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Moving to New Zealand

By Ally Cui, Investment Advisor at JBWere Auckland and Mike Williams, Tax Director at Deloitte

With GDP at about 2.5% p.a, the New Zealand economy has been performing well for the last few years. The country has experienced strong net migration with returning Kiwis and Australians contributing significantly to these numbers. Recent government change has not changed Australians’ right in New Zealand.

What would be the key considerations for a move to New Zealand in regard to investments and tax?

The Commission for financial capability’s website: sorted.org.nz has a good collection of general information including mortgage and pension (KiwiSaver) for you to get started. If you would like more specific financial advice, you should approach an Adviser[1].

You can obtain research and advice on New Zealand, Australian and International equities in New Zealand, but there is almost no Australian Fixed income expertise. You will need to find an Advisor that can access Australian expertise.

You may not be able to benefit from Australian franking credits anymore, but you could consider investing in New Zealand shares and benefit from imputation credits, which are similar to franking credits.  New Zealand market is a high yielding market.  Most other indexes only account for capital growth, the New Zealand S&P indexes calculation includes both capital growth and dividends. 

If your assets are held with a custodian, you will find it easy to transfer your portfolio to a New Zealand custodian. It will be easier for your annual tax filing if your custodian generates a New Zealand tax report for your investment portfolio.

The advantages of being a New Zealand tax resident is that there is currently no capital gains tax on financial investment (not including professional traders) and the top tier individual income tax rate is only 33% (on income in excess of NZ$70,000).

You may also be eligible for a temporary (4 years) “transitional resident” tax exemption on foreign passive income (interest, dividends, rental income etc). All new migrants and returning New Zealanders who have not been a resident for tax purposes in New Zealand for at least 10 years are automatically eligible for this tax exemption. You will need to ensure your bank or financial institution collects this information and ensures that their system is set up to deal with this situation. This is a very favourable treatment for your non-NZ base financial investments, such as your Australian and overseas shares and bonds.

Are you aware of the potential “Financial Arrangement” tax issue? When you move to New Zealand, you may bring some Australian dollars or other foreign currencies and hold them in a call account in New Zealand. The currency movement relative to New Zealand dollars, even if it’s an unrealised gain/loss, would most likely be taxable. However, if you are a transitional tax resident, you can avoid this tax issue by keeping any foreign currency in accounts outside of New Zealand. By doing so, the same foreign currency gains would be exempt from New Zealand tax in your transitional residence period. Some New Zealand custodians use Australian based banks for clients’ Australian dollars. The Financial Arrangements rules are complex and you should seek specific tax advice if you feel this is likely to affect you.

Are you aware of “Foreign Investment Fund (FIF) income tax issue” for overseas investment? Similar to the FA regime, the FIF regime seeks to tax realised and unrealised gains on foreign shareholdings, rather than simply taxing the dividend receipts. Fortunately, most Australian shares are granted an exemption from the FIF regime and are therefore treated like New Zealand shares from a tax perspective, except you can’t claim the franking credits if you are a NZ tax resident. However, many investors have more diversified portfolios, which include other investments listed outside New Zealand and Australia. If your non-New Zealand and non-Australian listed invests have a cost exceeding NZ$50,000 in value, you should seek professional taxation advice as you are likely to be subject to the FIF regime.

If this is your first foray into New Zealand, and you are considering spending substantial time in New Zealand you should consider seeking more specific advice relevant to your personal situation as the New Zealand tax rules are significantly different to those you may be more used to.

 

[1] There are three types of regulated Advisers:

  • Authorised Financial Advisers (AFAs) for Investments like shares, bonds, managed funds, KiwiSaver, or investment planning services;
  • Registered Financial Advisers (RFAs) for insurance, mortgages or very simple investments such as bank term deposits;
  • Qualifying Financial Entity Advisers (QFE advisers) for products provided by a company such as a bank, including their own KiwiSaver, mortgages, term deposits etc.  

 

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