Investing in NZ tax implications

I suspect you will have to pay CGT here if you are a resident for tax purposes here. You would probably only have to pay income tax if the tax you paid )if any) over there was lower than the Australian rate.

have a look at http://www.bantacs.com.au for some free brochures.

Terryw
Discover Home Loans
North Sydney
[email protected]

Hi Bevan,

Okay, let’s start with the easy tax issue. You are buying an income-producing asset in another country. So you are involved in international tax issues, namely the double tax agreement between Australia and New Zealand.

This means that tax returns shpuld be lodged firstly in the source country, namely New Zealand – where the income-producing property is located.

If there is tax to pay – a net profit has been made – tax is paid firstly in New Zealand and then in Australia. However, you claim the NZ tax paid as a foreign tax credit in Australia. So you might pay a top-up tax if the Australian tax rates are higher than the NZ rates.

If the property is owned in your own name, you will pay CGT in Australia if a capital gain is made on the sale of the property. There is no CGT in New Zealand, so you won’t pay it here.

If the property is owned in your name, and it is negatively geared – a lot of borrowings – you can claim the tax loss against your income in Australia. So that might be attractive.

If the property is breaking even or making a small loss, and you consider that substantial capital gains might be made over a 5-10 year period, you might consider a structure that will allow you to defer or avoid CGT.

The structures are not simple, but they are also not costly. They can also be used for investment in properties in the USA.

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