All calculators are downloadable Excel spreadsheets that allow you to save and amend your own personal data.With all the spreadsheets, enter your personal data in the purple coloured cells.
The foreign investment fund (FIF) rules apply to offshore equity investments held by New Zealand tax paying residents.
The FIF rules impose tax on your investments regardless of whether you receive cash or income from the investments, such as dividends or sales proceeds.
Exclusions can apply for people with smaller amounts invested offshore (less than $50,000) and for certain investments, such as certain companies on the Australian share market.
There are several methods of calculating income, and therefore tax. However, the default method is the fair dividend rate (FDR) method. Basically, this method calculates your taxable income as 5% of your opening investment balance at the start of the tax year (1 April).
Generally if you only buy shares during the year, the new value of your investments will only apply from the start of the next financial year. Conversely, if you only sell shares during the year, you will remain taxable on the full 5% of the opening year value. The lower investment amount not being applied until the start of the next financial year (if at all).
The exception is if you buy AND sell the same foreign share or fund during the same tax year, you become subject to the “quick sale” rules. The quick sale rule is designed to prevent investors avoiding tax by purchasing shares after 1 April and selling before 31 March. The amount taxed for the sale of the quick sale shares is the lower of:
The actual gain made on the sale of the quick sale shares
5% of the cost of the quick sale shares.
The main alternative to the default FDR method, is the comparative value (CV) method. Tax paid using the CV method, means the investor pays tax on the actual total returns of the investments and not a default 5%. With this method (unlike FDR) you will not pay any tax if your foreign shares make a loss. However, you can’t claim the loss either.
You would normally elect to use the CV method for paying FIF tax if your total return on all your FIF investments is less than 5% of the market value of foreign shares held on 1 April.
Whatever method you choose (FDR or CV), you have to use the same method for all your foreign shares. You can’t apply one method to some shares and another method to other shares. However, you can change each tax year depending on how well (or poorly) your foreign shares performed. You can choose to use any method after the tax year has ended, as long as you submit your return by early July.
There are other methods for calculating foreign income tax, but these two are the main ones used. For more information on the other minor methods used and for other information, check out the informative IRD guide.
If you hold overseas investments packaged into a NZ based fund, such as the InvestNow US500 fund, then you will not have to worry about filing for FIF tax. You will be taxed at the applicable rate for NZ investments.
Comparing FDR and CV tax paid if you don’t buy and sell foreign shares within tax year
This is the FIF calculator if you don’t buy and sell the same foreign share or foreign domiciled share fund in the same tax year.
Comparing FDR and CV FIF tax paid if you do buy and sell foreign shares within tax year
This is the FIF calculator if you buy AND sell the same foreign share or foreign domiciled share fund in the same tax year year.
This calculation will need to be completed for EACH overseas share or fund that you own.
FIF Threshold calculator
When investing in foreign currencies it can be difficult to know how much you have invested in New Zealand dollars. It’s hard enough to remember the date you invested a few months ago, let alone what the exchange rate was.
Thankfully this calculator will provide the cost of your investments throughout the year in New Zealand dollars and total them up for you, so you can check whether or not you have exceeded the $50,000 FIF tax threshold.
You just need to enter all your internationally based investments, their home currency, how much you invested and on what date. The calculator will then produce the cost of each investment in New Zealand dollars based on historical exchange rates, as well as the NZ dollar total for the year.
Just note that if you enter a date of investment that is a weekend date, it will not calculate that investment. It must be a weekday with this calculator.
Tax can be a very complicated, nuanced, and personal area so only use these calculators as a general guide. Your personal tax obligations are unique to you. A tax Accountant can help with your personal situation if you are not comfortable.
For personalised advice on deciding which investments to include as part of your financial plan, then get in touch for a no obligations chat to see how we may be able to add value for you.
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