sofistek

Hi gang,

A friend who's back from Australia for a while (though he'll be going back again in a few months) says that Aussies claim just about everything bought against tax, keeping all their receipts. Is it similar in NZ? Just what can be claimed, to get that tax bill lower?

Don

When you rent out a house, you can offset (against income so that you can reduce income tax):

bank interest
agent's fees
maintenance and small replacements
depreciation on contents (eg carpets, curtains, chattels) @ various rates up to 50% pa
depreciation on value of house @4% pa

ABCDiamond

When he says "everything" does he mean everything like food etc ? If so, he's pulling your leg

sofistek

I'll ask, but it seemed as though many or most Aussies had an accountant. If you do that, you've got to make more on allowances than the accountant costs.

ABCDiamond

Most aussies do have an accountant, but many could do it themselves.

Using an accountant is normally a faster way to get back the overpaid tax that gets taken each week via the payroll. It costs about $70 for the average taxpayer.

But with the internet, you can do it yourself now, and get the overpayments refunded within 7-14 days.

Tax return forms can be a bit complex, so that would be another reason to use an accountant, or should I say "Tax Agent".

sofistek

I asked, and he was using poetic licence. However, he said that immigrants could claim back many of the expenses associated with a move, including removal costs. He also said that a favourite loophole was to set yourself up as a kind of company in your own right (even if you're employed by another company) and claim various expenses associated with that. Such as car expenses, or costs associated with having a primary home in one part of the country and working in another, which can net allowances of $100 per day.

Now I don't want to avoid paying my fair amount of tax, but any help with the initial burden of moving and setting up home, would go down well.

ABCDiamond

My comments only relate to Australia, I don't know how the NZ tax works.
I will agree with certain aspects of this, especially setting up a company or a trust, but the removal costs ? If it is requirement of your job, then yes. But in 90+% of cases, I would say NO.

Having worked for a particularly creative accountants in the past, I have seen many things, but you need the RIGHT circumstances to get most of the benefits that can be obtained legally.

I've also seen the penalties imposed by the ATO on those who tried to hard !!

But I agree with you in claiming anything that is legally claimable, but if in doubt, DON'T do it yourself, get it done by a GOOD Tax "Accountant", as opposed to a general Tax "Agent".

Kiwipaul

When I worked in Auckland I registered as self employed IT contractor, and registered for GST. That way I could claim a lot more back as expences, 10% of house costs as used 1 room as office, 50% cost of any s/w or h/w as computer classed as 50% business use, etc.
I could have registered myself as a company but found that too complicated so didn't bother.
Aussie taxes rules far tighter and so not been able to claim as much in expenses and not even bothered registering as self employed as not worth the hassle.
Never yet used an accountant as can sort most out myself.

Don

Spoke to a slight mate today who has a string of rental properties, he said he usually gets income tax refund at end of year because he manages to make paper losses on his portfolio of flats + houses, and gets back most of the income tax he pays on his job (automatically deducted in advance).

ABCDiamond

Here in OZ, you can still claim certain expenses that you can classify as "incurred in your occupation" whether self employed or not.
eg: a % of depreciation of computer equipment if you need to use it at home, for self education, or doing some work at home, etc. You dont need to register for GST to be allowed to claim these things here.

But again even with things like this, a lot of people can do it themselves.

Oh yes, and dont forget to claim for sun tan cream if you work outside

Kiwipaul

Thats why rental properties are so popular to own in Oz and NZ because you have depreciation losses that you can write off against your earned income.
But you can only claim it against earned income in the same country as the property. I cannot claim my depreciation losses in NZ against my earned income in Australia. I currently have a massive potential tax loss in NZ but no earned income to write it off against, so it just gets bigger each year.

Don

Not sure whether I should depreciate my house in NZ (getting rented out next month). They claim back the depreciation when the house sells at above the depreciated tax value, so what's the point of that?

ABCDiamond

I think it depends on how long it will be before you sell it.

Depreciate now = Dollars in the pocket now and pay back later when you sell. It's like an interest free loan

sofistek

I don't quite get this. Is the depreciation similar to depreciation of company assets? Capital expediture is usually written off over a number of years. However, a property usually increases in value. Do the tax authorities allow you to treat it as a capital expense? And do you have to be a "company" to take advantage of depreciation (if it is an advantage)?

Don

see http://www.ird.govt.nz/library/publi...etax/ir260.pdf

You can depreciate most rental properties by 4% pa.