Fresh Insights, Timely Updates
New Zealand: Untapped potential in the land of opportunity
New Zealand is famously known for: beautiful scenery – lakes, mountains, beaches, and forests; the All Blacks – Haka; Kiwi ‘Number 8 Wire’ ingenuity; the Lord of the Rings; relaxed, outgoing and friendly people. Oh, and people being outnumbered by sheep by almost 5 to 1!
It’s also a great investment destination!
New Zealand has long been considered a safe and viable option for foreign investment and has been consistently ranked within the top performers globally for being one of the least corrupt countries in the world alongside Denmark and Finland.
New Zealand also ranks highly in the Economic Freedom Index, Human Development Index and OECD’s Better Life Index, ensuring a well-balanced landscape when investing.
New Zealand is a parliamentary democracy. The government structure is modelled on the common law English system whereby the institutions are divided into three branches being Parliament, Executive and Judiciary.
Business structures adopted when investing in New Zealand range from branches of overseas companies to Limited Liability Companies. Limited Partnerships have also become favourable as overseas investors can invest as a limited partner reducing the risk of their investment, as they are only liable for the debts and liabilities of the partnership to the value of their contribution.
Business landscape
Agriculture & wine
New Zealand has long been a global leader in agriculture, which makes up 70% of exports and 5% of GDP. The country is now the largest global producer of milk powder. Additionally, the country is well known for lamb and wine production, exporting very large quantities. Sauvignon Blanc is the most exported New Zealand wine variety, especially to the US, UK and Australia.
Other top industries include forestry, horticulture, food processing (seafood), and tourism.
These industries have dominated the New Zealand economy alongside the ‘bricks and mortar’ of property for many decades. There is now a big focus on tech and start-up investment in New Zealand and a focus on secondary markets whereby parental investors can acquire shares in privately owned companies that are not of the size to list on the New Zealand stock exchange. This has put further impetus in the economy to grow privately owned businesses which dominate 97% of the economy.
In addition, New Zealand is a very early adopter of technology and software and a leader when it comes to online software for efficiency – for those firms who use Xero software, you’re using ‘Kiwi ingenuity’.
Taxation
New Zealand does not have a capital gains tax, meaning both property and shares portfolios (for example), assuming these are not trading assets, will be tax-free on sale. The only exception is a ‘bright line test’ that applies to a second property that you own, such as a rental property sold within a 2-year period from purchase. This lack of capital gains tax has made New Zealand a favourable long-term investment option.
Company Tax has a fixed 28% rate. Individual Tax rates are based on a progressive system, ranging from 10.5% (up to NZD 15,600) to 39% (NZD 180,001 or more). (Thresholds effective from 31 July 2024.)
Property investment
Property prices vary considerably depending on where you live, with the median property price in Auckland (the largest city) being NZD 1,015,000 versus Christchurch at NZD 741,000.
Property on average has appreciated at a rate of 7% annually in Auckland and 6.2% annually for the remainder of the country for the last 30 years.
When you factor in no capital gains tax, it’s easy to understand why property is very hot in New Zealand for both local investors and foreign investment.
New Zealand, under a Labour government, had made it more difficult for foreign property investment, with the purpose being to maintain the affordability of property prices. However, with the National Party recently back in charge, the floodgates are likely to open for foreign investment once again.
Professional advice
Before investing, it is essential that you seek the help of legal, property and accountancy professionals.
Neovia are specialists when it comes to property, dealing with many large and well-known New Zealand developers and large commercial and residential property owners. The firm has been working with foreign investment partners for many years.
About the authors
Adam Coleman
Auckland, New Zealand
Adam is managing director of Russell Bedford's New Zealand member firm, Neovia. He has more than 15 years of accounting, taxation and finance experience, having worked with clients in a broad range of industries. His specialty focus is business advisory, where his approach is to first gain an understanding of the client's business and then align it with personal goals to develop a plan for success.
Jo McMaster-Finch
Auckland, New Zealand
As Business Advisory Director and Group General Manager, Jo is responsible for achieving best practice and operational efficiency throughout the group with a key focus on performance, people and culture, ensuring alignment to Neovia’s business strategy. Client experience is paramount, and the goal is to be innovative in thinking and solutions, partnering with clients to understand their goals and ultimate business drivers.