# Not all investors will have to give a statement of assets - only those to whom the new rules apply. Browse new legislation. February 10, 2007 Q. I refer to the recent reply regarding the new overseas tax legislation from Inland Revenue, which stated that the Aussie exemption doesn't include companies that are not resident in Australia, even if they are listed on the Australian stock exchange. A. Q. 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. 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. "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. 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 We worked in Ireland for a number of years and received some shares as part of employee incentive schemes etc, ie. How does one calculate the conversion to NZ dollars? Some argue that 5 per cent is not a reasonable amount, as dividends on non- Act articles 2020 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005. * * * Sorry for bombarding thee. Because of this, many New Zealanders invest only locally or in Grey List countries. If you have a job to come to, it is a good idea to open an account before you get here. If the rules do apply to you, when calculating your 2007/08 taxes, start with the value of your offshore shares next April 1. And that means, says Frawley, "it is not appropriate to recognise capital losses". 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? Individuals will pay tax, at their personal tax rate, on the lower of: Your exemption lasts for up to 4 years and means you do not pay PIR on income that you get from foreign investments as long as: the income from them is made outside New Zealand The $50,000 threshold. Is it still April 1, 2007, i.e. 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"? But it might be pretty hard to argue that you had any other purpose. Her website is www.maryholm.com. They also jointly own shares costing $30,000. Does this investment strategy make sense for the first year, or is it too good to be true? 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. However, what will happen on April 1, 2008? It's a swings and roundabouts thing. That would save you some tax and some hassle. Income Tax Act 1994, ss CF 6, LC 6, NG 1(2)(a). To get started, simply sign up for a FREE Sharesight account and add your holdings. # Personal investors have an exemption of $50,000 of the original cost (not current valuation) before the tax is payable. they are classified as traders by the IRD), Diversity Report – Shows how your portfolio is diversified across various groupings, at a chosen point in time, Benchmarking – enables you to select any ETF in the Sharesight database to compare against a holding or your overall portfolio, Contribution Analysis Report – Explains the drivers behind your portfolio’s performance, be they stock selection, asset allocation, or exposure to certain countries, sectors, or industries, 5 ways Sharesight helps NZ investors at tax time, How Sharesight calculates your investment performance. You'll need to pay tax on your overseas income even if: you do not bring it into New Zealand. # The total return on the shares - including dividends and any gain in price - during the tax year. 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. 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. "The new rules have been designed to minimise investors' compliance costs," he says. # The new rules generally apply to shares only, although they will also apply to interests in some overseas super schemes and life insurance products. PIR: Prescribed Investor Tax Rate. Do I have to revalue on April 1, 2008 or does the $50,000 exemption last forever? For other cases, … If you should be paying the tax but don't, you are likely to be in trouble if you are audited. 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. Our Kids Accounts fees are just $0.50 to buy or sell up to 50 shares. 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's irrelevant what happens to their value after purchase. Your second sentence is broadly speaking right. 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. The dumb people are those who don't ask. A. I will include more in the next few weeks. "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." less than 10% of the units in a foreign unit trust. Q. Those people will have to list their relevant overseas share investments. If you get interest and dividends from overseas, there are different rules depending on your situation. Nor does it include investments in Australian unit trusts listed on their stock exchange. 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. So you would be taxed under the current regime, which means your dividends would all be taxed. "If the shares make a loss then no tax is payable," adds Frawley. Nevertheless, strictly speaking the new tax is not a capital gains tax. But a capital gains tax on those shares could see investors move towards more investment in overseas shares. I must admit that sounds like a fair amount of hassle to me. 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 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. 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. Predictably, perhaps, Peter Frawley of Inland Revenue has a different perspective. The deutschmark was replaced by the euro from January 1999. 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. "Broadly, under the new method tax is paid on 5 per cent of the share portfolio's opening market value each year. Probably the latter. You should use the exchange rate on the date of purchase. 