Expat, a few tax questions

[aff67611]

Hi All. I've just been going through my budgets and am trying to figure out what I may be able to claim in April. Just looking to see if anyone knows the answers to the following. I understand that the generic answer is 'see a registered accountant' but I"m just looking for ball park answers so I can get a rough feel for what I will receive back. I most likely won't have enough money to pay for an accountant so I'm doing as much research as possible and will ease on the side of caution where I'm not sure.

1) I moved in May and have a investment property in Australia. My understanding from a forum search is I'm entitled to claim all interest, insurance, rates and maintenance costs against my taxable income. What I don't know (I may be greedy here) is do I have to claim my rental income as income? The website at htt p://ww w.ird.govt . nz/yoursituation-nonres/move-nz/temp-tax-empt-foreign-inc.html indicates I am exempt from foreign derived income for four years but my guess is that this would only apply for a positvely geared property?

2) After my company paid to move me here I had to relocate at my own cost to another city. htt p://ww w.ird.govt . nz/payroll-employers/make-deductions/staff-benefits/allowances/emp-deductions-allowances-relocation.html mentions that certain costs are taxable but it seems targeted towards employers. I'm sure most will say I should hit my company up to pay for the costs but it's not so black and white and I had to pay out of my own pocket. As part of the move I paid for:

• Fuel to drive from City A to City B
• 2 meals during the drive (8 hour drive)
• 3 weeks of paying rent at two properties because of a lease overlap.

Is any of the above claimable off my personal income or am I stuck with the costs?

3) Before I left home I started a partnership with a friend. We both took out a joint loan in our own names to finance the CAPEX to buy machinery. Since then we have been paying interest + repayments of that loan 50% each. I know back home I would be able to claim the loan servicing costs (my half of interest + monthly account fees) off my personal income. I can't find a reference on the IRD website for this. Am I able to claim this against my taxable income?

Quite a few long questions but I hope there's some simple answers, thanks in advance for any replies. I had to add spaces to the website links since the forum won't let me post links yet

Lastly, in Aus we have a program called e-Tax that you can submit online yourself. Does NZ have the same thing here or will I have to hire an accountant to submit my tax return?

[Rosco]

Hi,

It's hard to fully answer your questions as I don't know all the information. But I will provide some basic information;

I presume you used to live in Australia and now live to NZ. Did you live in NZ before this, and if so how many years before. If you have lived in NZ within the last 10 years, then the 4 year exemption doesn't apply. There are also other situations where the 4 year exemption doesn't apply, such as if you get working for families tax credits in NZ.

1) You have to return the rental profit, ie income less expenses, if there is no exemption for you. In NZ we no longer have building depreciation either.

2) No you can't claim these. They are just personal costs.

3) What income has the partnership received? What is the business activity? If there is no business activity, then there would be no deduction. If there is a business activity then you would expect income from this, such as leasing out the machinery. If this is a business, then you would return the income and claim the expenses, or your portion of them.

4) no program like e-Tax, but lots of other programs available to help you with your accounts, but not really with the tax return. IRD website does have forms or online forms to file your tax return.

Another option to using an accountant, is to draft the tax returns yourself and then get us to review them. Reduces the cost down to around $300 + GST. A review indicates what you could claim but haven't, what you have claimed but can't, but doesn't fix it for you or file it for you, plus there might be other tax planning points I would come back with.

Ross

[aff67611]

Thanks Rosco. I've never lived in NZ before and intend on being here for a few years until the earthquake related work in Christchurch dries up - or longer if I can it's a nice country. I am single with no dependents so I've never received families tax credits (and save for an 'accident' I don't intend to have any dependents!!!)

Re the 4 year exemption, I know I satisfy the conditions to claim it. My question more is, lets say Rental of $10k per year from my house. Interest/insurance of $20k per year. I'm trying to figure out if I can claim the tax deduction of 20k per year as a deduction while still claiming the 4 year exemption on the 10k rental. My guess is that if I claim the interest deduction I'll be forced declare the rental income? The answer will determine if my taxable income increases by 10k which is about $3.3k in/out of my pocket.

A little annoying I can't claim the relocation costs. I'll def be playing harder to get next time they ask me to move!

My partnership hasn't received any money. The business activity is soil testing. A good analogy would be saying I have purchased a Holden commodore to start up a taxi company with. I took out a loan to fund the initial purchase in my own name 6 months ago and have been paying P&I ever since. However I have not earned any taxi fares because I have spent the last 6 months 'preparing' the taxi for service (adding fare meters, lights, EFTPOS machines etc...). [end analogy]We are actively preparing the company for business and will be starting to advertise within a couple of weeks, however I'm still out of pocket for interest the last 6 months and I don't envisage the partnership paying that back. The loan is 100% for the CAPEX costs of the new businesses (we used it to buy a Mercedes Benz truck and are funding the remaining manufacturing/engineering from our own savings).

I'll have a think about using an option to review the forms. I like the idea of somebody double checking that everything is on the level. Too many friends have run into problems before.

[Wayne]

When reading income from investments you need to think net income (ie in minus out) which is what Rosco was saying

[sidinz]

You honestly expect the NZ govt/people to refund you some tax based on deductions from income you're not declaring? Yes, that is being greedy.

Others may have more expert advice, but my gut instinct would be that your loan for partnership is not deductible, either. A close analogy would be a newly-bought rental property that is off the market for renovations. While it is not available for rental, expenses are not claimable. An asset must be available for income-producing activities in order for expenses to be claimable.

[Rosco]

The interest on the new business could be deductible, depending on the exact circumstances. There needs to be a relationship with income, so while no income has been produced then the claim of expenses isn't so clear. Your Austrailia Tax year doesn't finish until 30/6/14, so I presume by then you would have earned income. Therefore the partnership would return the income and claim expenses against this income for the year up to 30/6/14.

If there is no income to 30/6/14, then it sounds a little dodgy to me and I would wonder if there is going to be income in the future.
- if the asset was sold with no real business undertaken, then there is no relationship to an income producing business so no claim.
- if there is good proof that the business will earn income in the future, then there is a relationship between the expenses and future income, so the interest would be claimable to the partnership even though there is no income.

Ross

[Rosco]

With the 4 year exemption. If you don't have to return the income, you can't claim the expense. So you can't claim the interest, insurance etc for your rental as an expense. This gives some more information on the exemption and right at the bottom is the part about not claiming expenses. http://www.ird.govt.nz/technical-tax...-migrants.html