# No capital gains tax in New Zealand



## westan (31 July 2004)

Hi guys

did you know NZ has no capital gains tax.  Therefore if you bought shares through a nz based entity either friend, company or trust based in NZ you pay NO tax.

However if you're a trader then you loose the exemption.

don't know if any of you can use this bit of info, as not a lot of Aussie stocks trade on the NZ exchange (telstra amp etc)  and the NZ based ones.

regards westan


----------



## wayneL (31 July 2004)

How you finding living in NZ copared to Oz Westan?

I have never been and dying to go there soon. 

I have been told I will fall in love with the place 

Cheers
Wayne


----------



## GreatPig (1 August 2004)

> I have been told I will fall in love with the place



You wouldn't fall in love with the place I came from 

GP


----------



## westan (1 August 2004)

hi Guys

Wayne we have settled in really well, and made lots of new friends already, the kids really like their school also, which is great.  I love the NZ scenery and that is one of the main reaons i wanted to live here for a while, as well as to make the most of the NZ property boom.  Our initial plan was 1 or 2 years we may stay longer now.  If you ever get here let us know so we can catch up.  
GP where did you come from ? i'm living way down south in Balclutha (where 30 years ago i lived for 1 year as a 10 year old).
regards westan


----------



## GreatPig (1 August 2004)

> GP where did you come from ?



A small town called Pahiatua in the North Wairarapa (east of Palmerston North).

In winter it can be miserably cold and wet, with no snow or redeeming views to compensate.

GP


----------



## RichKid (5 August 2004)

Hey, that's interesting about NZ having no CGT- does anyone know how we Aussies can take advantage of this? I assume you'd have to live in NZ or you'd be paying CGT here if you're an Australian taxpayer.
RichKid


----------



## GreatPig (6 August 2004)

> Hey, that's interesting about NZ having no CGT- does anyone know how we Aussies can take advantage of this?



Yeah, just don't make any capital gains ;D

Alternatively you could look at setting up a NZ discretionary trust where you're only a beneficiary who doesn't get any capital distributions. However, you'd need to read up on NZ trusts to see if they have to distribute each year, and if they do, then you'd probably need a NZ beneficiary to distribute to (possibly a NZ company or LAQC?).

If you're seriously considering it, you'd need to talk to a good NZ accountant who knows something about Australian tax laws.

Cheers,
GP


----------



## RodC (6 August 2004)

Hi all,

GP, 
NZ trusts don't have to make a distribution each year, but if they don't any income retained in the trust is taxed at 33%.

If any income is distributed to non NZ residents then NZ withholding tax is payable (10 or 15%), this income will also have to be declared in Oz, though you will get a credit for the NZ tax paid. 
As NZ doesn't have CGT, I would imagine this would be fully taxable in Oz when distributed to an Australian beneficiary. I'm not sure what the situation would be if you didn't distribute - you may not have to pay the 33% as it's CG not income, need to talk to an accountant about this.

Westan, What's the NZ stock market like? I was wondering the other day about investing into from NZ instead of bringing funds back to Oz.

regards,

Rod.


----------



## westan (6 August 2004)

Hi Rod

in answer to what is the NZ stock market like, well there is alimited number of stocks on it, a lot of NZ traders b/investor buy on the ASX to give greater exposure.  But to be honest i don't think i am knowledgeable enough about it yet to give any good directives.  Hope to be in the near future.  Just noticed that ING property trust pays a 10.5% divident, so with a margin facility it could show a high cash on cash return.  But not sure what interest rate you pay for Margin loans over here.
see i don't really know too much yet.

regards westan


----------



## RodC (6 August 2004)

Thanks westan,

I'm not in any hurry, I may look into it further in the future.

Rod.


----------



## RichKid (12 August 2004)

Thanks to everyone for the info on tax implications for Aussies. Looks like we can't escape taxes altogether (Even Aussie CGT) but it is interesting to know, never know when it may come in useful. There are certainly a few knowledgeable heads in this forum! 

RichKid


----------



## Odduna (18 June 2006)

http://www.ird.govt.nz/yoursituation-bus/australian/comparison/#ratesresind

Not a bad link to check out if you looking at investing in NZ.

I wonder what tax implications are for OZ resident setting up a trading trust in NZ???

Any ideas out there?


----------



## noirua (19 June 2006)

Capital Gains Tax in New Zealand: http://www.urban.org/uploadedpdf/1000569_taxing_capital_gains_nz.pdf


----------



## Julia (19 June 2006)

westan said:
			
		

> hi Guys
> 
> Wayne we have settled in really well, and made lots of new friends already, the kids really like their school also, which is great.  *I love the NZ scenery and that is one of the main reaons i wanted to live here for a while, as well as to make the most of the NZ property boom.  *Our initial plan was 1 or 2 years we may stay longer now.  *If you ever get here let us know so we can catch up.  *
> GP where did you come from ? i'm living way down south in Balclutha (where 30 years ago i lived for 1 year as a 10 year old).
> regards westan




Westan,

Glad you are enjoying in NZ.  I'm from Christchurch.  If you can stand the weather in Balclutha it would be a great little place with some of the friendliest people anywhere.  I always found that the further south we went the warmer were the hearts of the people.  
Have you experienced the recent weather events which have devastated parts of Canterbury?  A friend just near Ashburton was telling me yesterday that they have just got the power and water back on after being seven days without it in metre high snow.

