One is www.oanda.com/convert/classic, which goes back to January 1990. 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. Merger considerations and certain other corporate actions may be deemed dividends, resulting in withholding tax being payable on the capital value of your shareholding. No tax will be payable if the shares make a loss, after taking the dividends into account. Thanks very much. "If the shares make a loss then no tax is payable," adds Frawley. 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 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. That's a pity that you're planning to reduce your portfolio. "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. Mary Holm is a seminar presenter, author and publisher. It's a swings and roundabouts thing. 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. For NZ tax purposes I have always shown these dividends in my annual tax return. Unfortunately, in your case that means that your shares don't qualify for the threshold. 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. So it isn't all bad. 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)". 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"? "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. In such cases income is calculated under the comparative value method for as long as the person owns the investments. 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. The FIF regime was introduced to prevent NZ taxpayers using offshore entities to avoid or defer their NZ tax obligations. Individuals will pay tax, at their personal tax rate, on the lower of: 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. : 2) Is the $50,000 exemption or threshold based on the total cost of the shares including brokerage, or is it just the cost of the shares? the value of my portfolio at that date would determine my tax liability for the 2007/2008 financial year? Yes. 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? You buy and sell shares through a stock broker To buy and sell shares on the stock exchange (called ‘trading’) you’ll need to place an order through a stock broker – this is a company licensed to … 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. Browse new legislation. If you get interest and dividends from overseas, there are different rules depending on your situation. 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. And that would be a sure-fire way of boring most readers witless. "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. So you would be taxed under the current regime, which means your dividends would all be taxed. Overseas investments include: pension schemes. 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. # Will investors now have to give a statement of assets each year to the IRD? The answer to your third question is: "Yes, you can ignore the tax." A. February 3, 2007 Q. I have some questions regarding the $50,000 exemption with respect to the new overseas tax legislation: A. As Frawley points out, when you calculate the tax, it will be based on the current market value. 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. Alternatively, the couple could have jointly owned shares totalling up to $100,000. 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? 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. In the reader's example the reinvested dividends will be picked up in the opening market value of the shares each year." 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." 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 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. I hope many readers whose letters won't make it into the column can find answers there. For example BHP Billiton and Rio Tinto are dual listed in Australia and Britain, but are they resident in Australia? If you do sell and then repurchase your shares, under the new fair-dividend-rate rules shares bought during a tax year, and dividends on those shares, aren't taxed, says Frawley. 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." Those people will have to list their relevant overseas share 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. These investments are usually called FDR prohibited or CV enforced investments. By compiling all your portfolio data in one place, Sharesight eliminates the paper-chase and headaches normally associated with performance and tax reporting. less than 10% of the units in a foreign unit trust. i.e. 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. 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." But changes in New Zealand's exchange rate with one country will to some extent be offset by changes with another country. Nevertheless, strictly speaking the new tax is not a capital gains tax. Basically, as long as you buy no more non-Australasian shares, you stay outside the new rules forever. By the way, if you sell and then buy back less than $50,000 worth, you would be under the $50,000 threshold. Still, I don't know your circumstances, and it may make good sense for you. The FIF tax must be paid even if none of the earnings ever come into New Zealand and even if you receive no dividends. These rules apply to offshore investments held by New Zealand-resident taxpayers and target overseas companies who do not pay dividends. Frawley says you won't have to go to much trouble to pay the tax. And over the years, there'll be ups and downs. # If tax due is accrued is it still to be wiped upon death? 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. 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 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." This way the opening value of overseas investment is zero. This means a New Zealand resident receiving an inheritance from an overseas estate is treated as receiving a distribution from a foreign trust. Do I have to revalue on April 1, 2008 or does the $50,000 exemption last forever? 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. You will simply be asked if they cost more than that, in which case you will pay the tax. # The new rules generally apply to shares only, although they will also apply to interests in some overseas super schemes and life insurance products. Tax for non-resident taxpayers. However, Frawley says "The Reserve Bank monthly data will be acceptable to Inland Revenue for the purposes of applying the $50,000 threshold." Q. # The Aussie exemption doesn't include companies that are not resident in Australia, even if they are listed on the Australian stock exchange. 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. 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. 