I would love to buy an investment property in NZ, not only because of the favorable exchange rate and the depressed market there at the moment, but because I love NZ and not only would I love to own my own little piece of it but may consider moving there one day.
At this stage I would have to buy a property as an investment and would be heavily reliant upon both the rental returns plus any negative gearing aspects to make it financially viable for me.
If I were to buy a residential property in NZ what claims can I make (i.e. negative gearing on interest payments, depreciation, etc. ) can I make as an Australian taxpayer still living in Australia? Any advice regarding this will be greatly appreciated and will help me see whether my dreams are just that, dreams, or have the potential to become reality.
CheersMatt007Member@matt007Join Date: 2008Post Count: 259
Check out any reciprocal/double tax arrangements that may exist between NZ and AUS. Also check out the company requirements (as in who can set one up, what structure is useful there eg: company and trust etc), see what requirements their financiers have or if ours will finance there.
I think there are a few other threads on here about it. Do some searching… you'll find out what you need to know..Matt007 wrote:Check out any reciprocal/double tax arrangements that may exist between NZ and AUS. Also check out the company requirements (as in who can set one up, what structure is useful there eg: company and trust etc), see what requirements their financiers have or if ours will finance there.
I think there are a few other threads on here about it. Do some searching… you'll find out what you need to know..
I checked the threads before asking my question as I couldn't find the answers I was looking for. What I would like to know is:
*assuming I will have to declare any NZ rental income on my Australian tax return, can I also negative gear any interest I pay on the loan and/or claim for any depreciation and repairs/maintenance?
* If I can negative gear interest payments on NZ properties, is that on loans from both Australian and NZ banks or only that portion from Australian banks?
*do I have to pay any tax to the NZ government on rental income from any NZ investment properties?
If anyone can either help me with my inquiries or can direct me to specific threads answering my questions, as my own search has proved fruitless, I will be very appreciative.
CheerskeikoParticipant@keikoJoin Date: 2008Post Count: 513
If your investment makes a profit then yes nz will want to tax you on that income,
Keep in mind nz has no capital gains tax so you will pay no cgt in nz but greedy australian govt will tax you on your nz investmentwlynchMember@wlynchJoin Date: 2010Post Count: 8
I answered pretty much this question in another forum a few weeks ago the following is guts of what I had to say. Hope it helps.
I own two investment properties in NZ one in Whangarei which I’ve owned since 2004 and one in Nelson which I’ve owned since 2007.
I know for sure that all of your losses are a tax deduction over here and are treated as though the property was in Australia. There has always been reciprocal tax laws between NZ and Australia but they have become even more beneficial to NZ investors and they changed in Australia, as at 1st July 2008, so that now all losses can be claimed against personal income as long as the property, therefore losses, is in your name. This includes everything from the interest on your loan, management fees, maintenance, depreciation ….. the lot!!
You need a good NZ accountant do your tax return over there which you give to your Australian accountant so they can then claim the losses against your income over here. I’m doing it myself right now. The losses can also be back dated as long as, as I said the property is in your name.
Although I’m an ex pat there are alot of Australian investors in NZ. The benefits include, no capital gains tax, no stamp duty on loans, generally lower interest rates, a much much better depreciation system, in my experience better rental returns, the bank (no matter what bank) will give you back $400 towards your legals and I haven’t tested it, so don’t quote me, but I don’t believe any mortgage insurance. But that last point is probably irrelevant anyway as not even an NZ’er living in Aust can get a loan with less than 20% deposit.
You will, if you make profit, have to pay tax on the income received. You can’t have the best of both worlds. Although in having said that, both of my properties are positive and the depreciation keeps them negative so I claim a loss. The only downside is that the GFC has tightened lending up over there, even as a NZ citizen (still), I haven’t found a bank who will take less than 30% deposit now. Aust citizens are the same.
And lastly to do what I’ve done I burrowed the deposit over here took it over there and then burrowed the rest over there. The interest on the Aust portion of the loan is claimed over here and the interest on the NZ portion on the loan is claimed on my NZ tax return.
WendywlynchMember@wlynchJoin Date: 2010Post Count: 8
Oooo sorry Ozharp have just thought, forgot to say, DO NOT set up a NZ company to put your investments under. Did that and learnt the hard way. The losses are lost forever!!!
Many thanks for the very useful info.
PaulsonyasalMember@sonyasalJoin Date: 2008Post Count: 421
HI i thought people may be interestesd in one accountants' view of the proposed changes to investing in property in new zealand. this link is from another real estate group that i receive regular emails from. I am not propmoting this group or accountants, but thought this may interest posters on this particular topic.
Wendy, it sounds like you're having a very positive experience over here in NZ
I have worked with a lot of Ozzie investors and the general thing seems to be to leverage property in Oz to create the deposit and borrow the balance in NZ.
AMP (via a Roost Mortgage broker) is about the only outfit funding investors at 80% or above at the moment – I hear up to 95% for some. The traditional banks are, as you stated, at 70% across the board.
You will need two accountants though, one doing your Oz return, and another over here to do your NZ return, ideally go for one that is a property investor themselves and specializes in property.
