Whilst the same New Zealand tax laws apply to a New Zealand investor buying a property in Australia as they do if the investment was made in New Zealand, there are a few significant differences that the New Zealand investor should be aware of:

• You will need to file and Australian income tax return as your rental income is derived in Australia.
• Some Australian states charge stamp duty on the purchase of residential property. This is a capital costs to the investor, i.e. it isn’t tax deductible.
• Australia has a capital gains tax.
• Australia has a 30 June balance date.
• Our Accrual Tax rules say that if your finance is overseas and exceeds $200,000 you must account for foreign exchange fluctuations by converting your loan to NZ dollars at balance date. Foreign exchange fluctuations are either tax deductible or assessable income depending on the movement in the exchange rate.
  

Approved Issuer Levy
Any NZ tax resident that borrows monthly offshore is subject to the non-resident withholding tax regime. This means that any interest paid to an Australian Bank by a NZ resident must have a 10% Non Resident Withholding Tax deduction from is. This is paid monthly to the Dunedin IRD office.

As Australian banks are unlikely to agree to receiving less than the interest due, an alternative is available. Once approved, the New Zealand tax resident is only obliged to deduct 2% interest of the 10% Non Resident Withholding Tax. This involves registering for Approved Issuer Levy status with the IRD. It is important to pay all the levies on time. Failure to do so means reverting to the 10% withholding tax payment. The tax laws regarding cross boarder transactions are complicated, and we urge you to contact us for specific advice, if you are considering a foreign property investment.

The information on this web site is of a general nature only. Readers are advised to establish the applicability of information in relation to specific circumstances and not to rely solely on the information provided here.