Hi Dom,
I was wondering if it was you. The username made me guess.
Yes, the NZ qualifying trust that I set up for you will suit the purpose of either share trading or share investment.
Kind regards
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.nzOriginally 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 Carlyle,
The ATO Ruling is IT 2360. If you have problems accessing it from the ATO website http://www.ato.gov.au I can send you a pdf version, if you send me a private mail.
The rules in the double tax agreement are that between the two contracting states, the country that has the income-producing asset is the ‘source’ country. And the tax return should firstly be lodged in the ‘source’ country.
In the example given, where the property is making a loss, it may be academic as to in which country the tax return is lodged firstly.
However, where tax is payable, it is not academic.
Article 6 covers real property issues. Article 23 covers the source of income issues and Article 24 (2) explains how the NZ tax paid can be claimed as a credit in the Australian tax return.
It should be self-evident that you cannot claim the tax paid until it has been paid. So, where tax is payable in NZ, the NZ tax return should be lodged firstly. Then the Australian tax return can be lodged claiming the NZ tax paid.
If the Australian tax return is lodged firstly, there will be no NZ tax paid to claim as a foreign tax credit.
If you have a problem accessing the DTA, send me a private mail and I can email it to you.
Kind regards
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
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