NZ revisited

I think your questions would be too specific to you to answer except by a NZ accountant versed in property.
It would also depend if you have structures i.e. companies and trusts in either or both countries or if you are buying property as an individual.
Also make sure that your Australian accountant and your NZ accountant communicate with eachother.

re tax, the NZ tax site is
http://www.ird.govt.nz

Also check out

http://www.propertytalk.co.nz

, a wealth of information specific to investing in NZ,

ditto

http://www.housemouse.co.nz

cheers-
mini

>Thanks for your reply, but I’m still in the dark.

yep…

>1. I don’t have a trust set up in Australia or NZ. >This is why I was enquiring about them. Forget my >situation – can anyone tell me the advantages of >setting up a trust rather than investing as an >individual?

that’s a bit like saying, ‘forget my income, just tell me how much tax I have to pay?’ –
– it doesn’t make sense, because the answer is obviously *specific* to your situation – based on questions like how many properties you have already? how many you’re planning to get? whether you have kids, wives, beneficiaries, married, divorced? if you’re working in a high income job and paying a lot of tax? or not? self employed, or employee, or beneficiary? how much money your properties are going to make? if you’re planning on making a profit, or buying negatively geared properties and taking a loss you could offset against x, y, or z….blah blah blah…you get the picture.

The main reasons people set up structures is for ‘asset protection’ which means you don’t own the assets yourself, but you control and benefit from them.

You can either personally be the trustee of the trust (as well as the beneficiary), or else start a company where you are the director, and the company is the ‘corporate trustee’. A company is a legal entity which is not a person…and the tax dept. sees it differently to a person.

The other reason is to ‘legally minimise tax’. Although tax avoidance or evasion is illegal…but it comes down to the bottom line, the aim being that you start the structure if it will mean you are better off.

Where it gets gnarly is that companies (and trusts) cost a bit to run each year, because you have ASIC fees, tax returns for the company in addition to your personal tax return. My accountant is also my ‘company secretary’, because there’s all this beaurocratic palaver and compliance that has to happen.

i’ve heard of people with not that complicated structures up for several hundred a month to their accountant.

And if you have shareholders in your company it can cost several thousand to draft the shareholder’s agreement. it’s actually a bit ridiculous, unless you have enough properties to make it worthwhile – i.e. knowing how to calculate if it’s worth the cost or not.

so you need to know the answers to all those kinds of questions above to figure out with your accountant what makes sense for your situation.

Let’s say you’re not particularly paranoid you’re going to get sued, hehe, you have public liability insurance or whatever, and you aren’t making significant pots of money initially, then you might not bother with structures for a year or two. Then you’d also want to know if there was a downside or tax implication in the future if you later wanted to transfer ownership of your properties over to a trust you might create.

I can’t imagine having made the decisions I made for my personal situation without having consulted with a professional versed in companies and trusts, who is himself a property investor in Aussie, accounts my other business interests, and who is also in contact with my NZ accountant. my NZ accountant who i’ve used forever isn’t that down with property so I am actually going to consult with a different (specialist) accountant to do with that, who will get together with my regular accountant. I got the specialist’s name from a referral from another investor i respect, which is what it’s all about really…

I think the greener you are the more you need to consult with the best people you can get. I was green as when I bought my first property.

You could always get Steve’s product ‘wealth guardian’ which explains structures, the different types and how they work, how much they coast, and why and when you need them. it’s a book and a CD, like a seminar. Steve did it with Paul Harper who’s this gunny structures specialist based in Melbourne.

>3. I don’t have an accountant in either Australia or >NZ.

so you’re hopefully one of those people who does their tax returns themselves and is pretty au fait with the whole thing, rather than one of those people who doesn’t have an accountant because they’ve never done a tax return. doh. or somewhere in between.

>My experience with the average accountant is that >they don’t know near as much about tax and investment >properties as a seasoned investor.

totally. I mean, seasoned investors don’t use average accountants, they use experts. Don’t expect the local yokel to know stuff unless they’re an investor themselves. the best accountants for property are those that have property investments themselves.

>I’m sick of asking >accountants things and getting >vague and uninformed >answers.

so, accountants, plural, you’ve obviously been to more than one. OK so next time you need to get a referral for a good one in your area. In NZ I would check out the KPI magazine (subscribe to it) which is a specialist property investing mag which has lots of ads for specialists over there in structures, etc. You might want to figure out whether to do your structure here or there. or both. though, they can be costly – several hundred if not thousands to set up. you might decide not to do it right away. good luck.

cheers-
mini

Hi James

A few things…
This is with a NZ trust buying NZ +ive property. If negatively gearing look at a LAQC.

1. There is no tax free threshold ie. if you earn $0 to 25K (I think) your taxed at 19.5%.

2. If you set up a NZ trust and dispurse the income to beneficiaries then they still pay that 19.5% on whatever comes out of the trust.

3. Another option is to accumulate income from your assets, and not give it to your beneficiaries. However, this will accumulated income is taxed at a flat rate of 33%.

4. Any beneficiary income that is taxed in NZ will give you a credit on your OZ tax return.

A few personal notes
I personally havn’t dealt with OZ finance for NZ property. But I highly recommend reading KPI magazine and using the search icon at the top of the screen. There has been a few posts on New Zealand and NZ trusts.

Pick me up if I’ve got it wrong.

Hope this helps

Cheers[]

Mr Ironman

Hi James,
You said you would purchase in NZ using Australian property as security,
I have arranged funds for my clients here in Australia at 80% LVR with the NZ purchase as security,
The process involves the following:
Applying for the maximum funds required in Australia,
Upon preliminary loan approval, purchase in NZ subject to finance approval, (this is based on lenders valuation of property)

As for matters regarding accountants and trusts,I think the points raised by Mini are valid,
Regards
Steven

Mortgage Broker

[email protected]
http://www.mobilemortgagemarket.com.au
Ph:0402483216
Victoria

PLEASE note comments made should NOT be taken as specific taxation, financial, legal or investment advice. Please seek professional, specific advice.