Any person or legally constituted entity with tax-resident status in NZ may buy Australian assets and dispose of those without incurring capital gains tax. There are some caveats to this which mostly have to do with trading-like behaviour. If you are a buy-and-hold type saving for retirement, you will never pay capital gains taxes. The same is true in respect of assets located in NZ, and in other countries globally. It is the only country in the OECD to apply this treatment to capital gains, and a political pledge has been made (by the Labour government) that that will not change under the current leadership. Needless to say there's no threat coming from the parties on the right, whose voters have been laughing all the way to the bank for so long there's a groove in the pavement.
I am less familiar with Australian tax laws. It seems likely that, as you suggest, an Australian tax-resident person or entity who is the ultimate owner of a NZ entity is going to catch Australian taxes on the underlying assets one way or another. I'd be interested to understand the detail of "one way or another" however, if someone can shed more light.
I suspect it may be that the NZ-entity books the capital gains (tax free), but that when the day comes to pay out these gains as a capital distribution (which it would probably need to do on liquidation, if I remember the rules correctly), that distribution will be treated as a single large item for CGT purposes in Australia.
If that's the case, that probably explains why Australians aren't doing it. You'd need a very long-term outlook for the advantage of being able to reinvest amounts not paid (yet) as tax to be worth more than admin costs and foregone franking credits.
All that said, pity the Australian who makes poorly-timed investment decisions for reasons of tax-optimisation, and pays loads, while his kiwi compatriot does what he likes and pays nothing.
Fair? I guess one can always immigrate. As someone has (correctly) pointed out however, New Zealand is expensive. Taxes are low, everything else is high.
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