Rental Property Investments In Australia
TAX ADVANTAGES OF CLOSE ECONOMIC RELATIONSHIPS BETWEEN COUNTRIES
WHY INVEST IN AUSTRALIAN RESIDENTIAL RENTAL PROPERTY?
Investing in Australian residential property could be considered as part of a NZ tax resident diversification investment strategy. The goal of any diversified investment is to have a portfolio of various assets that earn the highest return for the least risk.
There is the benefit of low barriers to buying in Australia, as New Zealand citizens are exempt from the requirement to obtain approval from the Australian Foreign Investment Review Board (FIRB) to buy residential property in Australia.
WHAT ARE THE BEST OPTIONS?
Simply explained there are two likely advantageous tax structure options available for either investing personally or via a Trust.
There are advantages and drawbacks to both. However, the most common approach to investing is via personal ownership from a tax perspective. The key benefit is access to potential losses in Australia from the rental investment and being able to offset those losses against wages/salaries or other personal income in NZ.
The diagram shows a tax typical structure for a NZ tax resident who is investing in Australian residential rental properties.
HOW CAN WE HELP?
There are a number of considerations that need to be planned for regarding Australian residential investments. 'The devil is truly in the detail' and getting it wrong can prove to be expensive.
Whether you are planning on using the above strategies or seeking more information about how they could work for your particular circumstance, we recommend we meet for an obligation free tax planning meeting in the first instance.
Typically we will discuss the following;
- How to develop and implement an investment strategy based on your needs including analysis on property cashflows ( losses or surplus) and how it is possible to 'double dip' Australian tax losses in both countries.
- Outline the options regarding using NZ equity or Australian mortgages to fund the investment. There will be a need to account for foreign exchange (gains or losses) and ways to avoid non-resident withholding tax (which normally arises where a NZ resident pays interest to a non-resident lender) and the 2% Approved Issuer Levy.
- Introductions to experts who specialise in investing in Australia, especially if your key aim is to protect assets via a Trust. Professionals, we can introduce you to lawyers, mortgage brokers, residential property investment specialists and several of our existing clients who have already established successful property portfolio investments in Australia.
- Highlight several of the key differences in regards to property investment between countries i.e. in Australia Capital Gains and Stamp Duty taxes are levied and depreciation is allowable on buildings at 2.5% per annum (building depreciation is not allowable in NZ).
We account for and complete compliance requirements for a number of existing clients, so are well versed with the nuances required to correctly file with both the Australian Tax Office and Inland Revenue Department. We are confident that our clients pay less tax and make more money from their property investments.