Hi all
I’m in need of some advice. I live in Australia and want to set up a trust in NZ. What are the tax implications of recieving beneficary income from a NZ trust?.
Are their any other issues with oz and nz trusts?.
Cheers[
]Anto
Hi all
I’ve spoken to Oz and NZ accountants and they aren’t even sure?[xx(]
Cheers[
]Anto
It would have to be very worthwhile and very transparent. You never want to answer the question in your tax return as to whether you have a interest in a offshare trust with a YES unless you don’t mind a lot of attention you don’t really deserve.
Why not buy it with a Australian trust. Should not be an issue.
Hi Ghm
Have you done that yourself? I thought you would have to set up a trust offshore for offshore investments. I’ll have to look into it further[
].Cheers[
]Anoto
Anoto, I suggest you contact Bruce Whiting of the Mint Group. He presented at Dolf de Roos seminar on the weekend, and made a very big point of talking about having your structures set up in each country you are investing in. http://www.mintgroup.com.au
If you buy in an Australian entity in NZ, you lose an awful lot of the benefits that are provided in NZ – like the no CGT, Land Tax, Stamp Duty etc., and we have much higher personal tax rates here than there.
Cheers
MelAnto,
This subject has been broached a few times, do a search on NZ.
Also it has been discussed quite a bit on the forums at http://www.propertalk.co.nz there’s also a few articles on trusts at that site from NZ lawyers.
The short answer however is that it’s relatively straight forward. Beneficiary income will be taxed in NZ. This income will have to be declared in Australia but you get a credit for the tax already paid in NZ.
regards,
Rod.
RodC, Melbear and co.
I’ve previously had alot of conflicting advice regarding the location of the trust oz or nz. But it makes sense to set it up in Nz. I got onto propertytalk.co.nz…very helpful. Thanks alot[
]I’ve spoken to a solicitor, but forgot to ask. Can you claim the NZ tax credit if your not a NZ citizen? How does that work?
From what I understand if you draw on your accumulated rental income, annually you avoid income tax on those profits?[
]. Is that true?I need a gooood book on trusts. Any recommendations? Would dales fit the bill considering its dealing with Oz trusts?[
]Cheers[
]Anto
hi guys
what is the advantage of setting up another trust just for NZ investing, given that as an Australian tax payer you still have to declare and pay tax on any income from NZ as if it was made in OZ. those benifits Melbear mentioned are only for NZ tax payers.
westan
What you have to do is leave your income offshore and never bring it back. OR move to NZ establish a permanent place of abode for at least 6 months distribute the profit then pay NZ tax etc
Maybe find an appropriate charity…..or otherwise LIE, and hope no one opens up your income trail when you bring it back in. Problem here is the more sucessful you are the bigger the risk.Hi all
Tricky, tricky there seems to be no easy answers
MY GOAL: Buy many properties in the next 4 years in NZ. Cash flow positive (of course). If this income is accumulated and used to buy more NZ properties wouldn’t it be better to keep it as a NZ trust?
I was under the impression that Oz CG could be avoided? But now I’m not so sure.
Cheers[
]Anto
Hi guys,
As long as the funds are retained in the NZ trust you should have access to the NZ benefits that melbear has mentioned. When the money is ddistributed to non NZ residents that’s when it gets trickier.
The 2 main operational choices (as I understand them) with the NZ trust are:
1. The trust retains all income (no distribution) to beneficiaries. The trust then pays NZ company tax on the income (after all the usual deductions for interest, depreciation etc.). There should be no Australian tax implications in this case as there is no distribution to Australian taxpayers.
2. The trust (after deductions) makes a distribution to beneficiaries. If these beneficiaries are non NZ residents then they will pay a NZ withholding tax (I think it’s 15%). This income should then be declared on your Australian tax return and is taxable but you should receive a credit for the 15% already paid in NZ. If any part of the distribution is related to Capital Gains then this will be taxed in Australia.
westan, I think that if you use an Australian trust in NZ the trustee will have to pay the NZ withholding tax. The trustee would then have to declare this income in Australia and either pay Aussie tax or distribute it to benficiaries (who are then taxable). The trustee should get the credit for the NZ tx already paid. One of the advantages with a NZ trust is that you have the 2 choices I mentioned above, ie: retain the income in NZ or distribute it. With an Aussie trust you can’t leave the income in NZ, it needs to be declared in Oz.
Another issue with an using an Australian trust in NZ is if you have a Aussie Corporate Trustee NZ banks may not want to lend to a non-NZ entity.
Hope this makes sense, just remember I’m not a lawyer/accountant etc. So please check this info for yourselves before making any decisions.
regards,
Rod.
A trust is not a separate legal entity but hold assets, earns income on others behalf….hence the word trust.
If the trust makes income who will receive the distribution, if not distributed the trust is normally taxed at high marginal rates (this is the case in Aust & we tend to be in line with NZ )Your final problem is when you bring it home it might be subject to 48.50% rather than CGT at 24.5.
If you are serious you need to spend the $$$ and get advice that will help you in your OWN situation.
If the trust makes income who will receive the distribution, if not distributed the trust is normally taxed at high marginal rates (this is the case in Aust & we tend to be in line with NZ )In NZ income accumulated and retained in the trust is taxed at 33%.
Your final problem is when you bring it home it might be subject to 48.50% rather than CGT at 24.5.I don’t know the answer to this. You still get the 50% discount on CG distributions from an Australian trust, I don’t know if foreign sourced Capital Gains are treated differently.
If you are serious you need to spend the $$$ and get advice that will help you in your OWN situation.Definitely.
regards,
Rod.
Hi all
Thank you all for your detailed responses.[
]
I’m slowing bringing bits of the puzzle together. I’ve found a helpful accountant and solicitor in NZ who are familiar with my circumstances.Thanks again[
]Anto
What if you set up a credit card account in NZ, have all the IP income put in the trust account. Spend in Australia off the NZ credit card and clear the debt with the income from the trust.
Would that change anything?
What the mind of man can conceive and believe, it can achieve.
What if you set up a credit card account in NZ, have all the IP income put in the trust account. Spend in Australia off the NZ credit card and clear the debt with the income from the trust.My understanding is that this is still regarded as income by the ATO as ‘foreign entity distribution’ or ‘foreign source income’ and should be declared!(p34, Taxpack 2003).
Will someone try it on and see what happens?!
TerryTerence McMahon
HomeWin
Finance
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]. Is that true?
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