As a company director, you might receive a letter from the New Zealand Fire Service asking you to make a Statutory Declaration. What does it mean for you and your Look Through Company (LTC)?
The NZ Fire Service website states: "All property owners who insure property in New Zealand against the risk of fire pay a levy." Did you know that? I sure didn't.
So, what is it for? The purpose of the declaration is to provide to NZ Fire Service the following information:
Why do they want this info? The NZ Fire Service seeks to establish that all parties who are liable to pay levy do so. Where your insurance is through a NZ-based insurer or broker, then this levy will likely be included already in your premiums, and the NZ Fire Service is looking to confirm with you that this is the case. However, where you insure offshore, the liability to pay levy falls directly to you.
What do I do with the form? You have to take it to a Justice of the Peace, Solicitor of the High Court of NZ or another person authorized to take a statutory declaration, and sign it in front of them. They then sign it to. This form is then sent to the NZ Fire Service.
Want to read more? Go to this page at the NZ Fire Service website, or contact us for assistance with completing this form.
All trademark and copy rights belong to their respective owners. EpsomTax.com is not endorsed by the NZ Fire Service. Thanks to Darren Stafford for assistance with this post.
What is an LTC?
Unlike the LAQC rules, shareholders of an LTC are liable for tax upon the company's profit, as well as being able to offset the company's losses against their other income. The key features of an LTC are:
The LTC retains its identity as an incorporated company, and will keep its corporate obligations and benefits under general company law, such as limited liability.
For income tax purposes, the LTC is "looked-through" and the owners of an LTC are regarded as holding the LTC's assets directly and carrying on the activities of the LTC personally.
An LTC's income, expenses, tax credits, gains and losses are passed onto its owners, in accordance to their effective interest in the company.
Each owner of the LTC will then record any income or losses, as appropriate, in their own income tax return.
For other tax purposes (such as GST, PAYE or FBT) the LTC retains its tax obligations.*
What about QCs?
· There are no new QC or LAQC elections.
· Existing LAQCs cannot attribute losses or income years starting on or after 1 April 2011 - only LTCs can.
· Existing LAQCs automatically became QCs (without the ability to attribute losses) at the start of the income year that begins on or after 1 April 2011.
Read more from IRD here. Find out more about the QC and LAQC rule changes here
Tax Information Bulletin Vol 23, No 1 (February 2011)explains the LTC rules and the other changes to the QC and LAQC rules in further detail
The Australian Tax Office (ATO) wrote back! Call me pessimistic, but I didn't think we'd get a reply. Nonetheless, a few days ago it arrived. Here's the two questions we asked, and the response of the ATO regarding personal attribution of losses from a Look Through Company (LTC):
Seeing as a New Zealander working in Australia is taxed on his worldwide income, does the ATO allow losses from rental property in New Zealand owned by a New Zealand LTC to be offset against personal waged income earned in Australia?
"For Australian income tax purposes, companies are unable to distribute lossees from rental properties (or other losses) to their shareholders."
In other words, No.
Seeing as a New Zealander working in Australia is taxed on his worldwide income, does the ATO allow losses from rental property in New Zealand personally owned by said individual to be offset against personal waged income earned in Australia?
"If an Australian resident's overseas property tax deductions are greater than their overseas rental income, they will have a foreign tax loss. They can use their foreign income loss to reduce their Australian income."
In other words, Yes.
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“Are the losses from my rental in NZ tax deductible in Australia if I’m working there?” That’s what we were recently asked by a client. It appears that if your NZ rental property is owned in your personal name, the answer is yes. But if it is owned by a Look Through Company (LTC), what then? We didn’t know the answer, so we rang the Australian Taxation Office (ATO). After speaking to three different people, no one there knew either, so we have written to them. Here’s our letter below… we’ll let you know when we get a response:
GPO Box 9990
Dear Sir or Madam
Re: Personal attribution of losses from a Look Through Company (LTC)
We have some clients that are moving to Australia, where they will receive a regular wage from which tax is deducted by their employer and forwarded to the ATO. My questions are:
Click here to see the ATO's reply.
Accounting for your rental residential investment property; general taxation advice.