Key Tax and Financial Matters to Keep on Your Radar
Before making major financial decisions, it is worth checking the tax and compliance issues that may affect you. If any of these situations apply it is important to get advice early so you can make informed decisions and avoid surprises.
Rental Property Sales
If you own a rental property and are thinking of selling, there are several issues worth checking before putting it on the market.
- Brightline test: Check whether your property is caught by the brightline test. If it is, any profit may be taxable, while any loss can generally only be offset against bright-line income or carried forward. In many cases, using that loss in future is unlikely.
- Costs after the tenancy ends: If you incur maintenance or other costs after the tenancy ends to prepare the property for sale, those costs are generally not tax-deductible. They may, however, be able to be offset against building depreciation if depreciation on the building was claimed before 1 April 2011.
Talk to us before giving tenants notice if you are considering selling.
Student Loans While Overseas
The rules for student loan borrowers who move overseas for six months or more include the following:
- Student loans become interest-bearing at the current rate of 5.6%, rising to 9.6% if payments are late.
- Repayments are fixed amounts based on the loan balance as at the previous 31 March. They usually only change back, and the loan becomes interest-free again, after about five months. There are some exceptions if you are in New Zealand for part of the time.
- Payments can be suspended for up to 12 months if you apply before leaving.
- If your loan is over $89,285, the amount owing can actually increase even if you make the required minimum payments.
Check with us before you head offshore so you understand the consequences for your situation. Note that IRD tracks borrowers’ movements in and out of the country, so they will be aware of your circumstances.
Inheritances or Trust Distributions from Overseas
Inheritances or distributions received from overseas are not always tax-free in New Zealand and could be taxed up to 45% if they come from a “foreign trust” or a “non-complying trust”.
Whether tax applies depends on the country involved and whether it is a common law or civil law jurisdiction.
In common law countries, assets on death may first pass to the executors of the estate and then to the beneficiaries. The estate may be treated as a trust in New Zealand, which means the source of a distribution could be a foreign or non-complying trust.
If you receive an inheritance or a foreign trust distribution please let us know.
Gifts from family before death will generally not be subject to New Zealand tax. This can be a useful option for generational planning where parents are living offshore.
Investment Boost
The Government introduced this depreciation incentive on 22 May 2025 for qualifying assets. Businesses can claim a 20% deduction upfront and then depreciate the 80% balance under the usual depreciation rules based on the number of months the asset is held.
In effect, this is a timing benefit that can improve cash flow by bringing tax deductions forward.
Eligible assets must be new, or new to New Zealand, and include the following:
- Commercial and industrial buildings
- Improvements to commercial and industrial buildings
- Plant and equipment
- Vehicles
- Primary sector land improvements
So far, most businesses using this incentive appear to be SMEs, businesses with vehicle fleets, those undertaking major capital projects, or those aiming to improve productivity. Larger corporates have been more cautious in adopting, often because they are uncertain whether the incentive will remain in place long enough to support multi-year projects.
Collaboration
Big financial decisions often involve more than one moving part. If lawyers are involved, we should be as well. Otherwise, key accounting and tax matters that we are well placed to identify may be missed.
Recent examples we have seen include Trusts being wound up where:-
- tax losses carried forward were forfeited,
- double fees were incurred for work we had already completed,
- properties transferred to new owners temporarily created a potential brightline tax issue and unnecessarily triggered accounting and tax compliance obligations for the new owners,
- trust distributions were made unnecessarily when the payout could instead have been offset against an existing loan balance.
If you are planning a property sale, heading overseas, receiving funds from overseas, or investing in business assets, get in touch before you act. A quick conversation early on can make a real difference.
