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Moved Overseas But Kept Your NZ Home? IRD Hasn't Forgotten About You
Moving overseas can mean a new job, a new country and perhaps better weather.
But if you've kept your home in New Zealand and are now renting it out, there's one relationship you probably haven't completely left behind...
IRD.
If you're receiving rent from a property in New Zealand, that rental income will generally still need to be accounted for here for NZ tax purposes — even though you're living overseas.
There are a few important things to consider:
1. You may still need to file a New Zealand tax return
Your NZ rental income and allowable rental expenses need to be reported to IRD.
2. Keep good records
Keep records of your rent received and expenses such as rates, insurance, property management fees, repairs and maintenance, accounting costs and eligible interest expenses.
Being 10,000 kilometres away doesn't make finding a missing invoice three years later any easier!
3. Rental losses have special rules
If your rental makes a tax loss, New Zealand's residential rental loss ring-fencing rules will generally prevent you from using that loss against unrelated income. The loss can generally be carried forward for use against future residential rental income, subject to the rules.
4. Your tax residency needs to be considered
Simply getting on a plane doesn't necessarily make you a non-resident for NZ tax purposes. Your circumstances, connections with New Zealand and the amount of time you've been away can all be relevant.
5. Don't forget about tax in your new country
Depending on where you've moved, you may also have to declare the NZ rental income there. New Zealand's double tax agreements and foreign tax credit rules can become important, so getting advice in both countries can save headaches later.
6. Think carefully before eventually selling the property
Moving overseas, renting out your former home and later selling it can create additional tax questions. It's worth getting advice before you sell, rather than discovering the answer when we're preparing the tax return.
The main message is simple:
Moving overseas doesn't automatically end your New Zealand tax obligations.
If you've moved overseas and are renting out your NZ property — or you're planning to — get your tax position sorted early.
Then you can concentrate on enjoying life overseas while your NZ property hopefully gets on with the job of building your long-term wealth.
If you'd like help making sure your NZ rental property tax returns and filing obligations are being taken care of correctly, send me a message.