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Capital gain tax for Aussie tax resident

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  • Capital gain tax for Aussie tax resident

    Hi all,

    Looking for some advice here. We moved to Aussie in 2016 and we are tax residents in Aussie now.

    We have just recently sold a property in New Zealand, and the property was a house and land package. we understand it falls into the two years bright line test and we will need to pay capital gain tax on the profits we made.

    But if we are tax resident in Aussie, do we need to pay capital gain tax in Aussie too? or do I only have to pay capital gain tax in the country where I am defined as a tax resident?

    Appreciate your comments!

  • #2
    The short answer is YES - there is a double taxation agreement that means you won't pay the full amount in Aus, you will only pay the difference between what is the tax bill in Aus LESS the amount paid in NZ.

    If you were in Aus for over 12 months then you should be able to claim the 50% CGT discount and the actual cost of the asset should be determined on the day you entered Aus which means you should have had the asset valued and you then need to take the AUD value based on the NZ valuation and the FX rate on the day you entered Aus.

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    • #3
      Wouldn't be so sure about that. I believe ATO has ruled capital gains is not taxable for SCV holders who are temporary residents. Not sure if your gain would be NZ income though - best to speak with an accountant.

      Tax rules for New Zealand citizen living in Australia

      Let’s say I buy an investment property in New Zealand for AU$300,000, and sell it for AU$400,000. As a resident for tax purposes, I would pay about $19,500 in tax on that transaction, not to mention paying tax on the rent throughout the whole period I owned it.
      A temporary resident, on the other hand, would pay $0 tax on the same transaction. And because New Zealand has no capital gains tax (so I’m told – I’m no NZ tax expert) then you don’t pay tax in NZ either.
      So temporary residents can often be better off than permanent residents in the Australian tax system.
      That’s the thanks my family gets for contributing to Australian society since 1790, albeit part of that “contribution” was convict labour and criminal activity!
      The point is, New Zealand citizens who live and work in Australia need to know if this generous tax break applies to them.
      The Australian tax system gives Kiwis an advantage over every other nationality, including our own. Learn more about the benefits of NZ taxes in Australia.
      Last edited by Wellington Broker; 25-04-2017, 09:44 PM.
      Your Home Loan - Wellington Mortgage Broker
      [email protected]

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      • #4
        Originally posted by Wellington Broker View Post
        Wouldn't be so sure about that. I believe ATO has ruled capital gains is not taxable for SCV holders who are temporary residents. Not sure if your gain would be NZ income though - best to speak with an accountant.



        http://www.beyondaccountancy.com.au/...needs-to-know/
        You could be right for temporary residents... no mention of temporary in the post though.

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        • #5
          You'll need to speak to an Australian accountant about this. Quite an interesting one because it's considered income in New Zealand due to the Bright Line test.

          It's possible that you're in a terrible hole in the tax law where NZ considers it income and taxes it accordingly, but Australia considers it a capital gain and taxes it accordingly, but won't recognise the NZ tax paid because it's an income tax not a capital gains tax. That's the worst case - don't panic yet as I really don't know. But you really need some specific AUS advice.

          The glimmer of good news is that Australia will only tax you on the capital gain since you became a tax resident. It adds a bit of complexity, but is better for you. Say you bought the house in December 2015 for $200k, moved to Australia in October 2016 when your house was worth $230k, and then sold it in March 2017 for $250k, NZ brightline will tax you on $50k (250-200) but AUS will only tax you on $20k (250-230).
          AAT Accounting Services - Property Specialist - [email protected]
          Fixed price fees and quick knowledgeable service for property investors & traders!

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          • #6
            Originally posted by Anthonyacat View Post
            The glimmer of good news is that Australia will only tax you on the capital gain since you became a tax resident. It adds a bit of complexity, but is better for you. Say you bought the house in December 2015 for $200k, moved to Australia in October 2016 when your house was worth $230k, and then sold it in March 2017 for $250k, NZ brightline will tax you on $50k (250-200) but AUS will only tax you on $20k (250-230).

            This is technically correct. But you need to prove the value on the date you entered Aus. If you don't have a valuation you my find the ATO will not accept you assumption of the value on the date you entered.

            There are few trans tasman tax experts, those that are about are super expensive - when we were doing trans tasman transactions we found it best to have a good Aus tax expert and a good NZ tax expert and then co-ordinate a meeting between the two. You'll pay for both of their time but it will result in the right outcome and it shouldn't take more than a couple of hours.

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            • #7
              Originally posted by Don't believe the Hype View Post
              You could be right for temporary residents... no mention of temporary in the post though.
              Well they've only been there a year - aren't all Kiwis temporary residents since 2001? Some press last week indicated there's going to be a 9 year wait for Aussie citizenship
              Your Home Loan - Wellington Mortgage Broker
              [email protected]

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              • #8
                There are other considerations such as holding entity. My accountant can probably help with this, her background is tax advisory and is well up to speed on trans tasman taxation. PM me for an intro.
                Free online Property Investment Course from iFindProperty, a residential investment property agency.

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                • #9
                  Originally posted by Wellington Broker View Post
                  Well they've only been there a year - aren't all Kiwis temporary residents since 2001? Some press last week indicated there's going to be a 9 year wait for Aussie citizenship

                  That is an interesting POV - but citizenship is not the determinant of temporary/ There are some interesting tax rulings that determine temporary. I can't recall the details but you remind me of a couple of these
                  i) If you're a kiwi and you go to Aus for work you can claim temporary status which will mean no tax implication on the property sale but you can't claim other things (i.e. medicare i think).
                  ii) You no longer claim temporary status if you hook up with an Aussie while there in a domestic relationship.

                  While i'm not an accountant, this is a topic i know a little bit about as I've paid for the advice and know the Aus tax system quite well.

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