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. 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 Under the new fair dividend rate method no tax would be payable in such an income year." I've had trouble finding any other calculators that cover a range of currencies and give daily data earlier than that. # Does "overseas investment", i.e. Still, I don't know your circumstances, and it may make good sense for you. If you get interest and dividends from overseas, there are different rules depending on your situation. # Not all investors will have to give a statement of assets - only those to whom the new rules apply. 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. Act articles 2020 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005. Tax for non-resident taxpayers. In effect, then, part of the tax will sort of be on capital gains. "If the investor is an individual or family trust and the total return (dividends and capital gains) on their portfolio of directly held shares is less than 5 per cent, then tax is paid on the lower amount." Or do the shares have to be held specifically 50/50 in each individual name? # 5 per cent of the market value of their shares at the start of the tax year, or: The idea is to be able to recognise certain franking credits for New Zealand tax purposes. Tax for New Zealand tax residents. But the man's total, $5000 plus $15,000, keeps him under the threshold. Her website is www.maryholm.com. an insurer under a life insurance policy (and the policy is not offered or entered into in New Zealand). # Under the earlier version of the tax bill, taxes could be carried forward into future years. 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. But a capital gains tax on those shares could see investors move towards more investment in overseas shares. 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). We have a couple of shares which were bought some years ago for around 2000 and are now worth 55,000. Therefore, in your situation there may be relief to the extent the Australian company operates in New Zealand and the dividends arise from that operation. By the way, you won't have to prove each year that your shares cost less than $50,000. 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. In that case, you will pay tax on the yield amount. One is www.oanda.com/convert/classic, which goes back to January 1990. This is then converted to a certain number of shares, which are added to the base shareholding. The rules apply when less than 10 percent of the shares in a foreign company are held, or units of less than 10 percent in an overseas unit trust. Do any readers know of any? March 24, 2007 Q. You don't have to do any more calculations in subsequent years. These rules apply to offshore investments held by New Zealand-resident taxpayers and target overseas companies who do not pay dividends. So you would be taxed under the current regime, which means your dividends would all be taxed. From 1 October … "Any transaction that is done for the purpose of reducing tax could trigger the general anti-avoidance provisions in the Income Tax Act," says Peter Frawley. Inland Revenue is being unfair, if it leaves it up to the taxpayer to determine a company's residency. By the way, if you sell and then buy back less than $50,000 worth, you would be under the $50,000 threshold. The new rules don't apply to individuals whose non-Australasian overseas shares cost less than $50,000. If the couple has some shares owned jointly, and some owned individually, each person would have to add half the cost of the jointly owned shares to their individual total. For the purposes of calculating the cost of these shares, would they be valued at zero (what we paid) or the market price of the shares? Is taxable dividend income still capped at 5 per cent of the opening value of the portfolio (ie. No tax will be payable if the shares make a loss, after taking the dividends into account. The FIF regime was introduced to prevent NZ taxpayers using offshore entities to avoid or defer their NZ tax obligations. 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. The FIF-Exempt Overseas Income & Overseas Tax Credits page is part of the FIF Report available within Sharesight.It provides a taxable income summary for Australian shares that are excluded from the FIF tax regime. A tax resident is taxed on worldwide income, with a tax credit allowed if taxes are paid overseas on foreign sourced income. Mary Holm is a columnist for the New Zealand Herald. "If the shares make a loss then no tax is payable," adds Frawley. # Include the dividend as usual and not enter it in the value of the shares, or According to the IRD website, a foreign investment fund (FIF) is an offshore investment held by a New Zealand-resident taxpayer who holds: less than 10% of the shares in a foreign company. Carrigan adds, "The $50,000 exemption does not generally apply to trusts and estates. The FIF tax must be paid even if none of the earnings ever come into New Zealand and even if you receive no dividends. The dumb people are those who don't ask. If the rules do apply to you, when calculating your 2007/08 taxes, start with the value of your offshore shares next April 1. From reading