And if the value of my investment is $49,000 on April 1 and then $49,000 the following March 31, can I ignore the tax regardless of how much it goes up (and assuming I sold bits during the year) in between? Tax for New Zealand tax residents. This may seem a trivial question, but it becomes important if the $50,000 is a threshold rather than an exemption and one is close to the $50,000 limit. So you would be taxed under the current regime, which means your dividends would all be taxed. But the rules have since changed, and there is no longer any situation in which taxes will be carried forward. Predictably, perhaps, Peter Frawley of Inland Revenue has a different perspective. With regard to your Canadian writer who spent $60,000 on an investment in non-Australasian shares, am I correct to deduce that as the product cost $60,000 and eroded in value to $16,000, then the IRD expect the original value to be $60,000 yet will tax the person on their "gain" if it quietly grows back to $60,000, even though technically they have not made a cent of real "gain"? "The new fair dividend rate method seeks to tax an amount approximating a reasonable dividend yield on a person's investment each year," he says. Wages and salaries are usually paid directly into a bank account. February 17, 2007 Q. Is it still April 1, 2007, i.e. This is monthly data, and strictly speaking taxpayers are supposed to establish the exchange rate on the day they bought the shares. "Broadly, under the new method tax is paid on 5 per cent of the share portfolio's opening market value each year. Sorry for bombarding thee. a New Zealand tax resident, or where the individual has previously returned income of the superannuation scheme under the FIF regime and elects to continue to do so. My holdings will probably then be well over $50,000 (I've had them a long time). As a New Zealand tax resident, you pay tax on the total income you receive from all your investments, whether they're in NZ, the US, or elsewhere. Frawley also points out that under the current law "people are still taxed on their dividends even if their shares go down in value, resulting in a net loss for the year. Her website is www.maryholm.com. Just to complete the picture, NZ-based share funds that invest only in Australian listed and based shares will not be subject to the rules. Nevertheless, strictly speaking the new tax is not a capital gains tax. However, help is at hand. The dumb people are those who don't ask. As it may not be readily apparent that an Australian listed company is not an Australian resident, is Inland Revenue going to provide such a schedule on its website, which will ensure that taxpayers can comply with the new legislation. # Does "overseas investment", i.e. The FIF regime was introduced to prevent NZ taxpayers using offshore entities to avoid or defer their NZ tax obligations. By compiling all your portfolio data in one place, Sharesight eliminates the paper-chase and headaches normally associated with performance and tax reporting. The rules apply when less than 10% of the shares in a foreign company are held, or units of less than 10% in an overseas unit trust. If, however, you have larger holdings or plan to grow your international holdings, it's probably better just to pay the tax. All investors will see is lower returns. Some searching questions, answered here by Peter Frawley of Inland Revenue: 1) The $50,000 is a threshold. Note that if you have invested less than $50,000, so that you are under the threshold, you will continue to be taxed on dividends - as well as realised gains if you are a trader - as in the past. Some argue that 5 per cent is not a reasonable amount, as dividends on non- And, knowing that people are thinking of using this strategy, I wouldn't be surprised if Inland Revenue takes particular interest in share trading over the next few months. Overseas pension income (see our separate guidance on this); Other overseas investment income, for example, dividends on shares in overseas companies. Tax Technical - Inland Revenue NZ. My answer - not Peter Frawley's - is that if your international share holding originally cost, say, $50,000 to $70,000, and you have no plans to buy any more international shares, it would probably be a good idea to sell down to below $50,000. New Zealand tax law treats the estate of a deceased person as a trust. That means that if the cost of your overseas shares is $51,000, all of those shares are subject to the new rules. The new rules don't apply to individuals whose non-Australasian overseas shares cost less than $50,000. "This will be followed by further help, including a booklet and an online calculator which will calculate the answers investors can put in their tax returns from the data they input," says the department. Nor does it include investments in Australian unit trusts listed on their stock exchange. The woman's total would be $40,000 plus $15,000 (half of $30,000), which brings her over the threshold. Australasian shares are usually lower than that. Carrigan adds, "The $50,000 exemption does not generally apply to trusts and