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. Each quarter a dividend investment statement is mailed stating the gross dollar dividend value, federal tax taken and then the net amount. He adds that "it has been a requirement for many years with the current Grey List exemption for a person to know whether the companies they invest in are resident in Grey List countries (Australia, United Kingdom, Germany, Norway, Spain, United States, Canada and Japan)". 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 … 3) Does a married couple qualify for a total $100,000 exemption or threshold at purchase price automatically as a joint unit? The new overseas tax legislation will affect many investors. We've collated for you a selection of questions Mary has answered since the taxation legislation passed late last year. Yours is one of many questions I've received about the tax changes. You don't have to do any more calculations in subsequent years. Inland Revenue has recently published two papers clarifying a lot of the issues people are asking about. "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." For older data, you may have to ask your bank. A. 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 … at no cost to us. 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? The normal rule applies, of course, that when someone dies taxes are paid on their income in the year of their death. The FIF regime was introduced to prevent NZ taxpayers using offshore entities to avoid or defer their NZ tax obligations. This is then converted to a certain number of shares, which are added to the base shareholding. If that total rises above $50,000, you will be taxed under the fair dividend rate rules. The $50,000 threshold is based on the original cost of offshore shares. 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. Under the new fair dividend rate method no tax would be payable in such an income year." Perhaps you could answer a few points for your readers e.g. 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) Her advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. No tax will be payable if the shares make a loss, after taking the dividends into account. Dividends/income received from such investments are not directly taxable. 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? The new rules don't apply to individuals whose non-Australasian overseas shares cost less than $50,000. My holdings would come under $50,000 on purchase. # Include the dividend as usual and not enter it in the value of the shares, or IR330C - choose a tax rate for your schedular payments. 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? Our sub-custodian deducts your tax at source, and pays the overseas tax authority directly. i.e. Tax residence under New Zealand’s domestic rules is determined by meeting one of two tests. This is your personal tax rate. # Drop it from the dividend declaration and have it included in the value of the shares? In answer to your first question, "under the new fair dividend rate method dividends are not taxed separately and therefore do not need to be included in a person's tax return," says the IRD's Peter Frawley. Overseas share investments by New Zealand-based international share funds, such as WiNZ, will also be subject to the new rules. There are also some costs for selling and buying and a risk of price movements in the meantime to take account of, but the benefits could outweigh these costs. 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. The IR330C form is the IR form you need to complete to choose the rate of tax you have deducted from your payments. A. Inland Revenue has no plans to publish such a list. The FIF tax must be paid even if none of the earnings ever come into New Zealand and even if you receive no dividends. That's a pity that you're planning to reduce your portfolio. Q. Tax Technical - Inland Revenue NZ. Overseas investments include: pension schemes. Wages and salaries are usually paid directly into a bank account. Or do the shares have to be held specifically 50/50 in each individual name? In contrast, a non-resident is taxable only on New Zealand-sourced income. A. Dividends/income received from such investments are not directly taxable. # Will investors now have to give a statement of assets each year to the IRD? the value of my portfolio at that date would determine my tax liability for the 2007/2008 financial year? For example BHP Billiton and Rio Tinto are dual listed in Australia and Britain, but are they resident in Australia? See www.rbnz.govt.nz/keygraphs/graphdata.xls and click on Excel tab 8. 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). 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. 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. As the new tax regime on shares in countries beyond Australasia takes effect, many taxpayers seem to think it's tougher than it really is. Go to www.rbnz.govt.nz/statistics/, click on "Exchange rates" on the left side, and then on "B1 historical series". 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. 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. That means that if the cost of your overseas shares is $51,000, all of those shares are subject to the new rules. February 17, 2007 Q. However, help is at hand. I hope many readers whose letters won't make it into the column can find answers there. 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. We have a couple of shares which were bought some years ago for around 2000 and are now worth 55,000. He adds that "individual facts and circumstances are taken into account". These rules apply to offshore investments held by New Zealand-resident taxpayers and target overseas companies who do not pay dividends. Only you can decide if the strategy is worth the hassle, costs and possibly sleepless nights. 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