the answers you got from Peter Frawley, I understand that the $50,000 threshold operates on the original cost of purchasing the shares. They don't apply to overseas property, bonds or cash. Basically, as long as you buy no more non-Australasian shares, you stay outside the new rules forever. Browse new legislation. This means a New Zealand resident receiving an inheritance from an overseas estate is treated as receiving a distribution from a foreign trust. He adds that "individual facts and circumstances are taken into account". Australasian shares are usually lower than that. Also Rinker's main business is in the United States, but is it resident in Australia? You will simply be asked if they cost more than that, in which case you will pay the tax. Income Tax Act 1994, ss CF 6, LC 6, NG 1(2)(a). Overseas share investments by New Zealand-based international share funds, such as WiNZ, will also be subject to the new rules. "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 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. February 17, 2007 Q. See www.rbnz.govt.nz/keygraphs/graphdata.xls and click on Excel tab 8. "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." A. To make things easier for those working out their eligibility for the threshold, Inland Revenue has come up with a compromise. For NZ tax purposes I have always shown these dividends in my annual tax return. I hope many readers whose letters won't make it into the column can find answers there. 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. 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." 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. Frawley says you won't have to go to much trouble to pay the tax. 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. Murray Brewer Partner, Tax D +64 9 922 1386 M +64 27 448 8880 E murray.brewer@nz.gt.com Greg Thompson Partner and National Director, Tax Don't let the tax drive your decisions too much. This is an annual tax on the rise in value of your holdings, not a tax on the sale. A. In fact, New Zealand has the least cash circulating per person than any other OECD country. It's irrelevant what happens to their value after purchase. As a consequence of the new tax law coming into force I will be reducing the portfolio substantially. 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. If you are a resident, but non-domiciled, the amount of UK tax you have to pay on foreign income and gains may sometimes depend on whether or not you bring money or assets into the UK. These investments are usually called FDR prohibited or CV enforced investments. If the rules do apply to you, when calculating your 2007/08 taxes, start with the value of your offshore shares next April 1. A. "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. Multinational Enterprises - Compliance Focus 2019 (PDF 941KB) Download guide Compliance focus documents from previous years. However, what will happen on April 1, 2008? Our Kids Accounts fees are just $0.50 to buy or sell up to 50 shares. 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? "A person may choose to treat shares acquired before 2000 as costing half their market value on 1 April 2007 for the purpose of the $50,000 threshold," says Frawley. The amount of tax your employer takes may not be all the tax you need to pay. This will certainly help some people. For example BHP Billiton and Rio Tinto are dual listed in Australia and Britain, but are they resident in Australia? The Tax Working Group has recommended that owners of smaller foreign-share portfolios that currently fall under those $50,000 or $100,000 caps should pay tax … 4) Would you recommend a couple to sell down to $99,999 at purchase price in order to avoid the considerable problems of proving each year that shares purchased perhaps 40 years ago were indeed purchased at a seemingly low price? We've collated for you a selection of questions Mary has answered since the taxation legislation passed late last year. For some investments, New Zealanders are not allowed to use the FDR method. You asked for older data on foreign exchange rates, for people calculating whether the new $50,000 tax threshold applies to them. Nor does it include investments in Australian unit trusts listed on their stock exchange. The good news is that investors on a Sharesight NZ Expert or Sharesight NZ Pro plan can run their own FIF tax report in just a few clicks using both the FDR and CV method. Perhaps you could answer a few points for your readers e.g. Q. This way the opening value of overseas investment is zero. "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. Tax residence under New Zealand’s domestic rules is determined by meeting one of two tests. 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? In contrast, a non-resident is taxable only on New Zealand-sourced income. If that is the case, you will be subject to tax only on overseas income or gains remitted to the UK. So it isn't all bad. The authority has ruled that the man's family links and some property investments he kept in New Zealand counted against him. And that would be a sure-fire way of boring most readers witless. Only you can decide if the strategy is worth the hassle, costs and possibly sleepless nights. 