New Zealand Business Tax Structure Advice – Do it once, do it right.

No one helps more Australian business owners set up business in New Zealand than we do. We can set up the right business structure to help protect you from double tax.

Setting Up A Business In New Zealand

New Zealand is constantly ranked as one of the easiest countries in the world in which to set up and run a business. Unlike in sports, New Zealand constantly leaves Australia in the dust no matter which survey you look at and what international business owner you talk to.

So why is it that so many Australian businesses run into so many problems over there after setting up a business in New Zealand?

Perhaps because there are so few barriers to entry there is a view that what business structure works in Australia must certainly work in New Zealand.

In practice, this is simply not the case. Both New Zealand and Australia tend to use similar terminology however they are poles apart in the interpretation. Coupled with this is the Double Tax Agreement which many assume (incorrectly) must be a protection against double tax. It does sound like that must be the purpose of the agreement – right?

Well, actually, no. The agreement is really there so that the ATO and the New Zealand equivalent, Inland Revenue, have a good understanding of who gets to collect the tax. In some cases, both get to collect it and this can be a shock for some Australian business owners looking to make a go of it in New Zealand.

Because even though Australia may allow foreign tax credits, that doesn’t necessarily result in tax paid in New Zealand being allowed to offset tax owing in Australia on that same income. We’ve written an article on our blog and you can read that by clicking here.

There are many business structures available to Australians who want to make profits in New Zealand.

In fact, if you are to phone the New Zealand Companies Office, they may even suggest you simply register your Australian company in New Zealand. It is certainly the easiest way to go and you can legitimately be running your Australian company in New Zealand in a matter of minutes. And it certainly helps to prove how easy it is to set up a business in New Zealand.

Unfortunately, it is by far the worst choice when it comes to tax. Small business owners will most certainly be double taxed. Once in New Zealand and then again in Australia. And if you’ve read our blog post you will see that no foreign tax credits will be available to you. Now that is bad news for any business owner.

To bring things into context we have listed the most common trading structures (in our table below) available to Australians wanting to set up a business in New Zealand. We touch on some of the advantages and disadvantages.

No One Helps More Australian Business Owners Set Up Business In New Zealand Than We Do

We can show you how easy it is to set up business in New Zealand and we can help protect you from double tax. Because this is what we do.

We only deal with owner-operated and family-run Australian businesses (and their advisors) wanting to set up a business in New Zealand.  We do not deal with large companies. Because of that, we know how to best set up a New Zealand company for a small Australian business while ensuring flexibility come tax time.

We can provide a New Zealand address as your registered office and we can even help you to open a New Zealand bank account without you having to leave Australia.

We can handle the entire New Zealand company incorporation process, register your company with Inland Revenue for the relevant tax types, register with ACC (equivalent of Workers Compensation) and have your entire business ready to go – all for just $660 (which includes all registration costs payable to the Companies Office).

Or we can help you with any of the other structures that might be better suited to your needs.

There is no charge for a quick chat so give us a call on 1300 791 600 and we can talk you through the issues.

The Right Structure

Because we help more small Australian business owners set up shop in New Zealand than anyone else, we are well versed in determining the correct structure for you. 

We’ll work right alongside your Australian advisor to ensure you are confident the structure will work perfectly for you. And once it’s up and running we can help you make sure that you comply with the various New Zealand tax and company requirements.

And, being based here in Australia, we are always a local call away. We are the only accountants who specialise in helping Australians to do business in New Zealand.

NZ Business Setup

No matter what structure suits you best, we can assist you to ensure that it is robust and complies with New Zealand legislation.

Whether you want us to complete the registration process for you, draw up the necessary resolutions and agreements or provide a New Zealand address with online access to your statutory records, we’ll be able to guide you all the way.  

We can even provide you with a choice of phone numbers from various New Zealand cities and have them diverted to Australia to make it easy for your customers to stay in contact.

Compliance

A newly formed NZ business with greater than 20% overseas control needs to go through a certain process to register for tax. 

Once we apply for your New Zealand tax file number (IRD number) we can usually have all tax types registered and ready to go within a couple of days. Because we complete more New Zealand tax registrations for Australian residents than anyone else, we know exactly what Inland Revenue needs to expedite the process.

Often we have the tax registration complete and confirmed within a few hours of filing our applications.

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New Zealand Company & Business Tax Returns

We can often use the financial statements prepared by your Australian bookkeeper, tax agent or accountant with a minimal cost for any adjustments neccessary to adhere to New Zealand’s different tax rules.

