Cross border tax issues

Question from josh updated on 22nd March 2018:

One year ago I moved back to New Zealand after living in Melbourne for seven years. I have an apartment that I rent out in Melbourne that runs a a slight loss after all costs are taken into account. I'm feeling a bit lost and feel I might miss out if I don't do my New Zealand tax return correctly.

So my questions are: 

  • Can I offset these costs against my New Zealand income to pay less tax in New Zealand?
  • Do I still need to do a tax return in Australia - now that my only positive income is in New Zealand?
  • What about depreciation on the Australian property? Does this effect anything? How much can I depreciate my property and is there any benefit in doing so?


Our expert Mark Withers responded:

You can offset these costs against your New Zealand income to pay less tax in New Zealand. You must file a return containing your Australian rental income. Be careful to return the foreign exchange fluctuation if you have any Australian debt. Remember also to register as a payer of New Zealand non resident withholding tax or approved issuer levy that is payable on the Australian interest.

You do still need to do a tax return in Australia because the property is income derived in Australia so a return needs to be lodged there. They have a first taxing right on the income. Any tax paid in New Zealand should be available as a credit against the same income declared in New Zealand.

No depreciation is available in New Zealand on the building, only on the chattel items. So you must use New Zealand tax law to file in New Zealand and Australian tax law in Australia.

Do get some professional help if you need to. There is nothing simple about cross border tax issues!

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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