Question: I want to buy a rental property in NZ and being an Aussie, I’m not sure what tax issues I should be aware of. I also hold a few properties here in Australia so I want to know the tax implications of holding NZ property for both Kiwi and Aussie taxation departments.
Answer: Residents of Australia are liable to pay tax on assessable income (such as rent and capital gains) that they derive from worldwide sources during the financial year. This is so even if you paid tax overseas. If you’re liable to pay foreign tax (for instance in New Zealand) you may be entitled to claim a foreign income tax offset in respect of the amount foreign tax you paid.
The rent derived in New Zealand must be disclosed in your Australian income tax return and you can claim the same types of domestic rental deductions you incur in deriving your overseas income. This means you can claim rental expenses such as:
- Interest on borrowings to buy your New Zealand property
- Rates, insurance and repairs
- Depreciation and capital works deductions
- Real estate agent fees to collect the rent
- Travel costs to inspect your property in New Zealand.
If your foreign rental expenses exceed your foreign rental income; the net loss can be deducted from other Australian sourced assessable income you derive.
If you sell a property you own in New Zealand you’re liable to pay capital gains tax on any capital gain you make on sale.
With reference to the tax implications of holding property in New Zealand; you need to check with the New Zealand Tax Office as to whether you’re required to lodge a tax return in New Zealand.
- Answer provided by Jimmy B. Prince, LaTrobe University
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