NEW ZEALAND Law and Practice Contributed by: Violet Yu, Jonathon Russell and Sandy Chen, Cone Marshall Limited
1. Tax 1.1 Tax Regimes
nal, historical purchase price, when determining the capital gain and any tax payable under the bright-line rules. This circumstance can arise where a property is required to be sold sooner than anticipated – eg, on the breakdown of a marriage/relationship, or busi - ness failure. The usefulness of obtaining a valuation may depend on the surrounding factual context and the bright-line settings in force at the relevant time. That is particu - larly relevant in New Zealand, where the bright-line regime and timeframes have been altered by succes - sive governments. A further planning opportunity arises in relation to the distribution of trust income. Where trust income is distributed to beneficiaries who are taxed at a mar - ginal rate below the flat 39% trustee rate, the overall income tax burden of the trust can be reduced. This has become an increasingly important consideration following the increase in the trustee tax rate to 39% from 1 April 2024, which aligned the trustee rate with the top personal tax rate. 1.4 Pre-Immigration and Exit Planning New Zealand does not have a formal pre-immigration tax regime, but individuals moving to New Zealand may be able to undertake effective pre-arrival plan - ning. In particular, new migrants and returning New Zealanders who have not been New Zealand tax resi - dents in the previous ten years may qualify as tran - sitional residents, giving them a temporary exemp - tion from New Zealand tax on most foreign-sourced income for approximately four years after becoming resident. Before arriving in New Zealand, it is common for an individual to first review the timing of their move and consider the point at which they may acquire a per - manent place of abode, the ownership and location of investment assets, foreign superannuation and trust arrangements, and whether income or capital gains can be realised before New Zealand residence begins. On leaving New Zealand, planning generally focus - es on ensuring that New Zealand tax residence has ceased, including management of days of presence (more than 325 days in any 12-month period) and any
New Zealand has a range of tax regimes that can apply, including income tax, trust taxes and property- related taxes. • Personal income tax operates on a progressive tax system, with rates currently ranging from 10.5% for income up to NZD15,600 to 39% for income over NZD180,000, with intermediate brackets at 17.5%, 30% and 33%. • The trustee tax rate is set at 39%, effective from 1 April 2024 (although trust income distributed to beneficiaries will be taxed at the income tax rate applicable to that individual, rather than 39%). • The “bright-line” test is an income tax rule that effectively operates as a targeted capital gains tax, taxing gains on certain residential properties sold within a specified period of acquisition, with a two- year bright-line period applying to disposals on or after 1 July 2024. The capital gain will be taxed at the relevant income tax rate. There are some exceptions, including an exemption for the “main home”. • Presently no estate, inheritance tax, wealth or gift duty applies. • Goods and Services Tax (GST) 15% – applicable to most goods and services. 1.2 Exemptions There are currently no estate, inheritance, wealth or gift taxes in New Zealand. There are no exemptions applicable. 1.3 Income Tax Planning It is common for independent and up-to-date market valuation to be carried out before transferring residen - tial property into a trust. This is done for the purposes of establishing an up-to-date “base-line” value, and is particularly relevant if the property has appreciated in value since its original acquisition (but prior to trans - ferring that property into a trust). Following the transfer into the trust, if the property needed to be sold within the bright-line period, for whatever reason, the base value established via the market valuation could be used, rather than the origi -
485 CHAMBERS.COM
Powered by FlippingBook