What should I consider prior to leaving NZ and my rental?

Question from Dan Corkin updated on 22nd July 2009:

Hello, my wife and I are considering a move to live and work in the UK. We have a house in our names and wish to keep it, rented out, with the intention of returning to it in a few years time. We plan on using a property company to manage it and want little or nothing to do with it whilst we are away. What's the best way to ensure its kept safe i.e. trust/private ownership and what are our obligations to the IRD or anyone else. Thanks Dan

Our expert Mark Withers responded:

Before talking structures it is probably necessary to determine your tax residency status by completing an IR886 declaration that considers whether you have an "enduring relationship with NZ". Some structures are not appropriate if you are non NZ tax resident, for exanple, to be a LAQC the companies management base must be located in NZ.

This may well rule out this option and there can also be issues for trusts if the settlors emigrate. On the face of it I think I'd be inclined to suggest you leave the property in your own names. This will keep life simple and ensures that your only tax obligation is to file a non resident return here in NZ that declares your NZ derived income while you are away, ie the rent.

If you have not severed your ties with NZ and conclude you are still a NZ tax resident your worldwide income and the rent is all still assessable here in NZ, hence the importance of the IR886 declaration so that some certainty can be gained on your tax residency prior to departure.

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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