Nevertheless, strictly speaking the new tax is not a capital gains tax. # If tax due is accrued is it still to be wiped upon death? In the reader's example the reinvested dividends will be picked up in the opening market value of the shares each year." less than 10% of the units in a foreign unit trust. "The new rules have been designed to minimise investors' compliance costs," he says. 3) Does a married couple qualify for a total $100,000 exemption or threshold at purchase price automatically as a joint unit? I've had trouble finding any other calculators that cover a range of currencies and give daily data earlier than that. This way the opening value of overseas investment is zero. This is monthly data, and strictly speaking taxpayers are supposed to establish the exchange rate on the day they bought the shares. between 10% and 40% of the shares in a foreign company which is not a CFC. Individuals will pay tax, at their personal tax rate, on the lower of: February 17, 2007 Q. "If the shares make a loss then no tax is payable," adds Frawley. A. No tax will be payable if the shares make a loss, after taking the dividends into account. 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. For some investments, New Zealanders are not allowed to use the FDR method. 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? * * * They are all taxed under the new rules, as are New Zealanders' investments in UK investment trusts listed in New Zealand. 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." If you should be paying the tax but don't, you are likely to be in trouble if you are audited. "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." 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 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. For older data, you may have to ask your bank. A. A. Inland Revenue has no plans to publish such a list. 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 # 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? The answer to your third question is: "Yes, you can ignore the tax." 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). 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? A. 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)". I hope many readers whose letters won't make it into the column can find answers there. A. The new rules don't apply to individuals whose non-Australasian overseas shares cost less than $50,000. 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. In fact, New Zealand has the least cash circulating per person than any other OECD country. 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. # The Aussie exemption doesn't include companies that are not resident in Australia, even if they are listed on the Australian stock exchange. 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. 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? at no cost to us. That's a pity that you're planning to reduce your portfolio. # Include the dividend as usual and not enter it in the value of the shares, or But the man's total, $5000 plus $15,000, keeps him under the threshold. Do any readers know of any? Go to www.taxpolicy.ird.govt.nz, and scroll down the homepage to February 23, "More on offshore investment changes". A. Inland Revenue is being unfair, if it leaves it up to the taxpayer to determine a company's residency. 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. But it might be pretty hard to argue that you had any other purpose. The amount of tax your employer takes may not be all the tax you need to pay. If you get interest and dividends from overseas, there are different rules depending on your situation. As noted above, being a New Zealand tax resident, you'll generally pay tax on your worldwide income. 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. But the rules have since changed, and there is no longer any situation in which taxes will be carried forward. beyond Australia, mean just shares or does it include assets like property, bonds and cash? 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. The deutschmark was replaced by the euro from January 1999. They come into the regime the following year. This is an annual tax on the rise in value of your holdings, not a tax on the sale. Wages and salaries are usually paid directly into a bank account. You are also liable for tax in New Zealand, on any dividends from your overseas holdings. My holdings would come under $50,000 on purchase. Because of this, many New Zealanders invest only locally or in Grey List countries. It also covers managed funds held overseas and … zero)? 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? 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. "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. 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. But even if we ran nothing else for weeks, I couldn't answer them all in the column. He adds that "individual facts and circumstances are taken into account". Mary Holm is a columnist for the New Zealand Herald. A. From 1 October … So it isn't all bad. Don't let the tax drive your decisions too much. # The total return on the shares - including dividends and any gain in price - during the tax year. There's some compensation, though. Unfortunately, in your case that means that your shares don't qualify for the threshold. # The new rules generally apply to shares only, although they will also apply to interests in some overseas super schemes and life insurance products. 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. 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. 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) A. Overseas investments include: pension schemes. 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. Perhaps you could answer a few points for your readers e.g. 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"? Thanks very much. an insurer under a life insurance policy (and the policy is not offered or entered into in New Zealand). 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). The dumb people are those who don't ask. Browse new legislation. Australasian shares are usually lower than that. # Not all investors will have to give a statement of assets - only those to whom the new rules apply. Or do the shares have to be held specifically 50/50 in each individual name? 1) Is this a $50,000 exemption or a $50,000 threshold? They also jointly own shares costing $30,000. If the rules do apply to you, when calculating your 2007/08 taxes, start with the value of your offshore shares next April 1. 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 These rules apply to offshore investments held by New Zealand-resident taxpayers and target overseas companies who do not pay dividends. But if you do buy more shares, you need to add the cost of those purchases to the original costs of your current holdings. 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 funds will handle the changes. Income Tax Act 1994, ss CF 6, LC 6, NG 1(2)(a). However, help is at hand. 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. This will certainly help some people. February 3, 2007 Q. I have some questions regarding the $50,000 exemption with respect to the new overseas tax legislation: 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 … The FIF regime was introduced to prevent NZ taxpayers using offshore entities to avoid or defer their NZ tax obligations. Mary Holm is a seminar presenter, author and publisher. Does this investment strategy make sense for the first year, or is it too good to be true? To get started, simply sign up for a FREE Sharesight account and add your holdings. 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 $50,000 applies separately to each investor. 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. Nor does it include investments in Australian unit trusts listed on their stock exchange. 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. You'll need to pay tax on your overseas income even if: you do not bring it into New Zealand. In contrast, a non-resident is taxable only on New Zealand-sourced income. It's a swings and roundabouts thing. They don't apply to overseas property, bonds or cash. Our Kids Accounts fees are just $0.50 to buy or sell up to 50 shares. But a capital gains tax on those shares could see investors move towards more investment in overseas 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. 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 There will be market-crash years when we are glad we are in the new regime rather than the current one. Yes. Her advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. The FIF regime was introduced to prevent NZ taxpayers using offshore entities to avoid or defer their NZ tax obligations. 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. If you are not a tax resident, you pay tax on investments you have in New Zealand. "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. Q. 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. And over the years, there'll be ups and downs. 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. 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? You asked for older data on foreign exchange rates, for people calculating whether the new $50,000 tax threshold applies to them. We worked in Ireland for a number of years and received some shares as part of employee incentive schemes etc, ie. One is www.oanda.com/convert/classic, which goes back to January 1990. Dividends/income received from such investments are not directly taxable. In such cases income is calculated under the comparative value method for as long as the person owns the investments. On currency changes, the situation is the same, really. This is your personal tax rate. And that means, says Frawley, "it is not appropriate to recognise capital losses". 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. Examples are Private Portfolio Service Master funds (PPS), and ING property Securities Fund. : It's irrelevant what happens to their value after purchase. 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. For example BHP Billiton and Rio Tinto are dual listed in Australia and Britain, but are they resident in Australia? As Frawley points out, when you calculate the tax, it will be based on the current market value. And I don't think the new tax rules are harsh enough to warrant most people getting out of international shares. 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