none; instead, most assets a newcomer owns are treated as bought at market value on arrival.

When residence begins

The Canada Revenue Agency says a newcomer becomes resident once they have enough residential ties, usually from the first day they live in Canada; permanent-resident status with provincial health coverage will usually amount to such ties. Immigration status itself, the agency says, does not tell a person their tax obligations. In the arrival year, world income is reported only for the resident part of the year.

In Australia, residence under section 6(1) of the Income Tax Assessment Act 1936 turns on whether a person resides there, with extended tests, one of which is presence for more than half the income year unless the Commissioner is satisfied that the person’s usual home is abroad and that they do not intend to take up residence.

The Australian Taxation Office says it does not use the Department of Home Affairs’ rules: a person can be tax resident without being a citizen or permanent resident.

In New Zealand, section YD 1 of the Income Tax Act 2007 makes a person with a permanent place of abode in the country resident; otherwise, more than 183 days’ presence in any 12 months makes a person resident from the first of those days.

For people arriving on or after 1 April 2026, a “non-resident visitor”, who among other conditions spends 275 days or fewer in New Zealand in 18 months, is not made resident by that count. How countries count residence days is covered in a separate article.

New Zealand: about four years without tax on most foreign income

Under section HR 8, a person is a “transitional resident” if they become resident after at least 10 continuous years of non-residence and were never a transitional resident before. Section CW 27 then exempts their foreign-sourced income, except employment income for work done while a transitional resident and income from services.

Inland Revenue lists overseas interest, dividends, foreign investment fund income and rent as exempt.

For foreign-sourced amounts, section HR 8 also treats the person as non-resident under the financial arrangements, controlled foreign company and foreign investment fund (FIF) rules and parts of the trust rules. Exempt foreign income is left off the IR3 return; non-exempt foreign income is still reported.

The period begins on the first day of residence. It ends on the last day of the 48th month after the month in which the non-residence period ends, that is, the month the person meets the residence test, without backdating, or on the day before they stop being resident, if earlier.

Inland Revenue calls it “about 4 years”, but where residence comes through the 183-day count, the start is backdated to the first of those days and the end is not: in one of its examples, the exemption runs from 10 March 2023 to 31 October 2027. It is available once.

It ends early if the person, or a partner who is a transitional resident, applies for Working for Families tax credits, or if the person opts out, for example by including exempt income in a return or confirming to another country and to Inland Revenue that New Zealand tax has been or will be paid on overseas income from a date inside the period; an opt-out cannot be reversed.

The statute sets no visa condition. This means a resident-visa holder, such as an Active Investor Plus investor, and a work-visa holder are treated alike.

The exemption covers only foreign-source income, so the New Zealand investments that the Active Investor Plus visa requires fall outside it, as Inland Revenue notes in its commentary on a bill that was at select committee in mid-September. The conditions attached to that visa are covered in a separate article.

After New Zealand’s exemption ends

From the day after the period ends, worldwide income is taxed. Foreign shares then fall under the FIF rules unless an individual’s FIF interests cost NZD 50,000 or less throughout the year.

The rules generally tax 5% of the shares’ opening value each year or, for individuals and family trusts, the change in value plus dividends, and some interests must be disclosed in the return. Inland Revenue’s foreign income guide says a shareholding is usually treated as acquired at market value when transitional residence ends.

The Taxation (Annual Rates for 2025–26, Compliance Simplification, and Remedial Measures) Act 2026, which received Royal assent on 30 March 2026, added a “revenue account method” with effect from 1 April 2025, aimed at new migrants. It taxes eligible shares only on dividends and on disposal, with gains and losses on disposal discounted by 30% before the person’s marginal rate applies.

According to the official Act commentary, it is open to an individual who was non-resident for five years and then, on or after 1 April 2024, became a New Zealand resident who is neither a transitional resident nor treated as non-resident under a tax treaty, including someone whose transitional residence ended on or after 31 March 2024, and to a family trust whose principal settlor meets those tests.

Among its conditions, the shares must be in a foreign company, unlisted, without an effective facility for redemption at market value, and acquired before the person became resident, including before transitional residence. A person who uses it and then leaves remains taxable on those shares if sold within three years.

A bill introduced on 10 September 2026, at select committee as at 15 September, is not law. It would open the method to all resident individuals holding unlisted foreign shares and raise the FIF threshold to NZD 100,000, both from 1 April 2026.

From 1 April 2027, where a tax treaty applies, it would delay the start of transitional residence entitlements until the treaty settles residence in New Zealand’s favour.

Australia: relief that follows temporary-resident status

Subdivision 768-R of the Income Tax Assessment Act 1997 relieves “temporary residents”. Under the definition in section 995-1, that means a person who holds a temporary visa, is not an Australian resident under the Social Security Act 1991, and whose spouse is not one either; that Act counts, among others, citizens and permanent-visa holders who reside in Australia.

