Trans-Tasman investment taxes
Question from Geoff updated on 20th July 2016:
My wife is from New Zealand and I am Australian and we are based in Sydney. We are looking to invest in New Zealand property. To that end, are there any tax issues that we need to be mindful of in doing so? Any other general advice to consider when in this situation would be appreciated too.
Our expert Mark Withers responded:
Firstly, check with the lenders first: New Zealand banks have recently announced they are no longer keen to lend to non-residents.
Secondly, expect to file a IR3NR non resident tax return in New Zealand as the rent here is New Zealand derived income. The income is also assessable in your Australian return but you will get credit for any tax paid in New Zealand. Since Australia repealed its foreign loss quarantining rules you have been allowed to offset losses on New Zealand properties against your income in Australia.
Check with an Australian advisor about the tax issues associated with accounting for any forex movements in the debt instrument if you borrow in New Zealand currency. Because you are an Australian tax resident you will still be subject to capital gains tax in Australia despite the property being in New Zealand.
New Zealand and Australia have different balance dates but, for practical purposes, this is generally ignored when bringing an New Zealand result to account in Australia.
Some rights to deductions differ between the two countries. For example, we can depreciate chattels and fitout but not buildings. The New Zealand accounts will therefore need to be adjusted for Australian rules when filing 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.