Tax claims for Oz properties

[matapouri]

Hi all from an Aussie now living in this great land. My firstquery is, can I claim on my NZ income tax, any expenses incurred on my Australian IPs? Namely travel to view my Oz property.
Thanks in advance.

[masteraccountants]

Hi Matapouri,

Yes, you can claim reasonable inspection costs for your property in Australia. There are rules to be observed.

It would be wise to keep a travel diary or log of the trip. Let's say that you go for one week and are involved with the rental property matters for two days out of the seven days, then you could claim 2/7 of your travel costs - airfares.

If you were to hire a car for those two days, you could claim the car costs, including car hire and fuel for those two days. Otherwise apportion the costs for the two days.

You can claim for accommodation and food costs for the two days.

If you arrange the trip in advance, send letters to the rental manager. After the trip, send a thank you letter. The more evidence you have in written form to substantiate the trip and its purpose the better. People move on, and the ATO may audit you in 5 years time, long after the rental manager has changed jobs and cannot be contacted to verify what took place.

On the airfare issue, if you have a wife and she is a co-owner of the property, then her share of the claim will be allowed. Otherwise it won't be allowed. As far as any children go, it is a case-by-case consideration. Seek advice on these specifics before leaving, so that you don't have to say, "Oh no!", after the trip.

The other good thing is that you can claim the travel costs in both your Australian and New Zealand tax returns. This is one of the few exceptions to the general rule that you can only claim once for an expense.

[matapouri]

Thanks Chris for your reply, much appreciated. Same rules as in Oz.
One more clarification needed, to sort the hearsay from fact. Can I claim losses incurred on my Aussie IPs with IRD, against my NZ income? As they are not yet cash positive we are in a dilemma on whether to hold or sell, as we need to sink $$(NZ) into the upkeep of mortgage. And our relocation costs to NZ are blowing out from our original estimates. not a problem as it is a long term strategy and we will grin and bear it. But if we can have some clawback from the govt, then it will help and when you get $$ back from the taxman it alleviates the initial pain!!!

[masteraccountants]

Hi Matapouri,

If you have carried forward losses in Australia prior to becoming a NZ tax resident, you will not be able to bring them forward to your NZ tax.

However, you can claim your Australian rental property losses in NZ against your NZ tax from the time that you became a tax resident of NZ. Where you are in paid employment with PAYE tax being deducted, you need not wait for the end of the year (31/3/05).

Similar to Australia, you can vary your PAYE tax rate with your employer. You, or your accountant, fill in an IR23BS and apply to vary your tax rate for the losses on rental property investments. IRD will send you a copy of the variation that you pass to your employer.

Your take home pay increases by the reduction in the tax...with each pay.

You may like to look at that option.

[matapouri]

Wow thanks again Chris for your prompt reply , you haven't got an office in Whangarei? Greatly appreciate the advice. I will have to wait intil the new tax year here, as I have worked in Oz(3 months of 2005/2006) and will benefit from the short work period there, and claim against the OZ properties. So will wait till after March to begin Oz IP write offs with NZ IRD, and no more ATO relationship.

[cube]

Hi masteraccountants,

Thanks for this and many other useful and informative posts.

Long may you continue to make such a valuable contribution to the community, helping to make it the wonderful resource it is!

cube

[masteraccountants]

Hi Cube,

Thanks for the kudos. Flattery will get you everywhere - contrary to the saying that says the opposite I'm happy to help. I suppose that I can't stand by and let misinformation run riot without putting up my hand and clarifying what may not be common knowledge for the average person but is known to professionals practising in the area of interest.

Now to Matapouri,

It sounded from your last posting that you were gleefully thinking that you would soon see the last of the ATO. If you still own a rental property investment in Australia while you reside in New Zealand, you will have to keep on lodging tax returns in Australia as well as lodging them in New Zealand to declare/claim the rental property income and expenses.

If the property is running at a loss, you will have to keep your Australian tax returns up-to-date, or suffer a penalty of $100 for each late lodged tax return. When and if you eventually sell the property and make a capital gain (hopefully), you can claim your 50% capital gains exemption and then apply the carried forward losses from the annual tax returns to reduce what CGT you might otherwise have to pay in Australia. You don't get off the hook so easily.

However, by keeping your Australian tax returns up-to-date, you do not pay the annual penalty of $100 for late lodgement and you carry forward the losses to claim against the future capital gains tax payable. Knowing the total amount of carried forward losses may assist you in tax planning - like when to sell the property and how much CGT might be payable. That can be useful to know in advance.

No, I do not have an office in Whangarei. I have a client in Whangarei. I do his business and property investment Accounts. I know it is nice to be able to see your accountant - hey, I do offer my overseas clients web conferencing and audio conferencing, using MSN Messenger, so they can see and hear me, and also saves on expensive phone calls

The good news is that your Australian accountant can use the NZ Accounts for year ended 31st March as being 30th June, and just needs to make an adjustment for different depreciation rules on property. So the accounting costs don't have to be double.

[matapouri]

Wow Masteraccountant, you need to be promoted to Grandmaster plus, thanks for the great advice. Will have to digest it at a more leisurely time as I am off to help the NZ economy!!

And cube said it all.

Many thanks