In a poll conducted by the Lowy Institute, New Zealand was considered Australia’s “best friend”, displacing the United States. And so it’s befitting that we welcome the team at Hayes Knight in Auckland to Nexia Australia & New Zealand, and timely to note some unique advantages that come with doing business across the Tasman. We share more than just a language, head of state and love of sport. We also share a desire for a more business-friendly relationship, and that manifests in a number of specific taxation and other rules that are particular to Australia-New Zealand commerce.
Both of our countries can be proud of our respective achievements in containing the COVID-19 virus, but we also share the challenges of safely re-opening our economies as quickly as possible. A trans-Tasman COVID-safe travel zone would be a great step forward, but unfortunately we’re not quite there yet. Still, here are some useful things to know about tax and business between our two countries.
Trans-Tasman company tax credits
Australian shareholders in a New Zealand company operating in Australia can access franking credits for New Zealand company tax paid, and vice versa. There are rules that also facilitate this through cross-border subsidiary companies and group structures.
Withholding taxes
Dividends, interest and royalties paid by a resident of one country to a resident of the other are subject to withholding tax. This is a final tax imposed by the country from which the amount is paid, and does not need to be disclosed in a local tax return. The withholding rates under the Australia/New Zealand Double Tax Agreement are relatively low, being 10% for interest and 5% for royalties. The withholding rates for dividends are 5% and 15%, depending on the circumstances, but are actually exempt from withholding in a number of other circumstances. A non-refundable credit is generally allowed in the recipient’s home country for any tax withheld, so there is little or no double-tax impost.
Labour mobility
Australian and New Zealand citizens have wider freedom to travel, reside and work across both countries. This is through special visas being automatically granted to passport holders of each country. With labour increasingly mobile, these kinds of flexibilities are of great assistance to businesses seeking to expand across the Tasman.
Portability of superannuation
Australians and New Zealanders can transfer their retirement savings when moving between the two countries while preserving the integrity of each country’s retirement savings system. Special rules apply when transferring funds between an Australian complying superannuation fund and New Zealand KiwiSaver schemes. Whilst this can be done with minimal compliance and administration costs, there will inevitably be issues unique to your circumstances that need to be managed.
Structuring business expansion
Where you are looking to expand your business into another country, a critical issue is the type of legal structure to use. The taxation and regulatory rules will differ between countries, and it should not be assumed that how things work “here” is how they work “over there”. That’s where Nexia’s international collaborative spirit can be very helpful. We not only know our Nexia colleagues in New Zealand, we have frequent chats on video conferences, and catch up in person at actual conferences (except this year, of course). We can bring together the required tax and commercial expertise from Australia and New Zealand to advise you on structuring your business’s expansion across the Tasman.
We bring together
At Nexia, we have a diverse range of people with a variety of specialist skills. The collaborative spirit that is part of the Nexia fabric means we bring our people – and you – together to provide a holistic service. If you’re thinking about opportunities across the Tasman – granted, largely on hold for the time being – your trusted Nexia advisors can give you peace of mind that you’re making the most of those opportunities, with your tax risks managed, through the optimal tax and commercial structure for you.
Case Study
A client of Nexia Australia, who was the Australian distributor for an international manufacturer, obtained the distribution rights for New Zealand. There are different ways of structuring an expanded operation into New Zealand (eg, Australian company operating in New Zealand directly, set up a NZ subsidiary company, NZ trust, etc), and each produces different taxation and commercial outcomes. We brought in Nexia New Zealand to advise on the most suitable structure in which to operate in New Zealand.
We ensured that it fitted with the client’s existing structure in Australia, and advised on the international tax issues. Nexia New Zealand also assisted with setting up the structure, various registrations, and a number of local regulatory requirements. Our client is now fully operational in New Zealand.
