NZ for Tax minimization
 

Hi all,

Would appreciate some input from all of you Kiwi Tax gurus about a hypothetical situation, as it seems tooooo good to be true!:

An Aussie wants to get rid of some Australian investments for a Capital Gain of $500k. If he sells while an Oz resident, he will be taxed at this marginal tax rate eg 45%. Therefore he would owe the ATO $225k in tax.

So instead he packs up (no perm residence in Oz), flies to NZ, and then dispose of his Oz assets while in NZ. He pays no tax to thee NZ and Aus tax authorities because he will remain in NZ for 183 days in that tax year?

The Aussie then stays in NZ with his money sitting in an OZ bank account and get a refund from the ATO on his 'Australian non resident bank withholding tax', because he is now a NZ resident, and is entitled to pay no tax in NZ for 4 years (foreign income).

Am I missing something here? Does one have to remain in NZ (not return to Aus) for a set number of years, to not have the ATO make a claim?

Thanks

Re: NZ for Tax minimization
 

I´m not an expert on Oz tax but I have spent most of my working life playing around with international taxes and tax avoidance schemes. I assume that your investments are shares or unit trusts and not real estate. Don´t quote me, but to my knowledge, if an OZ tax resident becomes non resident, he is liable to capital gains tax based on the value of his shares when he becomes non resident and hence tax will be payable. He can however, elect when sending in his tax return for the year in which he becomes non rsident, to not be taxed on that theoretical gain, but rather to wait until the asset is actually sold and pay on the final profit. ( If you are planning to become resident again at a later stage, this route is not advisable
I would suggest that you don´t think that this election would mean you get away tax free as you´ll be long gone when the gain arises, as tax authorites are not that naive. I would imgine you´d have to give the ATO details of what those assets are that you want to delay paying CGT on, and there will be some way in which they´ll make sure that you wont get all the proceeds from the sale before having paid whatever taxes are necessary. It´s very difficult these days to get away with the kind of move that you suggest. It´s not impossible, but does involve doing a lot of homework

Re: NZ for Tax minimization
 

Thanks for your detailed reply. I was just hypothesizing of course.:D

Re: NZ for Tax minimization
 

Of course!! You´re probably like me- in that hypothetical situations just occur to me out of the blue, and I like to find answers, if I can.