A permanent resident is therefore excluded, and so is a temporary-visa holder whose spouse is a citizen or permanent resident living in Australia. A person who, at any time since the definition commenced, has been an Australian tax resident without meeting all three conditions cannot be a temporary resident afterwards.

A temporary resident’s foreign-source income is “non-assessable non-exempt”, except pay for work or services done while a temporary resident, and capital gains and losses are disregarded where a foreign resident’s would be. The controlled foreign company attribution rules and a trust accruals rule do not apply.

The law sets no fixed term. This indicates that the relief lasts as long as the status.

Residents who are not temporary residents get no income relief but do get a cost reset. Under section 855-45, an asset owned when a person becomes resident takes its market value at that time as the first element of its cost base, except taxable Australian property and assets acquired before 20 September 1985.

For a temporary resident, the reset waits until the person ceases to be one while remaining resident (sections 768-950 and 768-955). This indicates that it would occur, for example, when a person living in Australia is granted a permanent visa.

Subdivision 768-R and section 855-45 were last amended in 2015, according to the compilation of 27 August 2026.

The 2026 return instructions ask whether the person had overseas assets worth A$50,000 or more at any time in 2025–26, at the greater of historical cost and market value. Residents must show assessable foreign income even where foreign tax was paid; a resident who is also a temporary resident shows only some foreign employment income.

Canada: a reset of cost, and returns from the second year

Canada’s relief is a reset of cost, not an income exemption. Under section 128.1(1) of the Income Tax Act, a person who becomes resident is deemed to have disposed of each property at fair market value immediately before, and to have reacquired it at that amount.

For individuals, taxable Canadian property, inventory and Class 14.1 property of a business carried on in Canada, and certain “excluded rights or interests” are outside the rule. The Canada Revenue Agency tells newcomers to keep a record of the value on the date they arrived.

The reset is therefore a single event on each arrival rather than a relief limited in time, so for property within the rule only growth after arrival is measured on a later sale.

Canada’s former relief for “immigration trusts”, a 60-month exemption from the rules that deem certain non-resident trusts resident in Canada, was repealed by the Economic Action Plan 2014 Act, No. 2 for taxation years ending after 10 February 2014; trusts that had relied on it and received no contribution from 11 February to the end of 2014 kept it for taxation years ending before 2015.

The 60 months survive in section 94 in the opposite direction: a contribution counts as made at a “non-resident time” only if the contributor was non-resident from 60 months before it until 60 months after it, or until the test date if earlier, and section 94(10) applies that result to earlier years once the contributor becomes resident.

This indicates that a foreign trust funded in the five years before a move can come within the deemed-residence rules.

Section 233.7 spares an individual, for the year they first become resident, the foreign information returns under sections 233.2, 233.3, 233.4 and 233.6, Form T1135 among them.

From the second year, Form T1135 is due if the total cost amount of “specified foreign property”, including foreign funds, shares of non-resident corporations and interests in non-resident trusts, exceeds CAD 100,000 at any time in the year; for property held on arrival, the cost amount is its value at arrival. Distributions from a non-resident trust need a separate return.

No enacted amendment awaiting entry into force touches these sections or sections 94 and 128.1, according to the list of amendments not yet in force as modified on 28 September 2026, and the tax annexes of Budget 2025 and the Spring Economic Update 2026 do not mention section 128.1, section 233.7 or Form T1135.

The Vietnamese side

Under Article 2 of Law 109/2025/QH15 on personal income tax, in force since 1 July 2026, a person is resident if present in Vietnam for 183 days or more in a calendar year or in 12 consecutive months from first arrival, or if they have a habitual residence there: a registered permanent residence, or a home rented under a fixed-term lease.

A resident is taxed on income arising inside and outside Vietnam. Read on its face, Article 2 indicates that a family that moves but keeps a registered permanent residence, or a home under a fixed-term lease, remains resident even after it stops meeting the day count. The Government is to detail the article, and its rules were not read for this piece.

How the test applies to a holder of a second passport is covered in a separate article.

What this article has not established

It was not established whether a given Australian investor or business visa is a temporary visa, whether a temporary resident must answer the A$50,000 assets question, or whether other Australian residence rules changed in 2025–26.

For Canada, the Budget 2025 notices of ways and means motions were not opened, and neither the capital gains inclusion rate nor provincial rules were checked.

For New Zealand, the revenue account method is described from the commentary rather than the Act. Amendments not yet incorporated in the online Act, the 2025 amending Act, the bill’s progress after 15 September 2026 and trust disclosure duties were not checked.

The Vietnamese implementing rules and the tie-breaker rules of any tax treaty between Vietnam and the three countries were not examined.