Or if you produce your own financial statements using MYOB, XERO or a similar accounting package and the accounts have been reconciled, our estimated fee to prepare and lodge the financial statements in the form acceptable to Inland Revenue along with the preparation and lodgement of the income tax return is $1500 (+GST).

You might also want to have a look at our all-inclusive XERO packages where we can look after your various New Zealand tax requirements on a fixed fee package. Simply click on this link for details of our New Zealand XERO packages.

Our estimate for a very small businesses with low turnover (usually less than $800,000) is $800 (+GST).

We always fix the price with an emailed proposal before we start work on your New Zealand tax returns so you have absolute certainty.

Or if you prefer, you can pay the New Zealand equivalent. We accept both Australian and New Zealand currency and can model our operation so that you can receive your invoice with either New Zealand or Australian GST.

Tips And Traps Of New Zealand Business Structure

Using your existing Australian company is the easiest but often the worst option for most small Australian businesses.

It is very easy for an Australian company to register in New Zealand. In fact, if you contact the New Zealand Companies Office, they will usually encourage you to do just that.

Unfortunately, this is usually the worst possible way for an Australian company to do business in New Zealand.

There are fewer tax deductions available using this structure which will result in more tax being payable in New Zealand than through some alternative structures.

Even though the Australian company will generally be able to claim any income tax paid in New Zealand as a foreign tax credit, this credit will not be available as a tax offset to the owners of the company (the shareholders) meaning they will be taxed again on the dividends at their own marginal tax rate.

Therefore owners can expect to pay 60 to 70c in the dollar in income tax between New Zealand and Australia.

If the Australian company has a permanent place of establishment in New Zealand, or places employees in New Zealand for a period exceeding 6 months, it may be required to register for New Zealand income tax purposes.

Under New Zealand’s Anti-Money Laundering and Counterterrorism legislation, a New Zealand tax file number (referred to as an IRD number) will, in most cases, only be allocated once the company opens a New Zealand bank account.

Generally speaking, no bank account, no New Zealand tax registration.

In a lot of cases New Zealand banks won’t open a bank account for a small Australian company.

Furthermore, depending on the total turnover and asset holding of the group, the New Zealand branch’s financial statements will need to be audited and both the branch’s financial statements and those of the Australian company’s filed with the New Zealand Companies Office.

This will mean that they will be publicly accessible online. Your Australian competitors will have access to all of this.

If your intention is to claim back New Zealand GST there may be some additional complications.

We recommend you contact us before using this structure for New Zealand income tax or GST purposes.

Every company incorporated in New Zealand must have at least one director who either lives there or is the director of an Australian company.

That means Australian residents can set up a New Zealand company providing at least one of them is willing to serve as a director and is already a director of an Australian company, perhaps their own PTY company.

There is a requirement to have a New Zealand physical address that serves as the company’s Registered Office.

You should be aware that inspectors from the New Zealand Companies Office are likely to visit the Registered Office where the company is controlled by Australian residents. This is a result of greater policing of small overseas-controlled companies.

An “overseas -controlled company” is one where more than 20% of the shareholding is outside New Zealand.

The New Zealand Companies Office inspectors make unannounced visits on the Registered Office to check that the statutory records are being properly maintained and comply with New Zealand’s Companies Act. There is also a requirement for the Registered Office to have copies of certain financial records kept there.

Non-compliance can result in the company being removed and Directors receiving instant infringement penalty notices which are enforceable in Australia.

Depending on your business model the company may be able to be legitimately and easily structured to eliminate or minimise double taxation that will usually apply when a New Zealand company is incorporated.

Under the Australia New Zealand Double Tax Agreement there can be complications with regard to the company ‘s tax residence.

You should note that, in most cases, Australia’s Foreign Tax Credit offset will not provide any income tax relief to the owners of the company. This will also be the case where the New Zealand company is a subsidiary of an Australian company so care should be taken.

We can supply a physical address. We not only keep the required records at that address but we are also able to make the records available to you online. That means that when we prepare the required documents, Directors can peruse and approve them online (even with a mobile device such as an iPad, phone or tablet).

When we receive correspondence from the New Zealand Companies Office we will pass on our recommendations on what to do next.

We can assist with incorporating New Zealand companies using the best and fairest structure available to your circumstances and can protect against the double-taxation which usually applies.

Registering a partnership in New Zealand can be an effective way of reducing the incidence of double taxation between Australia and New Zealand.

There can be complications with regard to tax residence so care needs to be taken to set the structure up correctly. A partnership is not a legal entity in itself, so the residence of the partners becomes a major consideration.

