Investing in NZ Property from Aus

[J_J]

Hi All,

I have wanted to invest in property for a while now and am going to make the commitment in the next 6 months. I have searched the site for the answers to my questions but I don't think a few of these topics have been covered. Excuse me if it has been covered before.

I am a Kiwi who moved to Aus for Work Opportunities in 2004 and plan to return in the next few years. But before then I want to get exposure to the NZ property market for my investment portfolio.

*With all of my taxable income being in Aus I want to offset the losses that I make on the investment property against the tax paid in Aus. Does anyone know if I can transfer the losses back to Australia?

*I have done research into LAQCs and at this point I think that I will set one up. If I cannot transfer the losses back to Aus, do the losses from the LAQC accumulate each year?

*Can I get finance in Australia to purchase NZ Property?

*What LVR will an NZ lender give me for the investment property and my Aus Income?

Thanks in advance.

JJ

[NESW]

Check out the ATO's website on overseas investment, its pretty straight forward what you can and cannot do and remember any profits in NZ are subject to capital gains tax when you bring them back into Aust. under our taxation rules.....

I have mentioned in a similar thread a month or so ago the potential of returning "home" as a NZ resident during the sale of a profitable transaction, however whether that is seen as tax avoidance when you decide to "return" to Australia permanently, I am not sure, but would think so.

I guess you would have to prove your intention by shipping your contents, pets, and ceasing employment in Aust' for it to be deemed genuine.

Would be interesting to hear if anyone has had a go at it!

Unless you have a line of credit arrangement with a bank in Aussie on property in Aussie, I am not aware of trans tasman lending.
We bank with the BNZ in NZ and they certainly could not do it, but offered the best lending package on the initial property when we first started about 8 years ago. We used the balance from the sale of a property in NSW to fund the difference. There are others out there, but be aware of the collapse of several finance companies in NZ recently.

General stuff, know your potential investment area well. I presume you will be investing close to "home"? This can make a huge difference, when we have been unable to attend a property sale that looked decent on the internet, family were able to go instead and steer us away from a few potential disasters...

Good luck, just know the NZ market is undergoing some changes. lots of good info here so lurk regularly..

[J_J]

Thanks NESW,

I have checked the ATO website and, like any law, it is a wee bit ambiguous. The legislation talks about claiming debt deductions but does not mention were the source of the debt is. My question is: If the debt was sourced in NZ can I still claim the interest as a debt deduction?

In terms of capital gains tax, I don't intend to sell the property until I have moved back to NZ. I therefore would not be liable for Capital gains tax Doing what you suggest would be illegal in my eyes. I see little point in trying anything dodgy.

In my little experience I have been unable to find lending for Trans-Tasman investment. I understand the reasons why banks would not lend on NZ property but I thought that there may be a company out there that I have not found that specialises in it.

Do you know what LVR an NZ lender would give me for my Aus income?

I will be investing in Whangarei, it is experiencing excellent growth and it is home. I also have good contacts in the industry and know the area well. After doing more reading today I am going to push to get the property as positively geared as possible. It may not be possible considering I want to get an LVR of 95% but I need to start somewhere. This is the reason why I need to know that the losses can be used to offset tax that I do pay here.

I am guessing that the changes that you speak of are in regards to LAQCs. By the sounds of things this is more of a reason to act now. "Make hay while the sun shines". If there is something more that I should be taking into account please let me know.

Cheers
JJ

[NESW]

For your own personal taxation issues in Australia, I would be speaking with your Accountant, and reading the ATO guildlines hand in hand. Accountants can easily get it wrong as well. Back it up with a telephone enquiry to the ATO division that is experienced with overseas investments and taxation implications.... if all three agree, then you are on the right track. If not.... then question all parties further.

Might take a few calls to the ATO though....

Most of our residential purchases initially were based on 100% finance, however our initial purchase was not for a rental but a rural property we wanted to return back to the family ownership.
I think we were offered 60% of the valuations for that one with the BNZ, 50% westpac at the time. In saying this, we came under the farming category and they have different borrowing rules again, as opposed to residential.

[J_J]

Thanks again.

I will make a call to the ATO tomorrow.

Is there anyone else out there that has experience in investing from Australia or knows if you are able accumlate losses in an LAQC from year to year.