estates. Q. A. A. However, Frawley says "The Reserve Bank monthly data will be acceptable to Inland Revenue for the purposes of applying the $50,000 threshold." Examples are Private Portfolio Service Master funds (PPS), and ING property Securities Fund. # The Aussie exemption doesn't include companies that are not resident in Australia, even if they are listed on the Australian stock exchange. For a start, if you hold your international shares directly - as opposed to in a managed fund - and they cost less than $50,000 when purchased, you are exempt. You will pay tax on 5 per cent of that value, unless the shares have yielded less than 5 per cent - in dividends and share price rises. The foreign investment fund (FIF) taxation regime in New Zealand is broadly designed to prevent taxpayers from using investments in offshore entities to avoid or defer their tax obligations. "This is so taxpayers can refer to the fixed actual cost when determining whether the threshold applies to them, rather than having to track changing market values over time," says Peter Frawley of Inland Revenue. The funds will handle the changes. # If tax due is accrued is it still to be wiped upon death? If you hold overseas shares (excluding Australian-listed companies) that cost more than $50,000 NZD in total, then you may be obliged to follow FIF (Foreign Investment Fund) tax rules with the IRD. On your first question, that's one way of looking at it. The normal rule applies, of course, that when someone dies taxes are paid on their income in the year of their death. Richard Prebble: China has silenced New Zealand, NZ regulator issues Bitcoin warning: Be prepared to lose all your money, It's mother vs. son in Britain's priciest divorce war, 'It's desperate down there': West Coast town hanging on for Govt help, Police seek skipper and yacht last seen in the Marlborough Sounds. Basically, as long as you buy no more non-Australasian shares, you stay outside the new rules forever. Only you can decide if the strategy is worth the hassle, costs and possibly sleepless nights. A. # Are all companies listed on the Australian stock exchange exempt or are some still caught by the tax rules, as are UK investment trusts listed on the NZ stock exchange? Go to www.rbnz.govt.nz/statistics/, click on "Exchange rates" on the left side, and then on "B1 historical series". Read our guide on using the NZ FIF report to see how easy it is. The answer to your third question is: "Yes, you can ignore the tax." IR330C - choose a tax rate for your schedular payments. Tax residence under New Zealand’s domestic rules is determined by meeting one of two tests. A. A. Investments in overseas companies and managed funds costing less than NZ$50,000 and Australian shares not included in the FIF regime will usually be treated under the normal income tax rules, when on the basis the shares were not acquired with an intention of disposal, shareholders only pay tax on dividend income they receive. Over the past 12 months Mary Holm has dealt with a mountain of correspondence on the tax changes on foreign shares in her regular Weekend Herald column, Money Matters. Yes. less than 10% of the units in a foreign unit trust. # The $50,000 applies separately to each investor. beyond Australia, mean just shares or does it include assets like property, bonds and cash? PIR: Prescribed Investor Tax Rate. A tax resident is taxed on worldwide income, with a tax credit allowed if taxes are paid overseas on foreign sourced income. Key features of New Zealand’s tax system include: 1. no inheritance tax 2. no general capital gains tax, although it can apply to some specific investments 3. no local or state taxes, apart from property rates levied by local councils and authorities 4. no payroll tax 5. no social security tax 6. no healthcare tax, apart from a very low levy for New Zealand’s Accident Compensation injury insurance scheme (ACC). Thanks very much. When the deceased person was not resident in New Zealand at the time of death, the estate is classified as a foreign trust. "On-line calculators will be available on Inland Revenue's website which will calculate the tax answers for investors from the data they input," says Frawley. The idea is to be able to recognise certain franking credits for New Zealand tax purposes. The deutschmark was replaced by the euro from January 1999. If they are paying no tax that year on their offshore shares, because they have made a loss, the credit will reduce payment of tax on other income. Any method which involves carrying forward amounts (whether gains in excess of 5 per cent or tax losses) would be much more complex than the new method." Act articles 2020 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005. If you own overseas shares that cost less than $50,000 (or $100,000 for couples) you're exempt from the FIF rules. Inland Revenue has already published a summary of the new offshore tax rules on its website, www.ird.govt.nz (under "news and updates"), and it plans to publish a more detailed explanation of the rules on its website shortly. i.e. Will the IRD produce a booklet that could