2) The $50,000 threshold takes into account brokerage fees if these are part of the cost of buying the shares. If, however, you have larger holdings or plan to grow your international holdings, it's probably better just to pay the tax. However, with the new system due to be implemented this year, what does one do? March 10, 2007 Q. I follow your columns on taxing of overseas shares because I have shares and unit trust investments in Canada. Generally, I think the diversification gains of owning offshore shares outweigh the disadvantage of paying the tax. However, the exemption will apply for a limited period to trusts created on a person's death, so that trustees have sufficient time to deal with the deceased's estate under the will." 3) Does a married couple qualify for a total $100,000 exemption or threshold at purchase price automatically as a joint unit? Because of this, many New Zealanders invest only locally or in Grey List countries. For older data, you may have to ask your bank. 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. "This compliance cost savings measure is intended to cater for situations where a person may no longer have records of the purchase price of shares acquired many years ago." If this is you, Sharesies can’t handle your tax for you and you should seek tax advice. 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. 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. Sorry for bombarding thee. 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. Thanks very much. 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." They are all taxed under the new rules, as are New Zealanders' investments in UK investment trusts listed in New Zealand. The normal rule applies, of course, that when someone dies taxes are paid on their income in the year of their death. Our sub-custodian deducts your tax at source, and pays the overseas tax authority directly. New residents and New Zealanders who have been living outside New Zealand for at least 10 years can get an exemption from paying tax on some investments. will be your status as a New Zealand tax resident. Let's say a person with several US shares and a portfolio worth over the $50,000 threshold has several of these stocks placed in company dividend reinvestment programmes. Tax Technical - Inland Revenue NZ. A. The FIF tax must be paid even if none of the earnings ever come into New Zealand and even if you receive no dividends. Is it still April 1, 2007, i.e. And over the years, there'll be ups and downs. # Personal investors have an exemption of $50,000 of the original cost (not current valuation) before the tax is payable. Some argue that 5 per cent is not a reasonable amount, as dividends on non- The New Zealand stock exchange is the NZX and the Australian stock exchange is the ASX. Most New Zealand based fund managers have converted their retail funds into PIE funds. Some good practical questions, which David Carrigan of Inland Revenue has answered as follows: The Reserve Bank holds monthly NZ dollar exchange rates for the US dollar, British pound, Australian dollar, Japanese yen, and Germany's deutschmark, going back to January 1985. What happens if a married couple each are close to this exemption level and one dies, leaving their assets to the survivor (trusts and estates have no exemption)? # If tax due is accrued is it still to be wiped upon death? # Drop it from the dividend declaration and have it included in the value of the shares? : The law has already been passed, and will apply from April 1, 2007 for people whose tax year runs from April 1 to March 31, which is most individuals. I think Frawley is politely trying to tell you the new rules will be easier than the old ones, so what are you moaning about! 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. The RBNZ also holds monthly NZ dollar/US dollar data going back to 1970, used in the calculation of the trade-weighted index. There are no dumb questions. It also covers managed funds held overseas and … The answer to your third question is: "Yes, you can ignore the tax." January 13, 2007 Q. I have a portfolio of shares directly invested in overseas companies. Mary Holm is a seminar presenter, author and publisher. 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." # The total return on the shares - including dividends and any gain in price - during the tax year. 2001 New Zealand Master Tax Guide, 26-185. # The Aussie exemption doesn't include companies that are not resident in Australia, even if they are listed on the Australian stock exchange. My holdings will probably then be well over $50,000 (I've had them a long time). This is monthly data, and strictly speaking taxpayers are supposed to establish the exchange rate on the day they bought the shares. But how are dividends on shares purchased during the year treated? But the rules have since changed, and there is no longer any situation in which taxes will be carried forward. 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? if you have $51,000 at purchase price, is $1,000 in the new system and subject to the tax and $50,000 exempt and taxable on income only, or is all $51,000 now included? 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