Technically, if you become a shareholder in the LAQC, you would be subject to the CFC (controlled foreign companies) Regime. This would normally mean that you would return (declare) in Australia your income interest in the company.

As there is a double tax agreement between Australia and New Zealand, I believe that the arrangements…[Read more]

No, there have not been any tax-related issues or queries from the ATO in regards to any of the Trusts that we have set up. We have been setting them up over the last two years, so there has been opportunity for the ATO to query them with the Australian resident taxpayers who are using them.

That does not mean that they could not be…[Read more]

The Trusts that we set up are NZ qualifying trusts, not NZ Foreign Trusts.

NZ Foreign Trusts are not illegal. There are situations where NZ Foreign Trusts are suitable for certain overseas (to NZ) investors and their foreign-sourced income.

The ATO is not concerned with NZ Foreign Trusts that are used legitimately. They were correctly…[Read more]

In New Zealand, everyone has been speculating about when the market is going to top out. Most of us thought that after two years, the market would slow down. Well, we’ve seen four years of growth and the market still is growing. So, none of us are predicting its early slowdown.

To be true, many of the yields are falling as the…[Read more]

Well, there are a number of advantagesm compared to Australia –

* no stamp duty
* no capital gains tax
* higher rental yields (rent/investment)
* can structure for cash-flow positive investment – self-funding
* good capital growth

Do you need any more reasons?

Christopher Raynal
Master Accountants Group Limited
PO Box 46018 Herne…[Read more]

In case it was not clear, not CGT would be paid in either country on these deals. Income tax would be payable. To qualify for the 50% CGT exemption in Oz, you would have to own the property for twelve months and one day – from the date of purchase as per the Sale & Purchase Agreemens to the the date of sale.

Your money partners would be…[Read more]

Even though both Australia and NZ tax property trading or development income in a similar way, there is still the opportunity to reduce your overall tax bill if the marginal rates that you pay in Australia are above 33% – quite likely as the top rate is 49.5%.

With the extra information that you have supplied, it does look like a NZ…[Read more]

GVs are Government Valuations (used for council ratings purposes and apportionment of purchase costs by accountants) and RVs are Registered Valuations (used by banks for lending purposes).

PS. Funny that about my name coming up. Must be Karma!

Christopher Raynal
Master Accountants Group Limited
PO Box 46018 Herne Bay
Auckland New…[Read more]

It may already be too late to set up a structure for the project.

You have bought a section of land and are building on it. When you purchased the section of land, it would have been in your own names (presumably), and you have expended money on building the development.

Are you going to sell to a new structure to carry out the…[Read more]

In our trustee companies, the investors are also the directors – the only directors. And the Trust Deed ensures that only they are the persons authorized to appoint and remove trustees. There are many protections included in the Trust Deed.

Our trustee company acts as a co-trustee to ensure that the Trust is regarded as being…[Read more]

An LAQC is a Loss Attributing Qualifying Company. It is a NZ invention, and only assists NZ tax residents. The normal situation is that the losses of a company have to stay in the company to be offset against future (hopefully) profits.

In an LAQC, the losses are attributed to the shareholders in proportion to their shareholdings in…[Read more]

Yes, the proposed structure quarantines the capital gain in NZ, where there is no CGT.

The style of the corporate trustees and Trust ensures that the Trust is only a resident NZ Trust and is not considered an Australian resident Trust.

As it is not an Australian resident Trust, it does not need to lodge a tax return in…[Read more]

The ATO Ruling is IT 2360. If you have problems accessing it from the ATO website http://www.ato.gov.au I can send you a pdf version, if you send me a private mail.

The rules in the double tax agreement are that between the two contracting states, the country that has the income-producing asset is the ‘source’ country. And the tax return…[Read more]

I was wondering if it was you. The username made me guess.

Yes, the NZ qualifying trust that I set up for you will suit the purpose of either share trading or share investment.

Kind regards

Christopher Raynal
Master Accountants Group Limited
PO Box 46018 Herne Bay
Auckland New Zealand
Ph +64 9 360 3259
Fax +64 9 360…[Read more]

That is correct. There is no capital gains tax in New Zealand. So, where you make capital gains in New Zealand, you will not have to pay CGT to IRD.

However, if you own the shares in your own name, you will have to pay CGT to the ATO.

The solution would be to own the shares in a suitably structured New Zealand Trust.

You can do on-line…[Read more]

That is a very good question. I am asked the same question by NZ taxpayers that own rental properties, and my answer is always the same.

Let’s say that you have a chattels valuation (statement of estimated building construction costs as per TR 97/25 for our Australian taxpayers) prepared when you purchase the property, and you claim…[Read more]

Australia had the special building write-off, now called a capital allowance, that allows writing off the building cost at 2.5% straightline per annum.

