Sun, Sea and Tax, Part Three: Australia and New Zealand

Accountants BDO have been considering the tax benefits of certain locations to go alongside the promise of a better lifestyle. Here they consider the merits of Australia and New Zealand

 

Australia

 

People from all over the world relocate to Australia for various reasons ranging from its warm climate and diverse landscapes, to its wealth and large economy. Residents are subject to income tax on their worldwide income and net capital gains. Despite having no net wealth tax, inheritance tax or gift tax, Australia has relatively high progressive income tax rates.

New residents are able to benefit from a tax-free uplift in the base cost of their assets which are not already taxable Australian property when they become resident, thus potentially reducing any future net capital gain on the disposal of those assets while resident in Australia. For this reason Australia may well be a popular choice for individuals looking to cash out of businesses and retire to the sun.

In addition, individuals on certain temporary visas, and who do not have a spouse who is resident in Australia, may also benefit from further favourable temporary resident tax rules. Under those rules, most of their foreign income is not taxed in Australia (except income earned from employment or the provision of services), only capital gains made on 'taxable Australian property' are assessable (although without the benefit of the 50% capital gains tax discount available to resident individuals who hold an asset for more than 12 months) and no withholding or income tax is levied on interest paid to foreign residents who do not operate through an Australian permanent establishment.

 

New Zealand

 

New Zealand has a modern, prosperous and developed market economy, with most major international corporations having an office in Auckland, the economic capital of the nation.

New Zealand residents are subject to income tax on their worldwide income at progressive rates. However, a favourable tax regime may apply for new residents (or those returning after a 10 year absence) which, assuming certain conditions are met, provides a 49 month period in which non-New Zealand source passive income is exempt from tax.

New Zealand is not a low tax jurisdiction, but there is no general capital gains tax, no social security contributions (although a levy is payable for accident cover), no inheritance tax and no gift or stamp duty. Goods and services tax is imposed on goods and services other than financial services and residential rentals. Overseas portfolio investments may be taxed under a favourable regime.

 

See also our expat tax guides to Southern Europe and the Med and Middle East