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Tax changes ripple across the Tasman

Investors beware! Tax proposals in the Australian federal Budget are likely to impact on New Zealand-based investors with properties across the ditch.

Wednesday, May 24th 2017, 2:00PM

by Miriam Bell

In a bid to make housing more affordable to Australians, the recently announced federal Budget contains a number of policy measures which could impact on New Zealand investors.

Most controversial of these is the proposal to prevent foreign and temporary tax residents from claiming the main residence capital gains tax exemption when they sell property in Australia*.

This could make for a hefty capital gains tax of almost 50% on any profit made on a sale by foreign property owners.

There is some debate about whether or not expat New Zealanders in Australia will be hit by such a capital gains tax if they sell their Australian residence.

OzKiwi chairman Timothy Gassin told media that many New Zealanders living in Australia were classed as "temporary tax residents", which meant they would be affected by the proposal.

Conversely, Foreign Minister Gerry Brownlee said most expat New Zealanders would not be classed as foreigners and would, therefore, not be subject to the tax.

However, it is possible that if you own a property in Australia but live in New Zealand that the tax could be applied to you.

Tax expert Terry Baucher said there was a lack of clarity around the proposal but that property-owning New Zealanders not living in Australia would probably be classified as foreign investors.

“My first thought on hearing of the proposal was that it could prove troublesome for New Zealanders.”

While most rental properties in Australia are subject to capital gains tax already, the proposed change could affect those who bought Australian properties to live in and then moved back to New Zealand.

Investors should find out if the proposed measure would apply to them, Baucher said.

“They should also find out if it will be retrospective in effect – ie: will it be taxing the gains since the property has been held or since the measure comes into effect.

“That is critical. Because if it is when the measure comes into effect that means  the capital gains will be locked in, but if not they could be lost.”

There are other measures in the Australian federal Budget which could impact on New Zealand investors with property in Australia.

Foreign property owners who keep their property vacant for at least six months will now face a levy of at least $5,000 per annum, while developers will be restricted in the proportion of stock they can sell to foreign investors.

There is also a proposal that property investors should no longer be able to claim travel expenses as part of their investment expenditure.

But Baucher said it is worth noting that the legislation to enact the Budget proposals has not yet been written.

In his view, the measures smacked of an act in haste, repent at leisure approach and avoided dealing with issues surrounding negative gearing which is a big problem in Australia.

“The proposals are a minefield for a lot of landlords – both in Australia and elsewhere, like New Zealand.”

* Foreign and temporary tax residents who were holding property when the Budget was announced can continue to claim the exemption until 30 June 2019.

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AIA 4.55 3.19 3.19 3.49
AIA Special - 2.69 2.69 2.99
ANZ 4.44 3.15 3.25 ▼3.39
ANZ Special - ▼2.55 ▼2.69 ▼2.79
ASB Bank 4.45 3.19 3.19 3.49
ASB Bank Special - 2.69 2.69 2.99
Bluestone 4.44 4.44 4.44 4.44
BNZ - Classic - 2.65 2.69 2.99
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
BNZ - Std, FlyBuys 4.55 3.25 3.29 3.59
Lender Flt 1yr 2yr 3yr
BNZ - TotalMoney 4.55 - - -
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.45 - - -
Credit Union Baywide 5.65 4.75 4.75 -
Credit Union South 5.65 4.75 4.75 -
First Credit Union Special 5.85 3.35 3.85 -
Heartland 3.95 2.89 2.97 3.39
Heartland Bank - Online - - - -
Heretaunga Building Society 4.99 4.35 4.45 -
HSBC Premier 4.49 2.60 2.65 2.80
Lender Flt 1yr 2yr 3yr
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 3.99 2.58 2.68 2.79
Kainga Ora 4.43 3.29 3.39 3.85
Kiwibank 3.40 3.40 3.54 4.00
Kiwibank - Capped - - - -
Kiwibank - Offset - - - -
Kiwibank Special 3.40 2.65 2.79 3.25
Liberty 5.69 - - -
Nelson Building Society 4.95 3.45 3.49 -
Pepper Essential 4.79 - - -
Lender Flt 1yr 2yr 3yr
Resimac 3.49 3.45 3.39 3.69
SBS Bank 4.54 3.29 3.19 3.49
SBS Bank Special - 2.79 2.69 2.99
The Co-operative Bank - Owner Occ 4.40 ▼2.69 ▼2.75 ▼2.99
The Co-operative Bank - Standard 4.40 ▼3.19 ▼3.25 ▼3.49
TSB Bank 5.34 ▼3.35 3.49 3.79
TSB Special 4.54 ▼2.55 2.69 2.99
Wairarapa Building Society 4.99 3.75 3.99 -
Westpac 4.59 4.15 4.09 4.49
Westpac - Offset 4.59 - - -
Westpac Special - ▼2.55 2.69 2.79
Median 4.55 3.19 3.22 3.39

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