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Watch Out for Exchange Gains if you have loans overseas & Free Stuff

13 May 2016

 

If you have loans overseas, you need to watch out for exchange gains.  Have a read of this example:

Joe Bloggs lives in NZ, so is a NZ tax resident.
 
He owns a rental property in the UK.   The original loan 200,000 pounds.
 
The exchange rate when the rental was purchased around 10 years ago was 3 times.  So the loan in NZD was $600,000
 
Joe is eligible for Cash Basis, so only needs to account for any exchange gain or loss when the property is sold.
 
Now in 2016, Joe sells the property.  The loan is still 200,000 pounds, but now as the NZD stronger at 2 times, the loan is only $400,000 NZD.
 
So unfortunately Joe has made an exchange gain of $200,000 which is taxable!



 
FREE STUFF
 
If you are a paying client of Coombe Smith, we have some information which we can give you for FREE:

  • A list of Five Strategies
  • A list of expenses you can claim
  • Simple Spreadsheet for rental cash flow
  • Simple Spreadsheet for trading properties
  • Trading property notes, including GST and zero rating.
  • Rental Property Basics Seminar Video
  • Advanced Property Investors Tricks and Tips Video

Please email mareese@cswaikato.co.nz if you would like any of these.
 

Kind regards

Ross Barnett


 
 
 
 

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