Moving to Australia / Property in Auckland

[Andrew312]

Hi all,

Apologies if this is a simple question as I am not too versed in all this stuff, but looking for some guidance if possible.

My wife, young daughter and I (all NZ Citizens) are moving to Brisbane very shortly from Auckland. My wife has an job lined up and starts in early September and i am finishing my work up here before heading over there in late September / early October (will be seeking employment once over there). While you never know what the future holds, we are treating this move as permanent as we want to be closer to family/desire a warmer climate.

We have a family home here that we have decided to keep and rent out in East Auckland. We have owned this property since 2010 and we have a mortgage. We jointly own this property under our personal names.

What advice should we be seeking re the move/tax? I understand that in the future (although it would definitely not be our intention) if we sell the property while living over there it would be subject to CGT? Would this apply to the increase in value from the day we moved over? The property has essentially doubled in value in the 9 1/2 years we have had it etc.

Once again any advice on what steps we need to take before leaving would be greatly appreciated.

Cheers,
Andrew

[Anthonyacat]

For Australian tax questions, best speak to an Australian accountant. But my non-expert understanding is that your NZ rental becomes subject to CGT based on the value at the date you become an Australian tax resident, and if you then sell (or leave Australia prior to selling) the NZ property, you can be taxed on your realised or unrealised gains.

Otherwise, what sort of guidance are you after? Get a property manager to look after the property. Ask for recommendations, because living overseas you need a really good one.

[Rosco]

Hi Andrew,

There can be smart ways to structure your property, to keep it away from the Aussi tax net. Key things to do

- Get some advice from an Aussi accountant on how the capital gains tax could apply and when.
- If you want to, set up NZ structure before you move to Aussi!!! Leave lots of time!

Ross

[deechnz]

Interesting topic which might affect me. I was totally unaware that if you sold NZ property while living in Oz you had to pay CGT in Oz.

If indeed it is the capital gain from the date you became an Oz tax resident, how would that work (does it mean that people moving to Oz need to get a valuation of their property when they move to Oz, just in case they happen to sell while over there- otherwise there would be no record of the houses value at the time of moving?)

Also, I did a quick google search. The possible idea I had around this is to just move back to NZ prior to selling (you obviously wouldn't do that for just one house- but if selling a portfolio and having potentially millions in capital gains, it might be an attractive way around CGT). Anyway, I came across something which said "if I were to go back to NZ for 2 years, lose my tax residency then sell our NZ home he said then a tax avoidance clause kicks in and if you don't happen to sell the home within the intial 2 years but sell it at *any* time in the future you will be liable for CGT to the ATO. That sounds incredible to me - that a foreign government can have dibs on your money when you no longer live there but I have checked with several other accountants who have told me that is the situation".

It's a bit confusing, but I take it that they mean that you need to live in NZ for 2 years to lose Oz tax residency, but even if you sell after having lost Oz tax residency, they still get the CGT under the a tax avoidance clause. Seems crazy- basically, means that there is no escape from Oz CGT if you ever live there for a period of time. I can't find any more info about that apart from that one comment that I quoted.

[deechnz]

So I just came across this- sorry, it's a little off topic from the OG post, but also relevant to the topic of moving to Oz and the intricacies of CGT

"As an Australian tax resident you will remain subject to capital gains tax (‘CGT’) on capital gains tax assets held anywhere in the world, subject to certain exemptions and the operation of Double Trade Agreements. Your net capital gains are included in your assessable income and taxed together with your other assessable income at your marginal income tax rate."

Plus:
"If the asset disposed of was held for at least 12 months, a reduction in the taxable gain is determined.....If the asset was purchased after 21 September 1999, the gain is reduced or ‘discounted’ by 50%"

Doing the sums, and averaging the marginal income tax rate to 30%, if one was to sell up a NZ property portfolio with $3million in capital gains (=$1.5million when reduced by 50%), and then taxed at 30%, there would be $450k CGT payable to ATO (despite the fact that NZ doesn't tax for this). It heaps!

I wonder if the "tax avoidance clause" is real, as it is hard to fathom that if someone returned to NZ, lived here for 2 years or more (even selling up 20 years after a NZ return), that Oz would be entitled to $450k under a tax avoidance clause. Can anyone confirm this clause is real?

[Don't believe the Hype]

I have paid Aus CGT on NZ property having NOT sold while I was an Aus Tax resident.


If you are an Aus tax resident you're liable for CGT on your world wide assets - even if they're outside Aus and EVEN if they don't go up in local currency terms but do see appreciation in AUD terms.

You have 2 options of when to pay the tax -

Option 1 - when you stop being a Aus Tax resident a process called Deemed Disposal
> where by you pay the ATO the CGT payable between the date you entered Aus and the date you stopped being an Aus Tax Resident. This means you need to come up with cash as you're paying a tax but not selling the asset just essentially squaring the ledger with the ATO.

Option 2 - upon disposal of the asset - my understanding is that you pay CGT on the actual sale price despite no longer being a AUS tax resident.

I know this because I took option 1 - our gain (at the time) was due to currency fluctuations not actual property price growth - given the last decade of prices the decision was proven to be the best of the 2 options.

I recall there was some fish hooks for Kiwis in this legislation

[deechnz]

> where by you pay the ATO the CGT payable between the date you entered Aus and the date you stopped being an Aus Tax Resident.

Awesome, thanks for that input. I really struggle with the concept that you need to pay ATO CGT even when not selling, just because you lived in OZ for a bit and then left. Anyway, in your case, how did you record and prove the property values when you entered and left oz tax residency (are GVs enough, homes.co.nz, or do I need to get registered valuations- which I guess I might be able to get slightly favourable to my situation if I tried)?

[Don't believe the Hype]

I don't recall what we used as the valuation it was a long time ago. But ever since we've been sure to get registered valuations as we've moved in or out of Aus Tax residency.