Written by Damien Roylance, Managing Director of Entourage
I was in Christchurch a few weeks back for a work conference, and stayed on afterwards to travel around Queenstown with the family.
Between sessions and long drives past lake after lake, I found myself in a lot of conversations about property. Not tourism. Property. A few people I know in the industry over there have already bought. A few more are thinking about it. By the time I flew home, I was thinking about it too.
I put a short post up on Instagram about it and honestly wasn’t expecting the response I got. A lot of people are curious about this. So I wanted to put down a proper, unpacked version of my thinking.
Why New Zealand, and why now
Australia has disincentivised investing in residential property with:
- High stamp duty to get into property
- Land tax increasing with the goalposts always changing
- Scrapping of negative gearing for new investors
- No Capital Gains Tax (CGT) discounts anymore
- The removal to purchase in your SMSF
Every state seems to be tightening something else for investors, and every change adds friction to a decision that used to be a lot simpler.
Across the Tasman, the settings look different right now. As an Australian citizen, you can buy residential property in New Zealand, and there are a couple of things about the tax treatment that genuinely surprised me when I first looked into it properly.
There’s no stamp duty on property purchases in New Zealand. None. And New Zealand doesn’t have a broad CGT the way we think about it here. Instead, they run what’s called the bright-line test. If you sell within two years of buying, the gain is taxed at your income tax rate. Hold longer than that, and it generally falls outside the rule altogether, meaning you can have $0 CGT
Compare that to what an investor pays here in stamp duty alone before they’ve even settled, and it’s easy to see why this is starting to look like a genuinely attractive alternative rather than a novelty.
It’s not as simple as just buying, though
I want to be upfront about this, because I think a lot of the commentary on my Instagram post skipped straight past it.
You can’t just walk into an Australian bank and borrow against a New Zealand property. Australian lenders don’t lend on NZ security, so you’re dealing with New Zealand banks, which comes with its own set of rules. New Zealand lending policy has a higher deposit required for lending and you’re generally looking at around a 30% deposit. Banks also tend to scale your Australian income when they assess it, often only counting around 90% of gross income depending on the lender, though the exchange rate itself can work in your favour and take some of the sting out of that.
The workaround a few of my contacts have used is releasing equity from a property they already hold in Australia, and using that as the deposit, rather than trying to borrow directly in New Zealand. It avoids a lot of the currency-related friction.
You’ll also need an IRD number, a New Zealand bank account, and you’ll go through anti-money laundering checks like any other buyer. None of it is complicated, but it’s a genuinely different process to buying in Melbourne or Brisbane, and I’d rather people go in with their eyes open than get three weeks into it and hit a wall.
One thing I’d strongly recommend is getting your own independent tax advice from your accountant, particularly around how the rental income will be assessed in Australia. With the ATO taking an increasingly close look at overseas income and tax obligations, it’s important to understand exactly how this would apply to your circumstances.
Early feedback from people I trust in the NZ broking industry is that they haven’t seen the rental income effectively double-taxed. That said, I’d tread your own path here and get proper tax advice before relying on that assumption or factoring the income and tax treatment into your numbers.
Where I’ve landed on it
I haven’t pulled the trigger yet, but I’m further down the road on this than I expected to be a few months ago. What changed my mind wasn’t a spreadsheet, it was talking to people who’ve actually done it and hearing how straightforward the ownership side has been once the finance is sorted.
I think what’s happening here says something bigger too. When one market keeps adding cost and complexity, capital doesn’t disappear, it just goes looking for a market that hasn’t. Australians have always been comfortable investing offshore in shares. Property is starting to catch up.
I’m not suggesting everyone should be jumping on a plane to Queenstown with a deposit in hand. Every situation is different, and the rules around residency status, borrowing capacity, and structuring are worth getting right before you commit to anything. But if you’ve been priced out of the conversation at home, or you’re just curious what the numbers actually look like, it’s worth understanding properly rather than dismissing it.
If you want to talk through what this could look like for you, get in touch. And if you’ve already made the move yourself, I’d genuinely like to hear how you found it.