Expats & Immigrants

One of the frustrations Expats and new immigrants in coming to or returning to NZ is getting the right advice on where to buy property in NZ, what to buy, and what taxation and legal structures they should be using.

GRA are a 'one stop shop' but without self-interest. This means we do not sell property to you because we are fiduciaries.

This means we have an obligation to help you make the right decisions based on your circumstances unaffected by our financial goals or interest.

This means greater peace-of-mind for our clients.

Where to buy / What to buy

You can use our Property Procurement team to identify a good area to invest in or live in, and use us to procure property as your buyers agent.

We know our back yard, - we invest all over New Zealand and know what parts of it are growing and shrinking.

Our service and expertise allows you to invest where the growth is, and make sure you get it right first time to avoid costly mistakes of buying and reselling property at a loss.

Expatriates of New Zealand - what tax structures should you use for your NZ investments ?

Generally for cross border investment, we help expat investors to ensure that not only do they address the NZ tax planning issues (which GRA are expert in advising on), but additionally to address their tax obligations in their current country of residence.

Generally no matter where you are in the world, the country you are in will seek to tax your 'world wide incomes', including foreign investment in NZ. They key is to fit into one of their exemptions, so that your NZ investments are tax exempt. (This is not always possible, but should be your goal.)

Expat Tax in NZ

One of the key questions for you to consider is: Will you be able to access your tax losses from your property and investing activities when you return to NZ and derive income here?

As example, a common local structure for New Zealanders is a loss attributing qualifying company (LAQC). This is a company incorporated in NZ that makes a special tax election that allows flow through to the shareholders of all losses, and capital gains tax exempt.

A requirement is that there are 5 or fewer shareholders, and management is domiciled in NZ. This last point makes an LAQC a trap for an Expat, because while it will deliver losses to their personal tax return, the fact that the director (the Expat) is domiciled offshore means that company is in breach of the LAQC rules, and in fact is deemed to have revoked its LAQC status.

Taking this to the extreme, - imagine coming back to NZ looking forward to and enjoying utilising say $200k of losses in your tax returns generated from property investing in your absence, only to have IRD audit your LAQC, discover your absence from NZ and the foreign directorship domicile, - and then have them cancel your losses!

We have seen this happen. You get a bill for the tax on the $200k, and penalties, and you lose access to your losses.

A simple solution to the example would have been for the expat investor to put a local director in as manager, or approach GRA for help in this area.

The whole issue can be avoided, - you just need the right advice.

Of course for an expat investing with cash (not debt), you wont have losses, so a trust will be very attractive as an investing vehicle. In some circumstances Expats can avoid gifting programmes in NZ, avoiding having to make annoying and time absorbing gifting programmes transferring wealth to a Trust. We discuss this more below.

Trusts in New Zealand

Other investors seek to 'shelter' their NZ investments behind 'blind trusts', tax resident in NZ with GRA as your Trustees. In some circumstances this can make your NZ investments 'blind' to the world, and with the right Trust structure and tax planning, the trust can shelter your investments from your local tax domicile and effectively make the asset subject to NZ tax only.

As NZ has no capital gains tax, stamp duties or property tax, this effectively means your gains are untaxed and sheltered in NZ by the blind structure.

GRA can help you with forming these types of structures and planning to protect your assets and minimise your tax.

Family Trusts In New Zealand Have Advantages - Set One Up As Soon As Possible

The Trust regime in New Zealand is very good. Essentially an NZ Trust allows you to set up a Trust that you will fully control, can chose to be visible or invisible in, and enjoy excellent asset protection and taxation benefits.

The benefits include:-

Trust property is generally quarantined from creditors and matrimonial claims, making them excellent for asset protection from financial problems and divorces

The tax profile of a Trust in NZ is very good. Many countries including Australia penalise income being retained in Trust, where NZ does not. At time of writing the top marginal tax rate is 38% on income over NZ$75,000 while the Trust tax rate is 33% for income retained.

Alternatively Trustees of a Trust in NZ can 'income split', allocating the income to beneficiaries ( ie you and your spouse and your children), and enjoy their marginal rates ( which may be lower than the Trust ( marginal rates in NZ range from 0 - 38%, depending on your income tier).

For estate planning, NZ Trusts are excellent vehicles to operate your estate through ensuring continuity of asset management, and avoiding tax disposal issues often associated with estates and death. For example a property disposed of from an estate/through your 'Will' causes depreciation recovery (resulting in tax liability to the NZ estate), which a Trust by comparison shelters. There are many examples of tax issues with ordinary estates solved via utilising Trust structures.

In summary, using a Trust in NZ is an optimised way to protect your wealth and minimise your taxes, while providing an excellent estate planning platform. You maintain full control of your assets, while obtaining full asset protection from creditors and matrimonial claims.

Immigrants Moving To New Zealand - Set Up A Trust Before You move here!

One of the things that you need to consider doing before you move to New Zealand is settling up a foreign Trust, and making a non resident (as in non 'NZ resident') gift to the Trust before you migrate to NZ. Expats can also do this in some circumstances.

Under pinning the motivation for this is trying to avoid an annoying tax regime in New Zealand that taxes gifts of capital between related and non related parties.

Gift Duty and Gifting Programmes In New Zealand

Essentially a hangover from an old estate planning tax regime now repealed, the NZ government taxes gifts to family Trusts of individual wealth. An exemption is provided on sums of less than NZ$27,000 per annum per spouse, thus creating the annoying necessity (and compliance cost) of running gifting programmes, where under the settlors (creator of the Trust) make ongoing gifts annually of $27,000 per annum per spouse.

This can take a lifetime, or longer for high net worth individuals and undermine their ability to derive asset protection benefits.

One solution to the problem for non residents moving to NZ is to settle a foreign discretionary family Trust before you come here, and then 'migrate' the Trust to New Zealand to make it a qualifying NZ trust within 12 months of moving here.

New Immigrants (and some Expats) Can Avoid Gift Duty & Gifting Programmes

Foreign gifts by foreign domiciled persons, to non residents are of course not taxable gifts in New Zealand because they are not caught as part of the NZ tax net.

For this reason there is a window of opportunity before you migrate to NZ, or return ( in the case of some expats whom qualify) to migrate a Trust with all your wealth in it to NZ, avoiding a gifting programme and gaining the full asset protection and taxation benefits of the NZ Trust regime.

GRA Can Help You Set Up Your Foreign NZ Discretionary Trusts and Migrate Them Here

What you really should be looking to do is set up a trust that complies with, and is suitable for the NZ environment.

GRA can create a Trust that is domiciled offshore for you and provide advice and documentation surrounding the process. This will include the critical path to make sure you do not run foul of some of our more draconian Trust rules that could cause your migrated trust to become taxable on capital distributed at a rate of 45%. Also included is management of the process from start to finish. That's great peace of mind.

General Advice For Immigrants and Expats Coming To New Zealand

Looking for and finding good honest people, who know the local landscape in New Zealand and have common sense is no doubt one of the challenges you face.

Talk to us, and meet out network of realtors, lawyers, accountants, and advisors, or deal with us directly from anywhere in NZ.

Use our firm as a sounding board for your ideas, let us teach you the local commercial culture and lingo, and make the financial and commercial part of your move to NZ easy.

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