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A NEIGHBORHODD OF ICONS
Bask in the beauty of the Harbour, the world-class
entertainment at The Opera House, or simply enjoy a
quiet drink at one of The Rocks' many delightful, historic
pubs and hotels.

SERENITY OUTSIDE YOUR DOOR
Catch your breath in the flourish of green at the Royal
Botanic Gardens or nearby at Observatory Hill, all right
on the Harbour's edge.
Tax
New Zealand imposes income taxes on a comprehensive basis for its residents, but on a territorial basis for non-residents. This means that New Zealand taxes residents on income from all sources worldwide, whereas non-residents are generally only taxed in New Zealand on income that is derived from a New Zealand source.

Tax implications

An investor in New Zealand real estate may be exposed to a number of taxes:

  • taxes on holding: local government authorities levy rates to sustain local services. The level of both of these taxes is usually quite modest relative to property value. For commercial property, the local government rates can often be recovered from the tenant.
  • taxes on income: net rental income is taxable at the appropriate tax rate for the investor
  • goods and services tax (GST): GST is levied at a rate of 12.5% on taxable supplies where the value of supplies made exceeds $40000 pa.

Where GST applies, any GST on inputs can be claimed as a credit. Broadly, residential property is exempt from GST.


Deductions

For tax purposes, expenses incurred in the derivation of property income in New Zealand are deductible to the extent that they offset by individuals as losses indefinitely. Where the land is owned by a company, it is necessary to maintain 49% continuity of shareholding in order to carry forward losses.

Allowable deductions include interest from loan finance (subject to thin capitalization restrictions), local government rates, insurance premiums, maintenance expenses and depreciation of buildings (generally 2% straight line to 3% diminishing value).


Capital gain on sale of property

New Zealand does not impose a capital gains tax as such. However, New Zealand will tax capital gains on various categories of transactions involving land. Taxpayers that are related to parties undertaking business activities comprising land dealing, development, or construction, are taxed in respect of capital gains on the sale of land within 10 years of acquisition. Land that is sold within 10 years of purchase is also taxed where at least 20% of any resale profit is attributable to zoning changes. Land that has previously been held as an investment and that is realized in the course of a substantial sub-division project is also taxable. Specific tax advice should be obtained in order to ascertain the potential impact of this taxing regime upon acquisitions of land in New Zealand.


Investment Income

New Zealand imposes non-resident withholding tax (NRWT) upon New Zealand sourced income, interest and dividends derived by non-residents. Interest suffers a 15% NRWT (generally reduced to 10% if a double tax treaty applies) while “imputed” dividends (paid from fully tax-paid earnings under New Zealand's imputation system) may effectively by repatriated free of additional New Zealand tax under the Foreign Investor Tax Credit regime (FITC).


Local taxes

The only local taxes in New Zealand are the holding taxes for real estate discussed above.


Foreign taxes

Taxes may apply in the country of the investor's residence. Their impact should be assessed before making an investment.


Tax reporting obligations

Property owners, whether resident or non-resident, deriving assessable income in New Zealand need to lodge a New Zealand tax return and pay taxes on net property income at the appropriate rate.


Practical considerations

Investment into New Zealand involves dealing with a number of commercial and regulatory influences. Tailored planning before investing is vital.


Tax planning

Choosing the right investment structure and selecting the right mix of equity and debt can make a dramatic difference to the tax result.


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