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New Aussie tax rules affect Kiwi investors

Australia is hardening up its tax rules for all foreign investors – and that could have a big impact on many Kiwi property investors.

Tuesday, August 11th 2015, 7:37PM

by Miriam Bell

Business advisory firm Crowe Horwath is warning that the hard line Australian authorities have adopted on tax mitigation strategies in the global economy could filter down to New Zealand investors. 

Crowe Horwath managing tax advisory principal Scott Mason said the Australians have an increasing focus on foreign ownership of property – and it extends to all non-Australians.

For this reason, the Lucky Country has recently introduced two significant tax changes aimed at foreign property owners.

First up, there is draft withholding tax legislation in the works.

It proposes that a non-final 10% withholding tax be deducted from the sale proceeds of certain Australian assets (land and businesses) sold by non-residents after July 1 next year.

This proposal would apply to currently owned assets.

Also, as of July 1 this year, there are new disclosure rules for any foreign person or entity which owns agricultural land in Australia.

The cut-off date for disclosure is December 31. After that date, a substantial fine will be incurred.

Mason said these changes highlighted the international trend towards individual countries protecting their sovereign tax bases. 

However, many Kiwi investors do not understand the tax issues that can arise from rental properties they own in Australia.

“That’s a problem because not only is Australia hardening its rules, but in many cases our investors are not even complying with the existing rules.”

For example, New Zealand investors need to know that the 50% discount for capital gains tax in Australia for non-residents has now been removed. 

Further fuelling the risk for many investors is the fact that tax authorities in both countries are increasingly sharing information to catch those who break the rules.

This means that non-compliance in Australia could also result in residual tax consequences in New Zealand.

Mason said not understanding your obligations in Australia is no excuse for not meeting them.

“To ensure compliance, it’s important asset owners get good advice from tax specialists who have a foot in both jurisdictions.”

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