Most New Zealanders enjoy beneficial tax status in Australia as Temporary Migrants. This temporary migrant status for Australian Tax Purposes provides an exemption from Australian tax on foreign sourced investment income and foreign sourced capital gains. These concessions whilst enjoyed by individuals are not available to New Zealanders in their capacity as Trustees of New Zealand Family Trusts.
Because of the way the Australian tax rules work, more often than not Kiwis who are trustees of New Zealand Trusts that have migrated to Australia find themselves in a peculiar situation. This comes from the fact that Australia taxes trusts by reference to the residency of the Trustees. It is enough for one of the Trustees to be resident in Australia, to bring the New Zealand Trust within the scope of the Australian tax net. Income from a New Zealand Trust could be distributed to a Beneficiary as Beneficiary income without the imposition of Australian income tax, if done within prescribed time frames. This may not be the case with the capital gains. Consequently this could give rise to an unintended exposure to capital gains tax in Australia.
If you or a member of your family are contemplating a move to Australia and you have a New Zealand Family Trust, that owns residential properties or other capital assets, come and talk to us so that we can put the necessary mechanisms in place to keep your New Zealand Trust outside of the Australian tax net.
In addition to the above, the migration of Settlors, Trustees, Beneficiaries needs to be carefully considered. Changes in tax residency of these persons may have an impact on the classification of New Zealand Family Trusts for the purposes of Residential Land Withholding Tax (RLWT) and the definition of Offshore Persons, where the New Zealand Trust owns residential property.