Just wondering why you would be heavily reliant on the property being negative? Surely if you can find a good +CF property you will be able to leverage it and buy more rather than stopping yourself at one negative geared.
VickyJinalMember@jinalJoin Date: 2010Post Count: 3
As i think that investment in Newzealand is very profitable.I love newzealand and now i am thinking about take property in Newzealand.
Come over for a visit and check us out. There are lots of good deals in NZ at the moment.
I haven't seen good quality properties delivering over 9%+ deals in the Hawke's Bay for years, but over the past month or so they've started popping up here.
I think one reason these deals are around is because the mainstream banks are making it so difficult for people to buy investment property. Most of the banks are being so tight with their funding by requiring 30% deposits. First time investors have a chance, but people that are at all leveraged up are being eliminated from these wonderful buying opportunities.
My best advise is to get your finance pre-approved so you can take advantage of the opportunities.
VickyChizParticipant@chizJoin Date: 2008Post Count: 70
I like idea of investing in NZ property but I don’t like the idea of buying in my own name – goes against the “don’t own anything but control everything” principle of asset protection.
Has anyone found a way for Aussie investors to protect their assets in NZ?
Thanks for all the great info everyone…djjkParticipant@djjkJoin Date: 2010Post Count: 87
re investing in an alternative entity, just be careful. While there are obvious benefits as far as asset protection of setting up a trust etc, these are far outweighed by the negatives on the tax side imho.
If you own the o/s property through a trust or company, any tax losses you make will be trapped in that entity and can only be used against income that is earnt through the entity. As an individual you can claim those losses against other income (as i said in my post on the other thread).
Just dont buy in NZ thinking you'll save a fortune on CGT. You are still charged in Australia! Also – if the NZ govt does introduce a CGT like the rest of the western world (like they are talking about doing) it may have a neagtive effect on property prices there.
Joshjim beamMember@jim-beamJoin Date: 2010Post Count: 7
im selling some ip 's in nz regd value $385k rent $350pw i can leave in 20% to right purchaserChizParticipant@chizJoin Date: 2008Post Count: 70
Sorry, what do you mean you can leave 20% to the right purchaser?
It means he's willing to vendor finance 20% of the deal.
Bare in mind, it's a 4.7% yielding negative cash flow deal (rent at 350/week x 52 = $18,200 divided by purchase price $385K = 4.72%) and you're probably going to be paying 6% interest to float, or 7% to fix for two years.
Vickyjim beamMember@jim-beamJoin Date: 2010Post Count: 7
I accept its not the bext deal going round cf wise.
I thought it might appeal to those who were not able to get the deposit together.henry13aucklandMember@henry13aucklandJoin Date: 2007Post Count: 40
About income tax and capital gain tax issue regarding property in NZ:
I have a house in Auckland which is my home before I move to Australia in 08. I could not sell it for more than one year as at that time people stopped buying properties. I rent it out and am incurring the loss every month.
I did not claim any loss from my OZ income until I saw this post. So I can claim the loss from my OZ income!? How about capital gain tax? I intend to sell it in the next 2 years if there is small booom there. I hear it is still hard to sell at this moment. Need I pay tax to ATO here if there is capital gain there?
Any reliable resouce I could find out more about NZ properties owned by people in Australia?henry13aucklandMember@henry13aucklandJoin Date: 2007Post Count: 40
For those who want to buy Investment properties, I suggest Auckland suburbs like Glenfield, Forrest Hills, Northcote, Mt Albert, Glen Innes. One friend of mine just bought a cross-leased house in Glenfield under NZ 300K last week. Those suburbs are near Auckland CBD and price against rental is very reasonable. If NZ open immigration to skilled and business migrants and NZ banks loose the lending policy, I bet those area will have good capital gain easily. Of course, you could buy better suburbs like Epsom, Mt Eden, Greenlane, Bays area at north shore if you have more budget.urbanedgeMember@urbanedgeJoin Date: 2010Post Count: 34
if that's want you really want , then go for it..! there's nothing wrong with your decision for new zealand is a nice place to live in..
i have some info here..hope it can help you
New Zealand's Tax Regime for Property Investment.
New Zealand has no sales tax on property or mortgage transactions. The only direct property taxes are property rates which are levied by local Councils to provide Council services such as roads, water, rubbish collection and community services such as libraries. Rates are based on the value of the property and would vary between NZ$1500 and NZ$3000 per annum for a typical median value house.
New Zealand allows unlimited deductiblity of property losses against other New Zealand income, obviously including rental income. This includes depreciation of buildings and fittings. If there is no other New Zealand income to off-set the loss then losses are carried forward.
Other deductions typically made by New Zealand property investors are:
- mortgage interest, not capital repayments
- insurance of the property
- property management fees repairs and maintenance; but not improvements, these have to be capitalised and depreciated.
- accountancy fees
- valuation fees
- bank fees
- property rates
- lawyer fees associated with financing, not purchase of the property
- relevant magazines, books at fees for Property Investment courses
- reasonable travel and expenses for managing property portfolio – your next New Zealand holiday could become a tax deduction!