Tax Q&A: Your Questions On Non-Resident Tax and Capital Gains Tax
Q: As a New Zealand resident purchasing property in Queensland, if I decide to rent it out, do I need to pay non-resident tax on the rental income? I have heard I do not need to as a New Zealand citizen.
Or would I file a tax return in New Zealand and pay tax on the income in New Zealand?
If I were spending some time living in Australia throughout the year, would this alter things?
A: As a non-resident of Australia for income tax purposes, all income and investment expenses from Australian-sourced investments and assets (such as your investment property in Queensland which generates rental income) is required to be lodged via an Australian income tax return.
The same rule would apply if you decided to sell your Queensland property for a capital gain/loss(irrespective of whether or not you have used it for rental income purposes and/or it was vacant while you were living overseas).
Australian non-residents for income tax purposes are not entitled to the tax-free threshold and are not entitled to the capital gains 50% discount concession either.
Your Australian-sourced income would also be included in your New Zealand income tax return, and as you would have already paid income tax in Australia you would be entitled to a tax offset in your New Zealand income tax return as well, which will ensure that you are not double taxed on the Australian income.
Therefore, you would be required to file an income tax return in New Zealand which will include all your worldwide income, plus an Australian income tax return which will only include income derived in Australia.
On the other hand, if you were spending time living in Australia throughout the year, it might still not be adequate to change things because the non-residency laws are quite complex and a few tests would need to be passed in order to qualify. The mere fact that you may be spending some time in Australia does not automatically qualify you to be an Australian resident for tax purposes. It’s always a case-by-case scenario and a question of fact.
However, if you were an Australian resident for income tax purposes for the required period, the opposite of the above would apply, in that you would be required to ﬁ le an income tax return in Australia, which would include all of your worldwide income, including any income derived in New Zealand. Any tax that you would have paid for your overseas income would entitle you to a foreign income tax offset (thus again avoiding being double taxed) in your Australian income tax return, and will also mean you are eligible for the tax free threshold and the capital gains 50% discount concession as well.
– Angelo Panagopoulos
For full article please click on the link below: