Cross border tax matters

Question from raj updated on 22nd February 2019:

I am a New Zealand citizen but worked in Australia from 2008-2010. During my stay there, I bought a property where I lived with my family. My circumstances changed and I moved to New Zealand in 2011. Since then, I have been earning and filing my IRD return in New Zealand. I am also filling ATO Tax return and accumulating my rental loss in Australian property. My property is mortgaged with ANZ in Australia. I have not included my property details, mortgage repayment, legal cost etc in my New Zealand tax returns since 2011.

My question is - is it possible to claim my Australian rental loss (which comes to about $60,000 from the last seven years) in this year's tax return? Or do I have to go back to IRD and amend my annual tax returns since 2011? Do I have to show Australian investment at all to the New Zealand IRD? I have heard that from August 2018, the information will be shared by the two countries. I just want to know what my rights are and if I am doing the right thing. On the other hand, I would prefer not pay tax for my Australian rental loss.




Our expert Mark Withers responded:

Cross border matters are tricky so I will try to give talk in overall principals. As a New Zealand resident taxpayer you are required to declare your worldwide income. You are a New Zealand resident again from the first date you arrived back where counting forward you were in New Zealand for 183 days out of the next 365. Overseas income includes rents from overseas properties.

However, there is a returning resident’s exemption for people who have been away 10 years. It allows an exclusion of income from foreign assets for four years. This is to allow people to structure their affairs before everything must be returned. You can still file but then you are in for everything.

So you can and should be declaring and claiming the tax loss from the Australian property in New Zealand. Also, you will need to make a voluntary disclosure of the omissions and correct the historical returns.
Note though: if you have mortgage debt in Australia there may be forex gain/loss issues to consider in the New Zealand return. Further, if you pay interest to a foreign bank there are non-resident withholding tax and / or approved issuer levy matters to file at the same time. I would recommend you made a careful calculation of these before determining the best course of action because you may owe money for them - despite the tax loss in Australia.




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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