be used as a guide for those with overseas investments that clearly set out the rules of what can and cannot be done? Do any readers know of any? If you should be paying the tax but don't, you are likely to be in trouble if you are audited. That's a pity that you're planning to reduce your portfolio. Generally New Zealanders don't have enough invested in overseas shares - in terms of reducing their risk by spreading their money into different investments. at no cost to us. Browse new legislation. From what I've read it may be advantageous and legitimate to sell these on or before March 30 and buy them back in April. Our sub-custodian deducts your tax at source, and pays the overseas tax authority directly. February 24, 2007 Q. I am in the position of having invested in a tech stock in Canada in 2002, at a cost of slightly over $60,000, as opposed to today's value of the stock of around $16,000. Find out whether you need to pay UK tax on foreign income - residence and ‘non-dom’ status, tax returns, claiming relief if you’re taxed twice (including certificates of residence) You will simply be asked if they cost more than that, in which case you will pay the tax. the value of my portfolio at that date would determine my tax liability for the 2007/2008 financial year? If the rules do apply to you, when calculating your 2007/08 taxes, start with the value of your offshore shares next April 1. listed on the Australian Securities Exchange (ASX), qualify for the exemption from the FIF rules on its website, a FIF superannuation interest (from 1 April 2014). I've had trouble finding any other calculators that cover a range of currencies and give daily data earlier than that. But how are dividends on shares purchased during the year treated? Dividends/income received from such investments are not directly taxable. will be your status as a New Zealand tax resident. While no general capital gains tax applies in New Zealand, tax on gains made may apply to NZ investors trading shares when: They purchase a property with the intention to sell it (this rule was introduced in 2016) They purchase shares or other investments with the intention to sell it at a profit (rather than hold the shares and earn income from holding them) In these … On currency changes, the situation is the same, really. Example Take for example, a New Zealand tax resident who: » Acquires shares in USCo with a cost of $40,000 on 1 July 2013 » Acquires shares in UKCo with a cost of $20,000 on No tax will be payable if the shares make a loss, after taking the dividends into account. I hope many readers whose letters won't make it into the column can find answers there. It also covers managed funds held overseas and … The FIF tax must be paid even if none of the earnings ever come into New Zealand and even if you receive no dividends. And that means, says Frawley, "it is not appropriate to recognise capital losses". My holdings would come under $50,000 on purchase. However, I am uncertain when the law will be passed by Parliament and what are the dates/financial years when these investments would be assessed under the new law. From there you can upgrade to an NZ Expert plan to run your FIF Report, as well as other premium features including: Traders Tax Report – Calculates taxable gains for individuals who hold shares on revenue account (i.e. And over the years, there'll be ups and downs. In many cases, Resident Withholding Tax (RWT) or PIE tax is automatically deducted from you at a certain point in time, like when the income is paid – in the same way PAYE tax is deducted from your salary or wages. This is then converted to a certain number of shares, which are added to the base shareholding. Q. I have a portfolio of UK shares over the $50,000 threshold and therefore due to fall prey to the new foreign investment wealth tax. But a capital gains tax on those shares could see investors move towards more investment in overseas shares. the other country or territory has deducted tax. Inland Revenue has recently published two papers clarifying a lot of the issues people are asking about. We've collated for you a selection of questions Mary has answered since the taxation legislation passed late last year. But if you bought your shares before the early 1990s, using this shortcut will probably give you considerably higher share costs than were in fact the case - although as long as the total is still under $50,000, that doesn't matter. For example: A woman owns shares costing $40,000 and her husband owns shares costing $5000. They facilitate international tax compliance in accordance with New Zealand tax law. In that case, then, you will receive those dividends tax-free - putting you at an advantage, in those years, over people not affected by the new tax rules. This means a New Zealand resident receiving an inheritance from an overseas estate is treated as receiving a distribution from a foreign trust. Q. The amount of tax your employer takes may not be all the tax you need to pay. Frawley adds that taxpayers affected by the new rules will still be able to claim a foreign tax credit for the foreign withholding tax deducted from their gross dividends. employers navigate New Zealand’s tax and employment related matters; we provide advice about tax planning opportunities, management of assignment policies and the provision of New Zealand tax filing services. Is it the rate that applied at the date of purchase, and if so where can one find out the exchange on a certain day, say in 1997. It won't matter whether the value of your overseas shares changes because of changes in the share price in the home country or because of currency fluctuations. 