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? You don't have to do any more calculations in subsequent years. "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. For some investments, New Zealanders are not allowed to use the FDR method. Explanations of changes to legislation including Acts, general and remedial amendments, and Orders in Council. Some argue that 5 per cent is not a reasonable amount, as dividends on non- There will be market-crash years when we are glad we are in the new regime rather than the current one. You should use the exchange rate on the date of purchase. As noted above, being a New Zealand tax resident, you'll generally pay tax on your worldwide income. the other country or territory has deducted tax. I must admit that sounds like a fair amount of hassle to me. We worked in Ireland for a number of years and received some shares as part of employee incentive schemes etc, ie. In contrast, a non-resident is taxable only on New Zealand-sourced income. US tax: $1.50 USD (one-off), $0.50 a year A one-off $1.50 USD fee is deducted from your first deposit to cover the set-up, and after that, a $0.50 fee is deducted from your account each year to sort your US taxes for you. But it might be pretty hard to argue that you had any other purpose. This is an annual tax on the rise in value of your holdings, not a tax on the sale. 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. A. March 24, 2007 Q. # Include the dividend as usual and not enter it in the value of the shares, or They facilitate international tax compliance in accordance with New Zealand tax law. # Does "overseas investment", i.e. Each quarter a dividend investment statement is mailed stating the gross dollar dividend value, federal tax taken and then the net amount. 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 Some good practical questions, which David Carrigan of Inland Revenue has answered as follows: 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. 2) The $50,000 threshold takes into account brokerage fees if these are part of the cost of buying the shares. 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. Predictably, perhaps, Peter Frawley of Inland Revenue has a different perspective. 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. 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? 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? Regardless of tax, any investor in overseas shares needs to learn to ride those waves. This is then converted to a certain number of shares, which are added to the base shareholding. If the rules do apply to you, when calculating your 2007/08 taxes, start with the value of your offshore shares next April 1. They come into the regime the following year. "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. Tax Technical - Inland Revenue NZ. Your second sentence is broadly speaking right. In fact, New Zealand has the least cash circulating per person than any other OECD country. Sorry for bombarding thee. 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. 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. Generally New Zealanders don't have enough invested in overseas shares - in terms of reducing their risk by spreading their money into different investments. To get started, simply sign up for a FREE Sharesight account and add your holdings. will be your status as a New Zealand tax resident. This will certainly help some people. The $50,000 threshold is based on the original cost of offshore shares. Generally, I think the diversification gains of owning offshore shares outweigh the disadvantage of paying the tax. But if you do buy more shares, you need to add the cost of those purchases to the original costs of your current holdings. They also jointly own shares costing $30,000. Is taxable dividend income still capped at 5 per cent of the opening value of the portfolio (ie. 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. A. Taxable gains on shares in New Zealand. As a consequence of the new tax law coming into force I will be reducing the portfolio substantially. 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. Frawley says there are several websites that have foreign exchange calculators with historical data. Most New Zealand based fund managers have converted their retail funds into PIE funds. 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). On currency changes, the situation is the same, really. 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. Probably the latter. That would save you some tax and some hassle. Her website is www.maryholm.com. I've had trouble finding any other calculators that cover a range of currencies and give daily data earlier than that. Q. It also covers managed funds held overseas and … 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. # 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? # Personal investors have an exemption of $50,000 of the original cost (not current valuation) before the tax is payable. Don't let the tax drive your decisions too much. Also Rinker's main business is in the United States, but is it resident in Australia? Simply the best portfolio management tool for DIY investors. PIR: Prescribed Investor Tax Rate. You are also liable for tax in New Zealand, on any dividends from your overseas holdings. If, however, you have larger holdings or plan to grow your international holdings, it's probably better just to pay the tax. The FIF regime was introduced to prevent NZ taxpayers using offshore entities to avoid or defer their NZ tax obligations. at no cost to us. Tax residence under New Zealand’s domestic rules is determined by meeting one of two tests. The funds will handle the changes. The deutschmark was replaced by the euro from January 1999. The idea is to be able to recognise certain franking credits for New Zealand tax purposes. 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 … The authority has ruled that the man's family links and some property investments he kept in New Zealand counted against him. How does one calculate the conversion to NZ dollars? But how are dividends on shares purchased during the year treated? It also covers managed funds held overseas and … "Broadly, under the new method tax is paid on 5 per cent of the share portfolio's opening market value each year. Some searching questions, answered here by Peter Frawley of Inland Revenue: 1) The $50,000 is a threshold. If one spouse dies and leaves their assets to the survivor, and that causes the survivor's portfolio to exceed the $50,000 limit, the surviving spouse will then be subject to the new rules. The dumb people are those who don't ask. All investors will see is lower returns. My holdings would come under $50,000 on purchase. Do any readers know of any? The RBNZ also holds monthly NZ dollar/US dollar data going back to 1970, used in the calculation of the trade-weighted index. For older data, you may have to ask your bank. A. We've collated for you a selection of questions Mary has answered since the taxation legislation passed late last year. 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. FIF-Exempt Overseas Income & Overseas Tax Credits Content also available for tax entities or on our global site.. Under the new fair dividend rate method no tax would be payable in such an income year." 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. The amount of tax your employer takes may not be all the tax you need to pay. Carrigan adds, "The $50,000 exemption does not generally apply to trusts and estates. On your first question, that's one way of looking at it. Sure-Fire way of boring most readers witless get here appropriate to recognise capital losses '' conversion... 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