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  1. #1
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    Default what would you do?

    A friend of ours is receiving a substantial insurance payment in aussie dollars. She now lives in NZ. The funds need to be invested for about a year to give her time to think about her options with this money, whether to go towards a house or not etc. Would you bring the monies to NZ where fixed interest rates are higher or leave in Australia hoping the exchange rate will change in her favour. If invested in Australia does the taxed interest gets taxed again in NZ when declared as income. Are bank deposits the only logical place for this money?

  2. #2
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    Buy NZ property ETFs

  3. #3
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    thanks smpl. Are there downside risks with this strategy?

  4. #4
    Guru peat's Avatar
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    I'm not bringing back any more than I need to (from Oz to NZ) at the moment.
    I'm waiting for Aud/NZD to be 1.09 !! not the current 1.05

    Make sure you bring it back through a forex provider too! not a trading bank. I saved over 500 with NZForex vs CBA transfer on a mere 20k that I had to bring back recently, and the savings get greater with larger sums (percentage wise) as you get a better rate
    For clarity, nothing I say is advice....

  5. #5
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    Quote Originally Posted by voltage View Post
    thanks smpl. Are there downside risks with this strategy?
    Not if it ends up going to a house. Personally I do not want any more exposure to property.

  6. #6
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    Any interest earned in Australia has to be included in the NZ tax return. You can claim any tax deducted in Australia against tax here. Usually you just get 15% withholding tax deducted in Australia.

  7. #7
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    thanks for all the comments. Exchange rate risk is a biggie. It is very difficult to predict where this is heading. It is certainly not favourable at the moment.

  8. #8
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    Quote Originally Posted by voltage View Post
    thanks for all the comments. Exchange rate risk is a biggie. It is very difficult to predict where this is heading. It is certainly not favourable at the moment.
    The exchange rate risk is ever present, no matter what currency you hold.

  9. #9
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    For 1 year term, it's really hard to place bets on currencies. I'm more on the risk adverse side and would personally convert AUD -> USD as the global outlook and emerging economies are heading into a slump.

    There's a big problem with holding real estate in NZ (in ETF or not) and that is the upcoming NZ's Capital Gains Tax. There's a huge uncertainty on the tax treatment of NZ real estate as for most home owners, the capital gains is 100% tax free (if held more than 5+ years). Why would you invest into an ETF if you don't own a house in NZ? The principal residence is tax free.

  10. #10
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    Quote Originally Posted by voltage View Post
    A friend of ours is receiving a substantial insurance payment in aussie dollars. She now lives in NZ. The funds need to be invested for about a year to give her time to think about her options with this money, whether to go towards a house or not etc. Would you bring the monies to NZ where fixed interest rates are higher or leave in Australia hoping the exchange rate will change in her favour. If invested in Australia does the taxed interest gets taxed again in NZ when declared as income. Are bank deposits the only logical place for this money?
    Guessing the direction that exchange rates will move in a short term time frame is a fraught exercise.

    Split the money into four equal parcels.

    1/ Bring the first quarter back to NZ immediately and invest for one year.
    2/ Invest the second quarter in Oz for three months, then bring it back for NZ and invest for nine months.
    3/ Invest the third quarter in Oz for six months, then bring back to NZ to invest for six months.
    4/ Invest the fourth quarter for in Oz for nine months then bring back to NZ and invest for three months.

    This way, the ultimate 'exchange rate' you get will be averaged.

    All cash will then be in NZ after a year and your friend can make her decision. 'Bank deposits' and 'Government Stock' are the only realistic options for a time frame as short as a year, if you want to make sure the amount she has is 'capital stable' after that one year.

    NZ and Oz have reciprocal tax arrangements. So you shouldn't end up paying more tax depending on which jurisdiction you invest in.

    SNOOPY
    Last edited by Snoopy; 12-04-2019 at 02:00 PM.
    To be free or not to be free. That is the cash-flow question....

  11. #11
    Guru peat's Avatar
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    Aud/NZD : 1.06 already !! bring on 1.09
    For clarity, nothing I say is advice....

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