[Monkeyboy]

Not sure about the tax losses being able to be claimed in Aus. You should be able to borrow up to 95% for the investment, however your Aus income is converted to $NZ and then scaled down by 20-25% to allow for market fluctuations. From there any lender should be able to give you up to 95% depending on your income. I do know of lenders that were offering 100% to Australians, but then the loan is only 20 years and not I/O so it's much better to get that 5% saved. The changes referred to earlier are to the market also. Due to finance companies going under lenders are really tighting up their lending criteria so what could be achieved 2 months ago is no longer valid. To get lending while in Aus i would suggest using a good Mortgage Broker. Good luck

[J_J]

Thanks,

I will make a call to Mike Pero this arvo. Do you know if the losses in an LAQC accumulate each year, or is it, if you don't claim the losses in one year then you can not carry those over to the next year?

[Monkeyboy]

Hi JJ

Yes you can certainly carry your losses over from year to year. I know of someone who is now working in NZ and not payting any personal tax due to all the losses he made on his property while he was overseas. Perfectly legitimate.
I did also mention seeing a Good Mortgage Broker who knows the investment angles. Look for one that wants to help you move forward. Try Scoob for some great advice. I know he recently had a couple of clients in Australia and abroad.

[J_J]

So.... I have spoken to a bloke from Peros in Whangarei and he seems like he is on the pulse of the market up north.

I am pretty sure that I am not going to worry about trying to claim any losses in Aus and keep the entity separate, but it would be good to know what the ruling is so I can weigh up the options.

Looks that there is a bit of work required to get the LAQC set up, so before I start seriously looking at property I need to sort out the structure first.

Any further advice would be appreciated.

Thanks Again
JJ

[NESW]

For the aussie portion of advice, you are going to have to speak to someone this side of the ditch, but have you tried to speak with the ATO in the first instance?

There is also a fair bit on their website about carrying forward overseas losses etc. A good starting point that should assist with your initial queries.

I print out the bits that I read so if the dog bites me on the bum later, I have it in writing....

[J_J]

Sweet as, I intended to call the ATO on Monday, but didn't find the time. I need to get all my facts together first so I don't sound like a punter.

It is great advice, go to the source, don't get it second hand.

I have printed the pages fom the net but it does not mention where the funding comes from for it to be claimed as a deduction.

I want to get three oppinions, One from someone that has done it before. One from the ATO and a thrid from an Accountant.

[NESW]

Some bits of interest from the international section of Individuals in the ATO website:

http://www.ato.gov.au/individuals/co...1/002&st=&cy=1

http://www.ato.gov.au/large/pathway.asp?pc=001/009/039

http://www.ato.gov.au/individuals/co...1/002&st=&cy=1

http://www.ato.gov.au/individuals/co...1/002&st=&cy=1

Enjoy!

[J_J]

I have read most of that before, but what I hadn't really thought about is the CGT.

It seems interesting that if you cease to be an Aussie Resident then you will have to pay CGT on the property that you have in Australia. Once again I am not too sure if this applies to my situation because the property that I will purchase will be in NZ.

These are the things I do know:

I am an Australian Resident
I am a New Zealand Citizen
If I set up an LAQC, it will be a New Zealand Company
The Property is in NZ
The Financing will come from NZ
I currently pay tax in Aus.
The Losses on the LAQC will accumulate so I can use them in a few years when I move back to NZ

What I currently don't know is:

Will I have to pay CGT on the NZ Property when I move to NZ?
Can I transfer losses on the property back to Aus to offset the tax that I pay?

What I have to weigh up here is:

If I keep the entity in NZ, I presume that there are no Aus tax implications at all. From an Australian perspective, keeping it as simple as possible. But if I choose to claim the losses in Aus I will get the benefit from the losses straight away but the structure is much more complicated.

I need to weigh up the pros and cons and make an informed decision.

I appreciate your discussion on my situation.
JJ

[NESW]

JJ I think you need to find a very good Accountant who is up with trans tasman investing who can advise and tailor a plan for your needs.

Unless you can locate here a Kiwi accountant practising in Australia, I would be heading to a highly recommended firm within your general area.

Most Accountants here seem to throw their hands up in the air and say they don't want to know when it comes to overseas investing...

I also know if you were to set it up under a NZ Trust structure there is a requirement to report to the Aussie authorities of the structure.

I presume it might be the same for a Company structure as well, but I am speculating on this point and my thoughts are not to be taken as fact.

Are you going to go home permanently some time?

[J_J]

I have a referral to an accountant from a Kiwi mate in AUS who has property in NZ. I will be speaking to him about my situation after I have a cleary idea of what I want to achieve.

I do intend to move back to NZ permanently in the next few years.

At the moment I am trying to get as much info about what the normal practices are. Alot of the time the law can say one thing but what is practised in the industry is totally different. I am hoping to find others on this site that are in simaler situations to find out how they structure the deal.

Do you know of anyone that I could PM?

Thanks
JJ