3) For a couple to qualify for a total $100,000 threshold, half the shares would have to be held in each spouse's name. Some not-so-good news from Frawley: "The person in this example is treated, for the purposes of the $50,000 threshold, as having acquired the shares for their market value at the time they received the shares under their employee incentive scheme." It seems that on April 1 we can look at the original purchase price of things to determine if we are under the $50,000 for tax purposes. # Personal investors have an exemption of $50,000 of the original cost (not current valuation) before the tax is payable. A. You don't have to do any more calculations in subsequent years. By the way, if you sell and then buy back less than $50,000 worth, you would be under the $50,000 threshold. If I may ask one more thing, if the value of one's overseas investment fluctuates wildly due purely to currency changes (which is a big risk for the $) will we be taxed on the gain but not be able to claim the losses? In effect, then, part of the tax will sort of be on capital gains. So it isn't all bad. Regardless of tax, any investor in overseas shares needs to learn to ride those waves. A. Note, though, that the rules don't apply to investments in Australian resident listed companies, or if the total original cost of your non-Australian offshore shares is $50,000 or less. If you have a job to come to, it is a good idea to open an account before you get here. "For those that have a buy and hold approach [i.e., they do not buy and sell shares in the same year] the new rules are relatively simple to apply." 4) In light of what we've said above, let's change this to "Would you recommend that a person sell down to $49,999." Q. In general, there are two methods in which you pay tax on your investments. But I guess investors will get used to noting the value of their international shares on April 1 each year, and keeping track of dividends. Mary Holm is a seminar presenter, author and publisher. Do I have to revalue on April 1, 2008 or does the $50,000 exemption last forever? Sorry if this is a dumb question, but I would like an answer. Pre-register here! Is taxable dividend income still capped at 5 per cent of the opening value of the portfolio (ie. For example BHP Billiton and Rio Tinto are dual listed in Australia and Britain, but are they resident in Australia? If you are not a tax resident, you pay tax on investments you have in New Zealand. These investments are usually called FDR prohibited or CV enforced investments. Explanations of changes to legislation including Acts, general and remedial amendments, and Orders in Council. One is www.oanda.com/convert/classic, which goes back to January 1990. Your second sentence is broadly speaking right. This way the opening value of overseas investment is zero. As the original investment is over the $50,000 threshold, will I be hit again with this new tax or can I have the shares revalued at their market value on April 1, 2007 - which presumably will be well under the threshold unless there is a miracle between now and April 1 - and then be outside the new tax regime? Overseas share investments by New Zealand-based international share funds, such as WiNZ, will also be subject to the new rules. an insurer under a life insurance policy (and the policy is not offered or entered into in New Zealand). Dividends/income received from such investments are not directly taxable. But even if we ran nothing else for weeks, I couldn't answer them all in the column. They don't apply to overseas property, bonds or cash. New Zealand's capital gains tax applies only if you hold shares in companies not based in New Zealand or the Grey List countries, which are Australia, Canada, Germany, Japan, Norway, Spain, the UK or US, says Pippos. shares in foreign companies (like what you buy on Hatch) rental properties in another country (not included in FIF rules) bank accounts (not included in FIF rules) If you’re a tax resident outside New … 2001 New Zealand Master Tax Guide, 26-185. # Under the earlier version of the tax bill, taxes could be carried forward into future years. But, says Peter Frawley of the department, "If a person receives a dividend from a company listed on the Australian stock exchange that carries Australian franking credits (this would be stated on the shareholder dividend statement that the person receives from the company) then this should provide sufficient certainty that the company is resident in Australia." 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