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Would an NZ tax resident escape Australian CGT?

Discussion in 'Accounting & Tax' started by Propagate, 24th Aug, 2015.

  1. Propagate

    Propagate Well-Known Member

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    Hypothetical question.... I believe (could be wrong) that there is no capital gains tax in New Zealand?

    If that's the case, as an Australian Citizen, could you go on sabbatical to New Zealand and claim tax residency there for a year or two then once an NZ tax resident, if you sold all of your properties, would you essentially escape any capital gains tax?

    Or, would you still have to do Australian tax returns even as a none-resident like we do with the UK, and pay your CGT into Australia? Emma and I have been Australian Citizens since 2010 but we still have to do UK tax returns. Adjustments are then made on the Australian returns for tax credits for any tax paid in the UK first.
     
  2. ellejay

    ellejay Well-Known Member

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    I'd be interested in other replies but I'm certainly under the impression from our NZ accountant that moving permanently to NZ triggers a requirement to pay Australian CGT on properties held in Aus. You still have to do the Aus tax return as well for props not sold
     
  3. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    CGT would be payable in Australia on Australian property. If a non residence then you would also lose the 50% CGT discount. Becoming a non resident doesn't trigger CGT on real property but can on shares.

    NZ or other property overseas is a different story.
     
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  4. Propagate

    Propagate Well-Known Member

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    Interesting. I figured it couldn't be that easy. Thanks for the info.
     
  5. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Taxation is based upon residency except if you are US citizen (Funfact - or Eritrean !!) Residency doesn't use the normal terms used for migration but a concept of tax residency. Generally NZ citizens may be a non-resident for tax purposes if they have not permanently migrated to Australia. (This can get complex)

    Non-residents are tuxed on Australian property cupital gains (no CGT discount is allowed) and
    Non-resident are eximpt for public share CGT events unless they huppen to be Phul Rudd (I cant thunk of any other ruch New Zullanders)..I hope my translution is OK. eh.

    A NZ tax resident would be required to lodge an Australian income tax return if they sold a Australian property for any profit. They have no tax free threshold.

    Changing residency is a often overlooked tax strategy. There can be instances when a taxpayer may deliberately choose to treat a change of residency as a CGT event. An advanced issue for personal advice.
     
  6. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Incorrect. Its a choice. Read here.
    https://www.ato.gov.au/Individuals/.../?page=3#Ceasing_to_be_an_Australian_resident

    You may choose to disregard the gain or loss. However you are then committed to a future gain or loss when actual sale occurs. This issue is really one for shares and foreign (ie non Aus) property and not Oz property since Oz property always remains taxable but not all shares are subject to CGT. The misunderstanding is common as NZ tax agents don't see CGT issues frequently.
     
  7. ellejay

    ellejay Well-Known Member

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    That's really helpful, thanks. I think we confuse our accountant and ourselves because we'll probably continue to move a lot between the two countries.
     
  8. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    If you plan on doing that its very important your tax position is reviewed regularly on both sides. You may in fact be an Aust tax resident if your intent is not to depart permanently. Permanently has a vague meaning however.. ... You could be counted as a resident by BOTH countries and then need to use the tax agreement as a tie breaker. I have encountered many people with that problem between Aus / NZ.
     
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  9. ellejay

    ellejay Well-Known Member

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    Thanks Paul, I'll send you a message.
     
  10. MikeLivingTheDream

    MikeLivingTheDream BCOM MCOM MTAX CPA CTA Registered Tax Agent

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    Actually there is another one that also taxes worldwide income of their citizens and that is the philippines. Having helped a number of people including some people from here setup back end operations for their small businesses here in the philippines i know it well.
     
  11. shorty

    shorty Well-Known Member

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    Choice post, bro.
     
  12. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    I wasnt aware. Citizenship taxation is very very rare. The UScreates some bizarre tax problems for Americans. Born a taxpayer.
     
  13. ellejay

    ellejay Well-Known Member

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    I'm trying to get some clarification on this issue again. I'm an Aus citizen with properties in Aus and NZ that have had some gains. I want to move to NZ later this year, not necessarily permanently and sell some of the ips over there. If I move and am tax resident in NZ, at least temporarily I assumed that I could avoid paying CGT in Aus on the NZ properties. I'm not sure though if that would mean I'd be up for CGT at the point of moving on paper gains I've made on Aus property, even if I don't actually sell any Aus property? So confusing.

    I'm happy to pay the tax for either the Aus or NZ property but want to avoid paying for both. I'm trying to get clarification from my Aus accountant otherwise I'll be looking for an accountant who understands this area well. Anyone experienced similar to this?
     
  14. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Best not to assume as it could be costly. Becoming a tax resident there doesn't mean you are not one here.
     
  15. Casteller

    Casteller Well-Known Member

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    Usually becoming tax resident in another country is NOT GOOD, many of the tax deductions and shelters enjoyed in Australia disappear as the new country does not recognize them and will tax accordingly (eg negative gearing, franking credits, trust arrangements, account fees not deductible anymore, etc,etc..) plus there could be new taxes (wealth tax, inheritance tax, etc..)
     
  16. ellejay

    ellejay Well-Known Member

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    Thanks again Terry. I'll see what my accountant can come up with, otherwise might look at switching to get better advice.
     
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  17. sanj

    sanj Well-Known Member

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    there are a couple of people here who have show knowledge on the subject, id suggest contacting them.

    simply moving overseas does not stop you from being an aussie tax resident, there is no black and white rule but you have to show that you aren't intending to move straight back or that it isn't a temporary move.

    this was brought in by the Gillard govt and many people got caught by it, eg someone moving to dubai and expecting to work tax free all of a sudden was liable for tax in australia which often made the move not worthwhile. it's a complex area and one worth getting highly competent advice.
     
  18. ellejay

    ellejay Well-Known Member

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    Thanks. I sense I'm being charged the highly competent fees without the actual advice. I have been in contact with people who seem to understand it so hopefully will be a bit clearer.
     
  19. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Ceasing to a tax resident doesnt mean getting on a airplane but it may. It is more an intention and based upon time.

    A non-resident will still be taxed on Australian property and may trigger a CGT event on non-property assets when they leave. They will lose the general CGT discount when non-resident but also may be exempt from CGT on shares etc. Depending on when the property was purchased some of the past CGT discount may be protected and a proper valuation would assist.

    Generally speaking to become a non-resident you must emigrate to NZ and hold a perm residency etc and not a temp residency visa etc. Doing this with no intention of permancy may mean you are still an AU tax resident.
     
    Last edited: 23rd May, 2016