Taxing land question

Question from Janis updated on 5th November 2015:

I have one hectare of land for sale in Raetihi. The power is connected and the water and telephone cables are laid. It was bought while I was living in NZ.

However, I am now living in Australia. If I sell this property does my change in domicile mean the regulations set down for an overseas investor now apply to me? If so, can you advise what this would mean - and especially whether a financial penalty responsibility applies?

Our expert Mark Withers responded:

Because the land is in New Zealand, our country would hold the primary taxing rights over any income generated from it. This might include taxation under the land transaction provisions if purchased for onsale or if it has been subdivided, etc.

However, Australia also has a capital gains tax. On becoming an Australian tax resident, the property would have a deemed cost at the market value when you became resident. Australia does have some temporary resident exemptions from tax on foreign income depending on your circumstances. For this reason, you should seek tax advice in Australia before disposing of the land to check what issues may arise there.

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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