The only problem is that the allowance only started from 19th July 1987, so any construction before that date cannot be claimed for depreciation.

That is why your Australian tax…[Read more]

The issue with ‘tainting’ is that the tax-free status of capital gains is compromised. They are taxable, in other words.

Where there is an association between the persons owning each of your Trusts, any rental properties purchased after the property trading commenced will have the capital gains tainted for up to ten years.

If the properties…[Read more]

I would have thought that all tax agents would know about double tax agreements, but I have come up against one Australian tax accountant that showed complete ignorance of DTAs.

I qualified and practised in Australia, so I think that he must be the exception to the rule.

You might have to do an internet search of Yellowpages in South…[Read more]

You might be worrying needlessly.

Your investment in New Zealand comes under the double tax agreement between the two countries.

The country where the income-producing asset is located is the source country so is entitled to tax in the first instance.

Even if the property is making a loss, the tax return should firstly be…[Read more]

Okay, let’s start with the easy tax issue. You are buying an income-producing asset in another country. So you are involved in international tax issues, namely the double tax agreement between Australia and New Zealand.

This means that tax returns shpuld be lodged firstly in the source country, namely New Zealand – where the…[Read more]

A lawyer that we recommend is Jeffrey Ng in Auckland. His rates are very reasonable and he does a great job on checking mortgage documentation to make sure it has been done correctly. He has corrected some banks and they had to admit that they had got it wrong.

So if you want someone on your side who specializes in property…[Read more]

I have made several postings to similar forums asking the same questions.

We are a firm of property specialist accountants and tax advisers in New Zealand, and provide low cost setup and low cost administration structures for overseas investors to buy New Zealand and US properties.

If you are interested, send me a private mail so I can…[Read more]

Thanks for those links. It is nice to have the guides at the ready to quote them.

I have noted that most of the legislative references to definitions etc refer back to the 1936 Act.

It has mystified me as to why this part was not included in the progressive rewrite of the Tax Act since 1997.

But who are we to question the…[Read more]

The research that you have done is much appreciated.

This is more along the lines that I had found and was able to develop options for clients.

Just reading the guide from the ATO makes one give up hope and think that there are no options. It takes reading in between the lines and the sort of questions and answers that you put to the ATO…[Read more]

You might like to read the legal article in this link for an example of who a transferor is http://www.findlaw.com/12international/countries/nz/articles/2224.html

Christopher Raynal
Master Accountants Group Limited
PO Box 46018 Herne Bay
Auckland New Zealand
Ph +64 9 360 3259
Fax +64 9 360 2180
http://www.masteraccountants.co.nz

I am no longer operating in Australia as a tax agent, so I do not have standing with the ATO.

When I have these kinds of questions, I relay them through associated accountants in Australia, and they obtain the information or opinions requested.

That is so in this case. Private rulings have not been applied for. The ATO record on private…[Read more]

I advise that the NZ Trust also has an independent NZ resident trustee, whether as a company or not. In this way, there are two resident NZ trustee companies.

The Accounts and tax returns are prepared and lodged in New Zealand. The minutes are maintained and recorded in New Zealand. Buying trips are obviously conducted in NZ, and…[Read more]

I know that we have had this debate or discussion going on for awhile.

Can I ask you if you have contacted the ATO about what is a transfer and what is a purchase? Have you put different scenarios to them for clarification?

When a Trust purchases property, it is not a transfer. When an already owned property is sold to a Trust, there is…[Read more]

Currently, as you own the rental properties in your own names, you will have to lodge tax returns in New Zealand and in Australia.

It would make more sense to prepare the NZ tax returns, and then use those Financial Accounts for the Australian tax returns – with adjustments just for the different depreciation bases and rates.

When the…[Read more]

The solution is to liquidate the company and pay out the capital gains to the shareholders as the proceeds of liquidation.

It does mean closing down the company, and it does mean that all of the properties should be sold, so all of the capital gains have been crystallized.

In NZ, this would preserve the tax-free status of the capital…[Read more]

In answer to GP, there are some differences in NZ trust law compared to other jursidictions, the main difference being that the tax residence of NZ Trusts depends on that of the settlor, whereas other trust jurisdictions depend on that of the trustees.

Where the trustee does not distribute all of the net income of the Trust, the trustee pays…[Read more]

Yes, I am sure about what I have said about the Trust Transferor Rules.

If you remember, the Rules go as follows –

Under transferor trust measures, tax is imposed on a taxpayer where they have transferred property or services to a non-resident discretionary trust or, after 12 April 1989, to a non-resident non-discretionary trust for…[Read more]

I know that you have posted that information earlier, and probably more times than you care to remember. As new members join, they may come up with the same questions as others. It is too hard to look back on all the question on the forums.