If the intent is to claim back New Zealand GST, the structure and the management and operation of the business will need to be carefully considered.

Registering for GST when the partnership is deemed not to be conducting a taxable activity in New Zealand can result in significant penalties should Inland Revenue conduct a tax investigation.

Ignorance is no excuse.

Just because Inland Revenue registers an entity for GST purposes does not mean they have checked your situation and agree you should be registered. The onus is on you to have sought appropriate advice.

New Zealand does allow a particular structure known as a “Limited Partnership”.

This type of entity provides the limited liability benefits of a company with the flexibility of a standard partnership. This is a particular type of entity which operates under its own legislation.

This type of partnership will require a corporate partner and a series of resolutions and agreements between the various parties. If the resolutions and agreements are not put in place, or do not meet the requirements of the legislation, the structure can be set aside. If set aside, the entire structure can quickly unravel resulting in partners being personally liable for penalties.

This is one of the most complex arrangements suitable for smaller businesses. But it may suit where there is a need for flexibility in the ownership structure or alternate structures aren’t options because of the industry, business model or other factors.

All profits need to be allocated to partners. Income allocated from New Zealand to partners who are Australian tax residents will impact on their marginal tax rates applicable in Australia.

New Zealand banks may not open a bank account as a result of the requirements of New Zealand’s Anti-Money Laundering and Counterterrorism legislation.

If you are intending to use a traditional Australian partnership in New Zealand, obtaining a New Zealand tax file number (IRD number) can prove difficult because of the need for a New Zealand bank account in the name of the partnership.

We can advise on if these particular structures are right for you and, if so, help to register and administer it correctly.

Australian Trusts can quite legitimately trade in New Zealand. However there may be logistical problems.

It might be that the Australian Trust will need to file New Zealand income tax returns. And, in order to register for New Zealand tax, it will need a NZ tax file number (IRD number). This will usually require the Trust to have a New Zealand bank account opened in the name of the Trust.

Each beneficiary who receives a distribution from New Zealand-sourced profits may also need to file a New Zealand income tax return on that income. Any tax paid in New Zealand can usually be offset as a tax credit on the Australian income tax return.

However, this will require each beneficiary to register for a New Zealand income tax number (IRD number) and in order to get that, the beneficiary will usually be required to have a New Zealand bank account in their own name.

If the Trust intends to claim New Zealand GST, the way it intends to conduct it’s business and the business model it uses in New Zealand will be critical.

We can advise on the appropriateness of your structure in achieving your goals. We’ll ensure you have the right tax structure in place for doing business in New Zealand, if your Australian Trust will need to file a tax return in New Zealand and if you can achieve your desired objectives from using that structure.

New Zealand Trusts

Although there would usually be no merit in setting up a New Zealand Trust if an Australian Trust was already available, it might be an option to establish one.

You should note that Inland Revenue notifies the ATO when New Zealand Trusts are set up by Australian residents.

However, New Zealand Trusts are well regarded throughout the world because of the protection given to them in New Zealand. When administered correctly they are very difficult to overturn and are a very good means of protecting assets and for assisting in succession planning.

A significant number of New Zealanders use Trusts to protect assets such as rental properties and small businesses.

New Zealand Foreign Trusts

New Zealand Foreign Trusts are a particular form of Trust that, when registered and administered correctly, are exempted from tax on overseas-sourced income.

That means that New Zealand-sourced income earned by a Foreign Trust will be subject to tax in New Zealand however if the trust earns income from outside New Zealand that foreign income is not subject to any income tax in New Zealand whatsoever.

Because of recent changes in New Zealand’s legislation there are additional disclosure requirements however they are relatively minimal and have not impacted on the overall benefit and that overseas-sourced income is still not subject to income tax.

As with other types of Trusts, Inland Revenue collects and provides information to the ATO relating to the stakeholders of the trust.

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Questions about your New Zealand Tax Structure?

Our New Zealand expert, Mike Reddy, is a New Zealand accountant and NZ-registered tax agent based in Sydney. He works with individuals and small businesses throughout Australia to help take care of your New Zealand tax questions and Returns from our Sydney-based office.

Having been preparing and filing New Zealand tax returns since 1994, Mike is the most experienced New Zealand tax agent in Australia. He is regularly engaged by Australian tax agents and accountants who have clients with New Zealand interests.

So when it comes to looking after your New Zealand affairs, Mike can definitely help you with the right advice.

Call us now on 1300 791 600. There is no charge for a quick chat so we can talk you through the issues.

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