Rental Income Tax

A taxpayer receiving rental income may have income tax filing requirements under either of these circumstances:

  • Rental income from property located in New Zealand and held by either a New Zealand tax resident or a non-New Zealand tax resident; and
  • Rental income from property located overseas and held by a New Zealand tax resident.

Where the rental is subject to tax based on the country of source and the country of residence, the double tax treaty should be considered.

Thin capitalisation rules may apply where a New Zealand tax resident’s funds are borrowed from cross-border related entity.

Property

Overseas Rental Property

There are various income tax implications for New Zealand tax residents holding offshore rental properties:

  • Double taxation from country of source and country of residence,
  • Maximise deduction for expenses in relation to overseas rental income,
  • Return overseas income in the appropriate period where the balance date in the foreign country is not 31 March,
  • Adopt the correct foreign currency exchange rate,
  • Ring fencing of tax losses still applies to overseas residential properties,
  • Foreign denominated loans, where you may need to consider unrealised foreign exchange gains and losses, and
  • Interest payments to foreign bank, any non-resident withholding tax, or approved issuer levy obligations.

How We Add Value?

We endeavour to add value when handling taxpayer’s property accounting and tax affairs. We aim to:

  • Provide expert advice including best structures that support your investment decisions,
  • Share specialist property accounting knowledge and introduce you to our network,
  • Ensure tax planning and opportunities are maximised.

We also aim to ensure deductible expenses in relation to the rental income are maximised! Here is a list of standard expenses for rental returns:

  • Accounting fees
  • Body corporate fees
  • Depreciation, including depreciable chattels and fixtures
  • Insurance
  • Interest
  • Home office expenses
  • Property management fees
  • Repairs and maintenance
  • Rates
  • Telecommunication costs
  • Travel costs. Including vehicle expenses
  • Valuation fees
  • Water rates

Where the expense is capital in nature, considerations should be made to see if it is a depreciable property for tax purposes. If so, depreciation on the property can be claimed as a deductible expense during the useful life of the asset.

Collation of Information

Usually, the information we need to prepare your income tax return is quite simple.

  1. Complete a questionnaire,
  2. Complete the income and expense spreadsheet by exporting bank statements from online banking or provide access to Xero.

Best practice is to make sure all receipts and payments pass through the bank account that relates to the rental activity. This makes it easy to trace all business income and expenditure and ensure nothing is missed when we prepare the return.

Need Help with Rental Income Tax Compliance?

Our team can help you sort out your rental property’s tax compliance work. Get in touch with us so we can add value to your accounting and tax affairs!

Refer to our people for more information on who we are, our experience and how we can help.

We offer a free no obligation consultation where we can discuss:

  • your rental property portfolio;
  • highlight tax issues and opportunities; and
  • how we can add value and assist.
Book a Consultation