Investing in NZ

Hey Ozharp

I answered pretty much this question in another forum a few weeks ago the following is guts of what I had to say. Hope it helps.

I own two investment properties in NZ one in Whangarei which I’ve owned since 2004 and one in Nelson which I’ve owned since 2007.

I know for sure that all of your losses are a tax deduction over here and are treated as though the property was in Australia. There has always been reciprocal tax laws between NZ and Australia but they have become even more beneficial to NZ investors and they changed in Australia, as at 1st July 2008, so that now all losses can be claimed against personal income as long as the property, therefore losses, is in your name. This includes everything from the interest on your loan, management fees, maintenance, depreciation ….. the lot!!

You need a good NZ accountant do your tax return over there which you give to your Australian accountant so they can then claim the losses against your income over here. I’m doing it myself right now. The losses can also be back dated as long as, as I said the property is in your name.

Although I’m an ex pat there are alot of Australian investors in NZ. The benefits include, no capital gains tax, no stamp duty on loans, generally lower interest rates, a much much better depreciation system, in my experience better rental returns, the bank (no matter what bank) will give you back $400 towards your legals and I haven’t tested it, so don’t quote me, but I don’t believe any mortgage insurance. But that last point is probably irrelevant anyway as not even an NZ’er living in Aust can get a loan with less than 20% deposit.

You will, if you make profit, have to pay tax on the income received. You can’t have the best of both worlds. Although in having said that, both of my properties are positive and the depreciation keeps them negative so I claim a loss. The only downside is that the GFC has tightened lending up over there, even as a NZ citizen (still), I haven’t found a bank who will take less than 30% deposit now. Aust citizens are the same.

And lastly to do what I’ve done I burrowed the deposit over here took it over there and then burrowed the rest over there. The interest on the Aust portion of the loan is claimed over here and the interest on the NZ portion on the loan is claimed on my NZ tax return.

Good luck,
Wendy

Wendy, it sounds like you're having a very positive experience over here in NZ

I have worked with a lot of Ozzie investors and the general thing seems to be to leverage property in Oz to create the deposit and borrow the balance in NZ. 

AMP (via a Roost Mortgage broker) is about the only outfit funding investors at 80% or above at the moment – I hear up to 95% for some.  The traditional banks are, as you stated, at 70% across the board.

You will need two accountants though, one doing your Oz return, and another over here to do your NZ return, ideally go for one that is a property investor themselves and specializes in property.

Just wondering why you would be heavily reliant on the property being negative?  Surely if you can find a good +CF property you will be able to leverage it and buy more rather than stopping yourself at one negative geared.

Cheers,
Vicky

Jinal,

Come over for a visit and check us out.  There are lots of good deals in NZ at the moment. 

I haven't seen good quality properties delivering over 9%+ deals in the Hawke's Bay for years, but over the past month or so they've started popping up here.

I think one reason these deals are around is because the mainstream banks are making it so difficult for people to buy investment property.  Most of the banks are being so tight with their funding by requiring 30% deposits.  First time investors have a chance, but people that are at all leveraged up are being eliminated from these wonderful buying opportunities.

My best advise is to get your finance pre-approved so you can take advantage of the opportunities.

Cheers,
Vicky

Chiz
re investing in an alternative entity, just be careful.  While there are obvious benefits as far as asset protection of setting up a trust etc, these are far outweighed by the negatives on the tax side imho. 

If you own the o/s property through a trust or company, any tax losses you make will be trapped in that entity and can only be used against income that is earnt through the entity.  As an individual you can claim those losses against other income (as i said in my post on the other thread). 

Just dont buy in NZ thinking you'll save a fortune on CGT. You are still charged in Australia!  Also – if the NZ govt does introduce a CGT like the rest of the western world (like they are talking about doing) it may have a neagtive effect on property prices there. 

Cheers
Josh

Sorry, what do you mean you can leave 20% to the right purchaser?

I accept its not the bext deal going round cf wise.  

I thought it might appeal to those who were not able to get the deposit together.

For those who want to buy Investment properties, I suggest Auckland suburbs like Glenfield, Forrest Hills, Northcote, Mt Albert, Glen Innes. One friend of mine just bought a cross-leased house in Glenfield under NZ 300K last week. Those suburbs are near Auckland CBD and price against rental is very reasonable. If NZ open immigration to skilled and business migrants and NZ banks loose the lending policy, I bet those area will have good capital gain easily. Of course, you could buy better suburbs like Epsom, Mt Eden, Greenlane, Bays area at north shore if you have more budget.