Best tax options for move to Australia?
Question from Ray updated on 24th December 2014:
Hi, I am moving to Australia for a two to three year project and I have a freehold home in NZ which I am wanting to rent out while away to family. The rent will be by auto payment into my NZ bank account, so won't this get taxed anyway without having to fill out tax forms? Will the Australian tax department be interested in this arrangement? What are my best options?
Our expert Mark Withers responded:
The net rental income from the property is assessable for tax in NZ because it is income derived in NZ. You will need to prepare a rental statement and file a tax return in NZ. The question of whether you will now become non tax resident is also now a moot point. You should consider completing the IR886 tax residency declaration before departure. Where you retain a "permanent place of abode" in NZ you can remain NZ tax resident despite living and working in AUS. If this were the case your Australian income would also be assessable here which may mean the tax rate on the rent is higher. You may also be considered to be tax resident in Australia and be expected to declare the same income in Australia. In Australia you would be given credit for any tax paid in NZ but because their income tax rates are higher a top up may be required there. Australia does though offer a temporary residents exemption that may exempt you from this provided you meet certain eligibility criteria. Australia also has a capital gains tax and your NZ property could be impacted by this if you become Australian tax resident. You should take tax advice in NZ and Australia to properly determine your tax obligations in both countries. It is a focus area for IRD with a newly released interpretation statement on tax residency and some high profile test cases winding their way through appeals at present.
Mark Withers and his team at Withers Tsang & Co specialise in advising on property related transactions, valuation and restructure services and tax planning.