How can we minimise our losses from overseas?

Question from Ash updated on 22nd December 2009:

Myself and my partner moved to Australia two years ago, leaving behind our rental property in Wellington. We are currently renting it out to friends of ours, and the rent falls short of the mortgage repayment by approx $50 per week. This year we have spent approx $2000 in maintenance also. What is the best way to maximise our return, and minimise our expenses? Someone suggested setting up a company to minimise our expenses. Any advice would be greatly appreciated.

Our expert Mark Withers responded:

As non-residents you are required to account in NZ for any NZ derived income. In this case this is your rental loss. This loss can be claimed here in NZ in your IR3NR non resident tax return without altering the arrangements at all. It is likely though that losses will simply accumulate in your absence because you probably won't have paid any tax here to be able to get any refunded.

A company would be a dead loss to you in my opinion as it is probably not even eligible to be an LAQC as the management base must be in NZ. Companies with 25% or more of their shareholding owned by non residents also must be audited.

Interestingly, in 2007 Australia repealed it's foriegn loss quarantining rules which may now mean that the NZ rental loss can be also claimed as a deduction in Australia against your Australian income. Get some advice from an Australian accountant on this.

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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