Julia


----------



## The Mint Man (19 June 2006)

just thought I'd ask, is this the same westan from IPC?


----------



## dallee (11 July 2006)

Hi

On NZ trusts, I've had verbal advice from the ATO that income generated from a foreign discretionary trust is subject to tax in Australia at the marginal rate, less the company tax paid in NZ, regardless of whether the trustees choose to distribute the income to the beneficiaries. The thinking behind this is that the beneficiaries still gain from the income if it is reinvested in the trust.

Has anyone had advice to the contrary?

dallee


----------



## RodC (11 July 2006)

dallee said:
			
		

> Hi
> 
> On NZ trusts, I've had verbal advice from the ATO that income generated from a foreign discretionary trust is subject to tax in Australia at the marginal rate, less the company tax paid in NZ, regardless of whether the trustees choose to distribute the income to the beneficiaries. The thinking behind this is that the beneficiaries still gain from the income if it is reinvested in the trust.
> 
> ...




If the income is distributed (whether physically or just on paper) to Australian beneficiaries it would certainly be taxable both in NZ (non residents withholding tax) and in Australia. Australian residents would receive a tax credit for the NZ tax paid. 

If the income is not distributed then I would think the only tax liable would be the NZ corporate tax rate on the trust. If the ATO is attempting to tax this as well then this seems at odds with the way Australian trusts are taxed where beneficiaries are only liable to tax on distributions (but the trust is liable for 48.5% on retained income).

I'm not an accountant so bear in mind this is my interpretation only, I could be completely wrong.

Rod.


----------



## GreatPig (11 July 2006)

RodC said:
			
		

> If the income is not distributed then I would think the only tax liable would be the NZ corporate tax rate on the trust.



Not so, I'm afraid. There's a thing called the Transferor Trust provisions which can come into play.

See the ATO website and the Foreign Income Return Form Guide chapter 2.

GP


----------



## RodC (11 July 2006)

Thanks GP, I'll have a look at that.

Rod.


----------



## RodC (11 July 2006)

Yes, you're right.

It's probably easiest then to distribute all of the trust's income to an appropriate beneficiary rather than retaining earnings in the trust.

Rod.


----------



## money tree (11 July 2006)

Im moving back to NZ in 6 months to set up a hedge fund.

I also like renovating property but the tax laws in OZ suck. Stamp duty, CGT, land tax.......give us a break. NZ survives without all that so why cant OZ.

Theres no point dreaming about NZ no-CGT unless you LIVE there.


----------



## money tree (11 July 2006)

14. invest in NZ stocks, their tax rate is 33% and imputation credits are redeemable here (and 10% more potent)

Theres only one way for an aussie to abuse the NZ tax system.

Invest in NZ companies.

NZ company tax rate = 33%.

NZ imputation credits are acceptable to the ATO in exchange for franking credits. The trick is, you get 10% more of them (33% vs 30%)


----------



## dallee (11 July 2006)

After reading the Foreign Income Return Form Guide, I'm still not sure. There are quite a number of exemptions to transferor trust measures in Chapter 2, and Part 2 of Chapter 2 talks about distributions being assessible on income not already taxed in the hands of the trustee, but not what happens if the income is reinvested in the trust and not distributed to the beneficiary. An optimistic interpretation is that if an Aussie taxpayer is not subject to transferor trust measures and does not receive the distribution, which is reinvested in the trust, he/she is not liable to additional tax. One for an accountant or lawyer to settle I think.

Thanks for the help.

dallee


----------



## RodC (11 July 2006)

dallee said:
			
		

> An optimistic interpretation is that if an Aussie taxpayer is not subject to transferor trust measures and does not receive the distribution, which is reinvested in the trust, he/she is not liable to additional tax. One for an accountant or lawyer to settle I think.




Yes, there are a few exemptions. My reading though is that if you originally provided funds to the trust then you're probably subject the transferor trust measures and are potentially liable for tax on undistributed trust profits.

The best approach is probably to make sure any profits are distributed to a suitable beneficiary.

Rod.


----------



## KaiserBun (11 July 2006)

RodC said:
			
		

> Yes, there are a few exemptions. My reading though is that if you originally provided funds to the trust then you're probably subject the transferor trust measures and are potentially liable for tax on undistributed trust profits.
> 
> The best approach is probably to make sure any profits are distributed to a suitable beneficiary.
> 
> Rod.





If the arrangment is not picked up under the transferor trust measures, it looks to me that the Foreign investment fund (FIF) measures will cause some problems if the fund above $50,000.

http://www.ato.gov.au/large/content.asp?doc=/content/64063.htm


----------



## RodC (12 July 2006)

Yeah, it looks like if they can't get you one way, they'll get you another.


----------



## x2rider (12 July 2006)

hi folks ,
 As one of our prime ministers , Rob muldoon once said . People who leave New Zealand and go to Australia , increase the IQ of both countries  : 

 As for building . I am a builder in christchurch and watch some of my friends who aren't, build and sell a new house every couple of years . The area of tax on the profit is a grey area because the IRD can't cope with it . 
 Because they don't derive the soul income from building or are associated with the building industry, then they are pretty much free to build without tax . 
 You are supposed to stay in the home for a minimum of 10 years or have a good reason to sell . But this is really just a joke . You can change for schooling , Bad nieghbours , too smaller home . etc , etc , 
 So if you are thinking of coming to New Zealand for a building future give me a call and I'll build you something   
 Cheers Martin


----------

