As Kiwis take the exciting plunge across the Tasman Sea to Australia, the thrill of new opportunities comes with a complex web of tax implications.
While the prospect of a new chapter is appealing, understanding these tax considerations are crucial, especially the temporary resident exemption, which can offer significant tax relief. However, many Kiwis worry about capital gains tax and its potential impact on their finances.
At Moore Markhams, our purpose is to help you thrive. This guide provides a clear overview of the key tax implications you need to be aware of when moving between New Zealand and Australia.
Moving to Australia: Key Considerations
For Kiwis relocating to Australia, understanding your residency status is fundamental. It governs how you are taxed and what exemptions you may be eligible for. Here are some key points to consider:
- Temporary resident exemption: this can provide valuable tax relief for certain New Zealanders arriving in Australia. You are generally only taxed on your Australian-sourced income, allowing you to enjoy concessions while settling into your new home.
- Capital gains tax concerns: once Kiwis become permanent residents of Australia, it is important to remember, investments held in New Zealand that wouldn’t ordinarily be subject to capital gains, could now be subject to Australia’s capital gain tax. Proactive planning before you become a permanent resident is essential to manage this exposure.
Transitioning to New Zealand: Keep these in mind:
For those returning home after time in Australia, a different set of rules applies.
- Transitional resident exemption: as a transitional resident, you may be exempt from New Zealand tax on most types of foreign-sourced income for a set period. This provides a helpful window to organise your financial affairs without immediate tax consequences on your overseas investments.
- Pension transfers: the rules are specific, and timing is crucial to ensure you comply with the tax regulations in both countries and handle your retirement savings effectively.
​
Understanding Residency and Tax Obligations
- The 183-day rule: if you’re in Australia for more than half the income year, you may be considered a resident for tax purposes However, this is not the only test. Your long-term intentions and where your primary home is located also play a significant role.
- Dual residency dilemmas: if you find yourself classified as a tax resident in both countries, the Double Tax Agreement (DTA) can help clarify which country has the right to tax your income.
Trusts and Companies: Tread Carefully
Managing Trusts can get complicated. Be mindful that:
- Be aware that Australian tax residency rules may complicate your tax obligations, especially regarding capital gains tax.
- Appointing an Australian director to a New Zealand company can raise questions about residency and tax implications that need careful consideration.
​
Conclusion: Stay Informed and contact your trusted tax advisor.
Moving across the Tasman offers wonderful opportunities, but it is clear that the tax implications require careful consideration. Being informed and proactive is the best way to navigate these changes successfully.
At Moore Markhams, we are here to provide the clarity and guidance you need. Before you make your move, let’s discuss your specific situation. We can help you understand your obligations, plan effectively, and ensure your journey ahead is a successful one.
Contact Moore Markhams for expert advice on managing tax obligations when moving between New Zealand and Australia here.
