How do you buy overseas

[crazysydneydude]

Dear All

I am looking at investing in the NZ market in the near future. Whist I have some interstate investments in Australia, and am familiar with long distance investing, I am not sure of the best way to invest o/s.

I am particularly confused as to how I should purchase, e.g, should I:
-buy with my Aust company?
-buy as an Aust individual?
-set up an NZ company or trust and buy with that?

Are there any other options? Also confused with regards to tax, if I am making rental $ in NZ do I have to file a NZ tax return?

If all of this makes no sense at all please forgive me, o/s investing is all new to me

[Marc]

Hello!

Your questions are why this web site has been created!

First off we have loads of articles in the Articles section of Pt - link below - these articles will help you understand quite a bit about how NZ works in regards to tax, finance, NZ loans, trusts, company structures.

Also read this thread about NZ trusts and company structures for overseas investors.

http://www.propertytalk.co.nz/module...viewtopic&t=93

Best Regards

Marc

[RodC]

hi dude,

I had the same questions a few months back and after quite a bit of investigation I decided to establish a NZ trust.

A lot of the reasons will come down to you own circumstances, and each structure has it's own merits. But what I found was.

Australian company: If you're borrowing funds in NZ then many lenders there are reluctant to lend to a foreign entity. They would much rather lend to a NZ entity or to an individual. I suspect the NZ tax situation would also be messy.

Australian Individual: Certainly possible, and you should be able to use funds borrowed in either country without too much trouble. (Beware of foreign exchange rate risk). In this case if the properties were positive cashflow you would do a NZ tax return (and pay NZ tax), then declare the NZ income on your Australian return. You receive a credit for the tax already paid in NZ (so you're not actually taxed twice). If you make a loss on the NZ properties (negatively geared), I don't know if this can be offset against Australian income, I suspect not. Also if borrowing in your own name in NZ these borrowings may affect your debt servicing levels for any future borrowings you may want in Australia.

Trust: I set up a NZ trust with a corporate trustee. With this structure borrowing in NZ is not a problem as the corporate trustee is a NZ entity (you will probably have to go guarantor). With this structure the NZ properties are operated completely seperately from any Australian properties. The trust files a NZ tax return. The trust can either retain income for future investment (in which case the trust pays Nz tax) or the trust can distribute income to the beneficiaries. The beneficiaries then pay NZ tax on this income, and receive a tax credit in Australia for the NZ tax paid (same as individual ownership). If the trust makes a loss, this loss can be offset against future income. This structure keeps any borrowings completely seperate from Australian borrowings and should not have an effect on your ability to borrow further in Australia.

As marc said, have a read of some of the other posts on this topic and check out the trust article on the site.

Also note: I'm not a lawyer/accountant etc. So please do your own research.

regards,

Rod.

[crazysydneydude]

Rod and Marc, many thanks for your helpful advice I see now that a lot of my queastions have been covered previously.

So would I be right to think that most Aussie investors would be using a NZ trust? I seems like the safer and more logical option.

[graemeh]

Trust: I set up a NZ trust with a corporate trustee. With this structure borrowing in NZ is not a problem as the corporate trustee is a NZ entity (you will probably have to go guarantor)............

This structure keeps any borrowings completely seperate from Australian borrowings and should not have an effect on your ability to borrow further in Australia.

I think you will find that because you are guarantor for the trusts borrowing, this will affect your ability to borrow further in Australia in the same way that borrowing in your own name would.

If you have a low enough LVR or high enough income in the trust that you can do this without the bank requiring a guarantee then it won't affect your future borrowing.

[RodC]

Hi Graeme,

Yes, I guess strictly speaking you're probably correct, if they know about it. When applying for loans I've always been asked about existing borrowings in my name. But I've never been asked about anything I've given Guarantees for.

My main reasons for setting up the trust were to keep all NZ investments as a seperate self funding (these are cashflow positive propertys) entity which could borrow in NZ. Another consideration was keeping the NZ income in NZ for tax purposes. With this structure there should only be Australian tax implications if distributions are made to the beneficiaries.
Even if I do have to advise Australian lenders of the NZ guarantee, I don't consider it to be an issue as the LVR is ok and the properties are self funding.

Rod