Forum Replies Created
- Originally posted by masteraccountants:
Hi landlordtobe,
You might be worrying needlessly.
Your investment in New Zealand comes under the double tax agreement between the two countries.
The country where the income-producing asset is located is the source country so is entitled to tax in the first instance.
Even if the property is making a loss, the tax return should firstly be lodged in New Zealand. If tax is paid, it is firstly paid in NZ, then you claim the tax paid as a foreign tax credit when you lodge your tax return in Australia.
Do it the wrong way around, and you pay the tax in Australia, then pay it in New Zealand, and only get to claim the tax credit in Australia in the second year.
Next point, the tax year in New Zealand is 1st April to 31st March. There is a protocol between the two countries where tax returns lodged in NZ up to 31st March can be accepted in Australia as being to 30th June.
This means your Australian accountant can use the information in the NZ tax returns as if it is to 30th June, just convert to $AUD and adjust the depreciation to comply with the Australian tax rules on capital allowances. So you do not pay for two lots of accounting fees.
By now, you should be seeing that you do not need to lodge an Australian tax return for 30th June 2005 showing the NZ income until next year – then show the income to 31st March 2006 as if it is to 30th June 2006.
Don’t you just love double tax agreements – meant to avoid just that!
Christopher Raynal
Master Accountants Group Limited
PO Box 46018 Herne Bay
Auckland New Zealand
Ph +64 9 360 3259
Fax +64 9 360 2180
http://www.masteraccountants.co.nzHi Chris,
Excuse my ignorence but can you direct me to the part of the DTA that states “Even if the property is making a loss, the tax return should firstly be lodged in New Zealand. If tax is paid, it is firstly paid in NZ, then you claim the tax paid as a foreign tax credit when you lodge your tax return in Australia.” I have done some research on the matter and have found the following.
Basically it is my understanding that under tax law income in Australia is assessable when received. This is confirmed in tax ruling IT 2498 para 37.
However in para 38 of this ruling it states that if there are reasons demonstrating difficulties in dissecting income/expenses for the purposes of returning on an Australian income year basis you may be permitted to return on a foreign year basis.
So basically it would be up to the person lodging the return to prove to the commissioner that there were difficulties in disecting the income/expenses for their rental property. This will be different for every taxpayer and therefore needs to be assessed on a case by case basis.
You stated there is a protocol, do you have a reference for this I can look at.
Your advice is correct to most extent but from the references I have there is more to it than straight down the line include it on a foreign year basis.
Please Chris if I have missed something in my research/knowledge direct me to more info.
Carlyle
Hi Jason,
As Terry said check with your own accountant first but it generally would be. However I couldn’t see you getting a better return out of a term deposit than the interest rate on the loan, therefore costing you money in the long term. Make sure the return you expect on the investment is at least 1% better (if not more) than the interest rate on your loan otherwise it may not be worth it.
Carlyle
2 1/2k is pretty steep we set them up for our clients with Family or Hybrid trusts for just under 2k. Located in Newcastle.
Carlyle
Hi Kit Kat,
I would suggest speaking to your accountant first of all.
Without knowing your full situation some general advice is that you may be better treating any payments from your family as board meaning it is tax free and probably won’t affect your FHOG. Again best to check with FHOG. Saying that as it is tax free you cannot claim your expenses off your tax. However as it is your Principle Place of Residence for the first six months and when you move you won’t be having another principle place of residence you will be able to access the 6 year capital gain exemption. This will normally be of more value then 6 months of negative gearing.
As i said this is general advice please seek the advice of your accountant before acting on any advice herewith.
Carlyle Cousins
Incentive Business Accountants
http://www.incentiveaccountants.com.auAgree with Terry, ownership is what counts not whose name is on the loan.
Carlyle Cousins
Incentive Business Accountants
http://www.incentiveaccountants.com.auThanks Robert,
Currently with the NAB on a house I own 2/5’s. I am looking to buy the remaining 3/5’s and the NAB have approved the loan however want mortgage insurance as I need to borrow roughly 92-95% of the value.
Bells and whistles I can compromise on, I don’t want to pay MI as I see it as dead money.
Carlyle Cousins
Incentive Business Accountants
http://www.incentiveaccountants.com.auBuyers agents fees are a relatively new expense in relation to purchasing IP’s and have not been specifically mentioned by ATO. However I would see them as being non-deductible but able to be added to the cost base for CGT purposes also non-depreciable as they are not an asset. Reasoning would be that the expense in not necessarily incurred in producing income and also is an expense that takes place before the property produces income. Establishing expenses are seen to be capital in nature.
Also to note building inspections and independent valuations are also non deductible unless the valuation is for the bank to get the mortgage where it is then deductible over 5 years as a borrowing cost.Buyers agents fees are really the opposite of sellers agents fees also non-deductible but added to cost base.
Hope this helps
This info is general advice and should be discussed with your accountant in regards to your own circumstances.
Carlyle Cousins
Incentive Business Accountants
http://www.incentiveaccountants.com.auHi Jason,
I’m an accountant in the Newcastle area (office in town) and our practice is very much in favour of IPs. We have many clients with them and also have set up various structures within the firm to invest in property ourselves. Please feel free to look at our website below and give me a call for a free 30 minute obligation free meeting if interested.
Carlyle Cousins
Incentive Business Accountants
http://www.incentiveaccountants.com.au
