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.nz