Rental Property in Auckland - Time to sell?

[Halebop]

I think there could easily be a 10% differential (in Australia's favour) in $A/$NZ cross rate over the next couple of years. But your transaction costs are likely to swallow a degree of this.

Property would certainly seem to be at a peak and it appears unlikely the the boom time increases can continue. On the positive though employment is still strong, as is net immigration into Auckland, albeit on a more modest scale. Interest rate expectations have certainly cooled, with expectations on a likely Neutral or dropping rate environment. However, this if anything would only likely prod the RBNZ into further hawkish acts so some caution would be prudent here.

If cashflow and debt levels are not concerning but you wish to pursue alternate investments in Australia then refinancing and transferring the additional cash to fund an Australian investment (rather than personal consumption debt like a "owner occupied" mortgage) may be viable. NZ borrowing costs are likely to be solid comparative to Australia's so cashflow would have to be a major consideration.

With the right structure, (at least) refinancing your original equity out of the property should be tax beneficial.

Comparing apples with apples, on balance shifting from end of cycle New Zealand real estate, paying off Australian personal consumption mortgage debt and eventually refinancing into end of down cycle Australian real estate might be lower risk, tax efficient and more profitable, but incurs additional transaction costs and closes you to any further gains in NZ assets prices or currency.

[CJ]

quote:

quote:Originally posted by David Hardman




Any idea on how long it takes to re-qualify for NZ tax residence. If I did move back it would only be temporary (but the IRD/ATO needn't know this)

I think I could only handle Auckland for a year at the most

Shasta is correct.... generally 180 days, although there is no hard and fast rule - you have to prove that you intend to commit long term to the country you reside in...be careful though in this regard, as it the ATO/IRD do pursue you if they think your residency is a "sham"!

The issue is not so much a "sham" but that you will gain NZ residency (through the 180 day test) but not lose your Australian residency, hence ending up a dual resident which complicates things. You normally need to sever all ties and plan to leave for at least 2 years but preferably 3 years.

[CJ]

quote:Originally posted by aspex

Question on Australian residency tax considerations.
If the person is the beneficiary of a NZ family trust, what changes in the structure of ownership of assets owned by the trust, would be reflected in that individual,s Australian tax position?
I cannot see that there would be any, provided the Australian resident did not receive a payout while living in Australia, while on taking up residency in NZ the money could be distributed.

For an NZ qualifing trust, the key person is the settlor and there residence. htere must always be one NZ resident settlor of or the trust will lose its qualifying status.

In relation to the distribution, that will depend on the tax laws of the nation you are resident in. If an income distribuion, it will be taxed as income. If a capital distribuiton, not sure as NZ not taxed on these but Australia may. The resience of the trust is not effected by the residence of the benificiary.

[Westie]

Sell the house into an LAQC, take the take the money you need to pay off your personal mortgage, leave the remainder in the rental. Talk to your accountant. An LAQC can have non resident shareholders but you may have to file audited accounts. You will also probably have depreciation recovered. Do the math, even with the negative gearing on the NZ rental you will probably come out ahead due to tax deductibility on the rental & savings on the interest costs on your personal debt which probably has an effective rate of at least 11% after taking into account your tax bracket.

I've thought a lot about selling my rental properties but in the end, unless you really need the money, you will probably do yourself a disservice in the long term. Takapuna is a desirable area. Last I heard they weren't creating any more land in Takapuna so you have the law of supply & demand on your side. Forget about trying to predict what will happen in the next couple of years. Think clearly about the long term. If you think you can come back in 5-10 years and buy the same property for the same or less, sure, sell it. Otherwise, just sit on it.