Renting out properties has been a popular form of investment amongst New Zealanders over the past few years, both domestically and internationally.

If you are a resident of New Zealand for tax purposes, you will be taxed in New Zealand on your "worldwide income". This is income derived from New Zealand as well as income derived from all other countries. This includes any rental income derived from the properties owned offshore.

Inland Revenue has recently released three draft statements discussing the range of tax implications a New Zealand resident, who owns an overseas rental property, may come across. The draft items include:

  • Tax issues arising from ownership of overseas rental property
  • Application of the financial arrangement rules to a foreign currency loan used to finance overseas rental property
  • Currency conversion methods that individuals with an interest in an overseas rental property can use to convert foreign currency amounts into New Zealand dollars

It is not uncommon for people to believe they do not need to return overseas rental income in New Zealand and these can have some additional complexity around the loans and the treatment of deprecation.

If you do have an overseas rental which you have not been returning in New Zealand, let your advisor know and we can help you work through the implications of this.