This still leaves the question unresolved of whether the loan taken out in the…[Read more]

We set up NZ Trusts in a way to avoid CGT in Australia. Our cost for the structure is $NZ600.

If you send me a private mail with your email address, I can send the info and attachments.

The structure involves an NZ Trust with 2 NZ resident company trustees. This avoids the ATO deeming the Trust to be an Australian Trust.

As long as any…[Read more]

You have not actually said what advice you received from the other accountant or what the conflict is.

In the absence of that, there is nothing preventing you from buying the family home in a Trust and renting it to yourselves.

There just won’t be a tax claim available where the rent received is less than the expenses. In any event,…[Read more]

Yes, New Zealand does have a more benign tax regime for foreign property investors.

However, the ATO introduced ATO ID 2002/764 with effect from 1st July 2001. This interpretive decision effectively allows for the claiming of foreign rental property losses where the interest deduction gives rise to the bulk of the foreign property loss.

It…[Read more]

The way that tax law works, you can effectively claim for the other NZ property expenses.

Tax law says that an expense can only be claimed once against the relevant income. Once you claim the property interest in your personal tax return, the ‘balance’ of the property Accounts will be likely to show a profit – if it is the interest…[Read more]

The last comment was correct to the extent that there is not a 100% CGT exemption when the family home is owned in a Trust. However, the Trust would still be able to claim the 50% CGT exemption where the beneficiaries of the Trust are the same family members living in the house.

It looks like the ATO doesn’t want families to own the family…[Read more]

Any way that you try to cut it, any attempt by whatever structure to purchase a family residence and claim the expenses (or excess of expenses over income), is doomed to failure. The ATO would rightly regard the dominant reason for the arrangement to be tax avoidance, and strike it out.

Christopher Raynal
Master Accountants Group…[Read more]

The other contributor has suggsted correctly that you seek the advise of a property accountant. If you want some advice without the benefit of consulting an accountant, then I offer the following.

The title would be 99/1. The way to achieve it is buying the property as tenants in common. Ensure that your lawyer understands this, as they…[Read more]

The other contributor has suggsted correctly that you seek the advise of a property accountant. If you want some advice without the benefit of consulting an accountant, then I offer the following.

The title would be 99/1. The way to achieve it is buying the property as tenants in common. Ensure that your lawyer understands this, as they…[Read more]

A nice thought, but it doesn’t happen in my experience.

You have paid for the LMI upfront and there is no refund – even where you sell the property.

I would be interested to hear of anyone receiving a refund where either the property increases in value or is sold early.

Christopher Raynal
Master Accountants Group Limited
PO Box 46018…[Read more]

Rental property inspections can be claimed for as many trips are necessary or appropriate in a given year.

If repairs are being carried out, or there are changes in tenants or property managers, more inspections than normal may be required. So more claims can be made.

It would be wise to document the trips. This would involve…[Read more]

Loan Mortgage Insurance in excess of $100 is claimable over the term of the loan or 5 years, whichever is shorter. This is pursuant to ATO ID 2002/1116.

This means that the $7 800 is claimed over five years. Where the property is sold before 5 years has expired, the balance of the unclaimed insurance is claimed at that time.

LMI is…[Read more]

In your example, the $1 500 loss would be claimed as Loss on Disposal of Assets. It would be claimed in the Statement of Financial Performance (formerly known as the Profit and Loss Statement). This shows that it is a deduction on revenue account.

In general, any loss on disposal of fixed assets is recorded as a Loss on Disposal of…[Read more]

In this case, there is no capital loss. The negatively geared property gives rise to a loss on revenue account not on capital account.

What you ask happens in effect, but not the way that you envisage. A current year deduction cannot be claimed in a future year. It has to be claimed in the relevant year to which it applies.

So that,…[Read more]

In each of the three scenarios listed – the number of years before sale – the legal costs are claimed at the time of sale. They reduce the capital gain on which taxed is paid. They are capital costs and are taken into account to reduce the capital gain made on sale.

If by LMI you refer to loan mortgage interest, that is claimable each…[Read more]

Maybe you should consider another tax issue – CGT. You won’t receive the 50% exemption where the property is held in a company.

Christopher Raynal
Master Accountants Group Limited
PO Box 46018 Herne Bay
Auckland New Zealand
Ph +64 9 360 3259
Fax +64 9 360 2180
http://www.masteraccountants.co.nz

For a NZ bird dogger you can try CastleDreamer. She is a member of PropertyInvesting.com. Check out her profile.

Christopher Raynal
Master Accountants Group Limited
PO Box 46018 Herne Bay
Auckland New Zealand
Ph +64 9 360 3259
Fax +64 9 360 2180
http://www.masteraccountants.co.nz