Can I let to a family member if I am overseas?

Question from Kay updated on 9th August 2010:

If I am a New Zealander and have non-residence status and working overseas. Can I let a rental property I want to buy to a family member? Do I have to set up some sort of trust and if so what sort? How much and how long does that normally take - I am about to put an offer in on a property and want to do it correctly from the start.

Our expert Mark Withers responded:

Regardless of being non resident you can still let a rental property, nobody can stop you letting it to a family member if you wish. If you do it personally you will need to lodge an IR3NR tax return to declare the income derived in NZ. If there is a profit you pay tax in the normal way. If there is a loss there may been the need to scale back your deduction of expenses if the family member is paying a below market value rent.

There are quite complex tax rules around trusts with non resident settlors and trustees. Unless there is a very good reason to use a trust I'd consider it a problematic structure given your non residency. Remember to also take advice in the country you are resident in about the tax concequences associated with the NZ rental. 

Mark Withers and his team at Withers Tsang & Co specialise in advising on property related transactions, valuation and restructure services and tax planning.


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