Hi all
We will be moving from NZ to Australia in a couple of months. We currently have our house on the market, however if it doesn't sell we will rent it out.
Given we have a large amount of equity in the place the rent will offset the mortgage costs and other expenses (rates, maintance, insurance, etc).
I was wondering if we can claim the interest and depreciation against our Australian income. Also I was wondering if there are any things we should watch out for
cheers NEV
Hi Bignev
Sounds like you have made a big decision. Good on you . As someone who has done the same, you will find there will be both rewards and challenges as a result of your decision. So be prepared for an interesting journey.
When we left we kept a rental property (and bought 2 more since), and sold our main house, so my note pertains to our experience.
I shall outline a couple of the issues we have come across that you will need to watch out for if you end up renting out:
1. Rents: these will possibly be slightly higher in NZ than what you would receive for the same money in Aus. Depending on where you live you may be better off earning rent on you NZ house and paying rent over here , as it is often cheaper in Aus ( ie you don't get as good a return on investment property in Aus). But do your homework. There are some good websites to check out rents etc.
2. Property management – You need to have a good way of having your NZ property managed. We do most of it from Aus, but do pay friends a retainer to take care of the odd thing that is a bit impossible from this side. Make sure you take a copy of the yellow pages with you when you move!!! We deal with contracts, banking, paying contractors, talking with tennants etc from this side. We also take a trip back to NZ every year or two to tidy up / renovate etc. Some folks prefer to find a good property manager and leave the lot to them – you just need to have checked them out pretty thoroughly first.
3. Taxes: Ah now at this point you should probably get a stiff drink!!! We have kept filing NZ tax returns since leaving NZ, because of the rental income. We have kept the properties negatively geared, until this last year. The ATO ( Australian Tax office) have said that they don't want to know about any losses we make in NZ as we can't claim then against our Aus income. However they do want to know about any income, as they then wish to tax it!!
Apparently there is a double tax income rule between NZ and Aus that says that one country can't make you pay tax on income you have already paid tax on, in the other country. But as we are currently discovering, ATO do look for little loops i.e NZ doens't charge capital gains tax on regular property sales (development and trading they do). Australia on the other hand do charge capital gains tax and it seems now want to dip their finger in the NZ pie as well, as New Zealand haven't!
I would suggest to get around this that you ensure the property is negatively geared in NZ. Seek a finaciali advisers thoughts, but it may be better to refinance, take a lot of your money out of your NZ house and bring it over, or buy more NZ property. The whole process was much simpler when negative gearing.
With that said it does mean that you can't claim any of your exprenses or losses against Aus income. So you end up building a NZ tax credit up.
I guess the best thing you can do is seek good professional advice. We have found that hard to come across, but currently use two good accountanting firms who are familiar with property – NZ: Withers and Tsang in Auckland and in Aus: Chan and Naylor in Sydney.
If I knew then what I know now, I would have always kept the properties negatively geared.
Enjoy the journey… both in experience and geography.
By the way the weather is a balmy 24 degrees here today!
Take care
Kwasi ( 1/2 kiwi +1/2 aussie)
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