Ozzie needs help

[zed]

I am considering moving to New Zealand.

As a tax resident of NZ, what tax rate will apply to distributions and dividends received from Australian trusts and companies? Can I claim back any Australian tax already paid?

Does this change if the income is received by a New Zealand trust or company?

Any advise would be most welcome, my head hurts from deciphering all the ATO/IRD combinations!

[CJ]

Tax will be charged at the tax payers marginal rate:

Individual - 15% - 39% depending on income
Company - 33%
Trust - 33% but can be distributed to indvidual, therefore see above.

Withholding tax can be claimed as a credit so in general any interest received will have sufficent foreign tax credits to cover it (ie Australian withholding tax).

Dividends are normally fully or partly franked (similar to NZ imputation credits). These can not be claimed in NZ so will result in double taxation!!!

IF you retain an Austalian company to hold the shares, this will not be subject to NZ (unless dividends paid to the shareholders in NZ). However Labour has proposed changes will will make this taxable (wait for post election talks on this one but it is very bad for the international investor so will face much opposition).

Dont know about Australian trusts.

[zed]

Tax will be charged at the tax payers marginal rate:

Individual - 15% - 39% depending on income
Company - 33%
Trust - 33% but can be distributed to indvidual, therefore see above.

Withholding tax can be claimed as a credit so in general any interest received will have sufficent foreign tax credits to cover it (ie Australian withholding tax).

Dividends are normally fully or partly franked (similar to NZ imputation credits). These can not be claimed in NZ so will result in double taxation!!!

IF you retain an Austalian company to hold the shares, this will not be subject to NZ (unless dividends paid to the shareholders in NZ). However Labour has proposed changes will will make this taxable (wait for post election talks on this one but it is very bad for the international investor so will face much opposition).

Dont know about Australian trusts.

Thanks for the info CJ, it helps....I think
I'm trying to work out the taxation impact of an Ossie with IPs in Aus. going to live in NZ and using the Aus. IP income to support me until I buy enough NZ IPs to do this.

Both countries seem to treat non-resident income quite harshly.

[zed]

I meant to ask, what's a kiwi property investor doing in London, besides getting wet?

[SEIBU]

I meant to ask, what's a kiwi property investor doing in London, besides getting wet?

Probably checking the exchange rate daily.... as well as lunchtime down the pub....

[CJ]

Zed,

While I live in London, I claim my prperty investor status by having one property in Auckland. As Seibu stated, i am constantly checking the exchange rate and when I come home, will get into it a bit more.

The problem with property is that it will always be taxed in the country where it is. therefore you will still have to do an Australian tax return. if you become non resident, you will only be tax on income sources in Australia (ie rental income less rental exp).

As a New Zealand resident, you will be taxed on your worldwide income (this is the same as most countries as well). YOu will get a credit for any tax paid in australia (with the exception of the franking credits noted above).

The major problem is that the australian tax return must be filed using Australain rules and the NZ one under NZ rules. For big multinationals, they can yuse this to there advantage but for you, it is probably best just to try and make sure there are as few differences as posible.

If your properties are negative geared, you wont pay any tax in either country.

One option is to move your australian properties into an Austalian company so it will not be subject to NZ tax. Major problem there though it will stuff you up big time with Australian CGT!!!!

If you plan to keep you properties, it may pay to talk to an accountant expert in transtasman tax as there will be costly complications (ie finance and the NZ accrual rules that most dont have to deal with - forex movements maybe taxable).

Easiest option though not the best would be to cashup and start over here.

Best option - talk to an expert accounting in transtasman and get the full picture rather than someone who has just come back from a pub lunch

[CJ]

I meant to ask, what's a kiwi property investor doing in London, besides getting wet?

Just because everyone in England is praying for Rain, doesn't mean the Cricket will be rained off. Warne has had a good start.

It rains alot less that I was lead to beleive - must be global warming.

[zed]

The problem with property is that it will always be taxed in the country where it is. therefore you will still have to do an Australian tax return. if you become non resident, you will only be tax on income sources in Australia (ie rental income less rental exp).

You're right, but the tax will be at non-resident rates which aren't nice!

As a New Zealand resident, you will be taxed on your worldwide income (this is the same as most countries as well). YOu will get a credit for any tax paid in australia (with the exception of the franking credits noted above).

I can accept that (but what happened to trans-tasman imputation and the double tax agreement!)

The major problem is that the australian tax return must be filed using Australain rules and the NZ one under NZ rules. For big multinationals, they can yuse this to there advantage but for you, it is probably best just to try and make sure there are as few differences as posible.
If your properties are negative geared, you wont pay any tax in either country.

Good point. One of the properties is not geared at all and currently gives a yield that helps support us..... but maybe I should borrow against it and use the proceeds for a tax-friendly NZ investment!

One option is to move your australian properties into an Austalian company so it will not be subject to NZ tax. Major problem there though it will stuff you up big time with Australian CGT!!!!

Why won't it be subject to NZ tax? I still have to get money out of the company to myself in NZ to live on.

If you plan to keep you properties, it may pay to talk to an accountant expert in transtasman tax as there will be costly complications (ie finance and the NZ accrual rules that most dont have to deal with - forex movements maybe taxable).

Easiest option though not the best would be to cashup and start over here.

I'm starting to believe that expert trans-tasman tax accountants are mythical creatures, the ones I've paid (dearly) for haven't come back with acceptable answers.
Cashing up is not an option for CGT reasons.

Best option - talk to an expert accounting in transtasman and get the full picture rather than someone who has just come back from a pub lunch

Ain't life grand
Thanks for your thoughts CJ

[CJ]

Why won't it be subject to NZ tax? I still have to get money out of the company to myself in NZ to live on.

Good point. It wont be subject to tax as NZ does not tax you on investments held in Australian companies (As noted above, Labour proposes to change this). However you will need to get money out which the obvious way would be dividends. These would be taxable in NZ.

There are too many problems with this as you will have CGT issues getting the houses in there in the first place.

How does CGT work in Australia?? 50% of your marginal rate if held for over 2 years?? FI so the best optionmay be to move here and sell them slowly so that your marginal tax rate is low on the CG. - however you mentioned special tax rates for Non Residents.

To tell you the truth, i cant think of a simple solution to your problem.