Investing overseas earnings in NZ rentals
Question from Thomas updated on 8th June 2020:
I am wondering if there is a suitable financial structure to invest money from overseas freelance consulting work directly into investment in a property (rental home) at home in New Zealand. I have no intention of avoiding tax or fees but I’d like to minimise them as much as possible over the next two to three years.
I would need a small mortgage to buy an average property. And I am wondering if it is possible to purchase a property with an LTC and then use the overseas income and rental income to pay the mortgage and minimise profits all around?
Our expert Mark Withers responded:
I am going to assume you are a NZ tax resident, and as such, are required to declare all your income sources in New Zealand, including the foreign freelance work. That being the case you are free to use the income to repay a mortgage whether the property is in an LTC or not, but, not without that income first being subject to tax.
So you should budget for and pay the income tax on the income before you invest it in building equity in the property. Of course using the net income to reduce the mortgage will maximise profits and increase your tax bill.
Mark Withers and his team at Withers Tsang & Co specialise in advising on property related transactions, valuation and restructure services and tax planning.
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