Open Door Consultancy: Australia, The Tax Rip Off
Kiwis who have been living in Australia for 4 years will be able to apply for citizenship through the recently announced fast-track process. This will bring all the benefits of being an Australian citizen that has otherwise been unavailable for Kiwis, such as access to welfare support, student loans & other government aid. On the surface, it’s a very compelling proposition for many Kiwis considering the leap.
As most things we write about here, there’s always a catch or a downside. Before rushing to apply for Australian citizenship, anyone eligible should ensure they consider the tax implications of doing so, especially if they have assets elsewhere.
Of course, every case is different and unique, but usually Kiwis living in Australia as tax residents in Australia are subject to Australian tax on their worldwide income. But Kiwis that are not permanent residents or Australian citizens often qualify to be “temporary” tax residents.
The key benefits of being a temporary tax resident are:
- They can usually exclude their foreign investment income from their Australian tax returns, such as interest, dividend, or rental income from New Zealand (or anywhere else); and
- Overseas assets are generally not subject to Australia’s capital gains tax (CGT).
^Above is very nuanced^
What happens now when a temporary tax resident becomes an Australian permanent resident or citizen is that they lose the benefit of being a temporary tax resident. This means that their foreign income will become taxable in Australia (although they may get a foreign tax credits). But the biggie is Capital Gains Tax – if they have rental properties in New Zealand for example, or have kept their main house in New Zealand, these could become roped into the the capital gains tax net in Australia; any gain in value from the date of losing their temporary tax resident status would be liable.
Book a Call with Open Door Consultancy if you have similar questions
Is Australian Citizenship foolish for New Zealand citizens?
Obviously, there is no single right answer here, as everybody’s circumstances are different. But it’s a matter of diversifying your holdings and incomes. Consider:
- The level of non-Australian income – how much tax is paid on that income in New Zealand or elsewhere in the world; the calculated difference between the tax rates in the two countries; it may be that Australia is cheaper!!
- The level of non-Australian assets – if a Kiwi has significant New Zealand assets that will become subject to Australian CGT, then becoming an Australian citizen could be quite costly in the long term, especially if the asset is compounding.
Companies
New Zealand has some great Trusts (Cook Islands even better) and some Kiwis may have companies brought over, but if a trustee of a New Zealand trust moves to Australia, that trust may become subject to tax in Australia even if it has no income from Australia (due to CFC rulings). Kiwis in Australia may also be taxed on distributions received from offshore trusts, even if these are capital distributions. It is really important to consider this before making any distributions from New Zealand trusts to beneficiaries resident in Australia.
The key here is becoming a citizen or permanent resident of Australia
Non-Kiwis
If you’re considering a long-term move to New Zealand with the eventual goals of becoming Kiwi yourself, did you know there’s tax benefits that they offer for new residents? It’s very interesting indeed!
Write me below to find out all about this programme!!
Again, Contact Open Door
Closing
As I say, there’s a downside to everything. In the world of taxation, it’s undoubtedly getting worse and worse as more tyrannical governments clamp down on their citizens. However, the countries that were known as tax havens or offering tax benefits, still are the go-to location with the exception of Dubai.
For the sake of the document or card that mirrors you’re own in travel benefits, it may be a better decision to save on the taxes and open another residency or work towards a completely different residency or passport.
Get in touch!!
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