Can someone pls explain why Australian residents would use a trust to purchase in NZ. Is it to do with tax?
In NZ there is no capital gains tax but when an IP is sold there can be a claw back on the depreciation claimed.
Isn’t it just cheaper to purchase in your own name rather than set up a trust? Also implications of LAQC for non residents are that company needs to be created (cost). Company then needs to file a return thats needs to be seperately audited for non residents which is a further cost.
Regards
TerryTerry
I think Aussies would have to pay tax in Australia on income earned in NZ. So even tho there is no CGT in NZ, they will have to pay CGT in Australia on any gain. Hence the benefits of a trust – to reduce tax.
But I am not an accountant so may be wrong.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
The reason we buy in trust is straight up asset protection and tax advantages.
In laymans terms with a trust, you never actually own the assets however you do have control over them and decide where to distribute the profits.
From a legal stand point, you cannot sue a trust only a company, therefore you have the ability to change the trustee from one company to another and then any legal action is against the company which holds no assets.
I hope this made some sense. Contact me if you have any other questions.
Mic
Hunter House Hunters.
Specialising in finding your dream home in Newcastle and the Hunter Valley or your perfect investment property throughout Australia.To join our database [email protected]Originally posted by Terryw:So even tho there is no CGT in NZ, they will have to pay CGT in Australia on any gain
I believe this is the case. However, I’ve had suggested to me that to avoid that you can invest in NZ through a NZ-based trust and if necessary distribute capital gain to NZ beneficiaries (perhaps a company or LAQC owned by the trust if there’s no one else). Then you don’t actually own any assets in NZ and don’t personally receive any capital gain. Of course there’s extra cost in setting up the NZ structures and any gains would have to remain in NZ.
However, I’m also not an accountant and have only had a vague outline of this suggested to me by a NZ accountant who used to practise in Australia. Confirmation of the details would be required.
GP
Originally posted by GreatPig:Originally posted by Terryw:So even tho there is no CGT in NZ, they will have to pay CGT in Australia on any gain
I believe this is the case. However, I’ve had suggested to me that to avoid that you can invest in NZ through a NZ-based trust and if necessary distribute capital gain to NZ beneficiaries (perhaps a company or LAQC owned by the trust if there’s no one else). Then you don’t actually own any assets in NZ and don’t personally receive any capital gain. Of course there’s extra cost in setting up the NZ structures and any gains would have to remain in NZ.
Sounds good but remember setting up structure with the specific intent of avoiding tax is a criminal offence! You would have to demonstrate to the ATO a very good reason for setting up the NZ beneficiaries.
Banderos,
As I say, I’ve only had the possibility suggested to me. I’d have to look into it further before proceeding that way.
Still, Australian trusts are used to help minimize tax, so I don’t see why using a NZ trust for the same purpose should be considered much different.
GP
Banderos
I can see nothing wrong with trying to minimise tax. I do not think you would be queried on your purpose in setting up a trust – it is done every day of the week.
But I am not an accountant!
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Tax minimisation is not illegal there are many legal ways of reducing you overall tax liability.
An Australian would use a trust in NZ to buy property to:
1.Provide asset protection,
2.Avoid any possible death duties and/or gift duties that may arise now or in the future,
3. Allow for the accumulation of losses to be carried forward,
4. Enable income distribution/splitting to beneficiaries to take advantage of lower tax brackets etcThose are just a few possibilities off the top of my head. All situations are different however, and it is probably dependent largely on how the Australian structure is set up as to the extent of the benefits.
Cheers
JeffHi all, just wanna ask that if i have already bought an IP in New Zealand under my own name, and after the purchase a NZ trust account has been set up, is it possible to change it such that the IP is under the trust’s name? Thanks.
Hi Dreamweaver,
Yes you can transfer the IP into the name of the Trust at a later date. It will cost you legal fees and probably something regarding the mortgage transfer etc.I probably wouldn’t bother with the one, just ensure you purchase future IP’s under the appropriate structure.
Cheers
JeffOK if you buy in your own name you lodge an NZ income tax. Pay the tax (s0b sob)and then declare your NZ tax return on your Aussie tax. Thus claiming back the equivalent of the tax paid there. This means no double taxation as an investor.
Also why not just have all funds remain in NZ to buy more anyway. Have a credit card from the offset account there for those trinkets you need here from time to time.
Sorry Banderos, couldnt resist that little tax MINIMIZATION scheme.
Options options, we all have more options the more properties we have. Happy hunting all.
DD
Don’t sweat the small stuff,and it’s all small stuff!!
“Have a credit card from the offset account there for those trinkets you need here from time to time.”
The ATO is targeting this type of setup (on about 150 individuals)…. Just letting you know….
Rgds.
Lucifer_auThanks for the reply Ibuycashflow. I gather from some of the posts on this topic that gains made in NZ would have to remain there. Is there an intelligent yet legal way of transferring gains made in NZ into Australia without having to sacrifice the tax advantages available in NZ? Thanks.
I’m not an accountant, but from my understanding…
Originally posted by dreamweaver:I gather from some of the posts on this topic that gains made in NZ would have to remain there.
It’s not just a matter of them remaining there. They can’t be gains that you personally have made, otherwise you still have to declare them as foreign income for Australian tax purposes.
The suggested idea was that income or gains made in a NZ trust would not count as yours as long as they weren’t distributed to you.
Is there an intelligent yet legal way of transferring gains made in NZ into Australia without having to sacrifice the tax advantages available in NZ?If you mean transferring into Australia so that you can use the funds yourself, then I don’t know of any way of legally avoiding Australian CGT in that scenario.
However, if you used the gains in the NZ trust to purchase Australian property in the trust’s name, then I’m not sure how that would go. Also, I don’t know what would then happen when the NZ trust later sold the Australian property. You would need to check with an accountant familiar with these things.
GP
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