"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. This is monthly data, and strictly speaking taxpayers are supposed to establish the exchange rate on the day they bought the shares. To get started, simply sign up for a FREE Sharesight account and add your holdings. New Zealand tax law treats the estate of a deceased person as a trust. So you would be taxed under the current regime, which means your dividends would all be taxed. However, help is at hand. If this is you, Sharesies can’t handle your tax for you and you should seek tax advice. at no cost to us. Predictably, perhaps, Peter Frawley of Inland Revenue has a different perspective. Individuals will pay tax, at their personal tax rate, on the lower of: The new overseas tax legislation will affect many investors. The new rules don't apply to individuals whose non-Australasian overseas shares cost less than $50,000. But even if we ran nothing else for weeks, I couldn't answer them all in the column. That means that if the cost of your overseas shares is $51,000, all of those shares are subject to the new rules. But the rules have since changed, and there is no longer any situation in which taxes will be carried forward. Our sub-custodian deducts your tax at source, and pays the overseas tax authority directly. Some searching questions, answered here by Peter Frawley of Inland Revenue: 1) The $50,000 is a threshold. 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. It's a swings and roundabouts thing. * * * 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)? This is an annual tax on the rise in value of your holdings, not a tax on the sale. 2) The $50,000 threshold takes into account brokerage fees if these are part of the cost of buying the shares. There are no dumb questions. Regardless of tax, any investor in overseas shares needs to learn to ride those waves. How does one calculate the conversion to NZ dollars? # Not all investors will have to give a statement of assets - only those to whom the new rules apply. In that case, you will pay tax on the yield amount. If you get interest and dividends from overseas, there are different rules depending on your situation. You asked for older data on foreign exchange rates, for people calculating whether the new $50,000 tax threshold applies to them. 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 … 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." Thanks very much. They don't apply to overseas property, bonds or cash. By the way, if you sell and then buy back less than $50,000 worth, you would be under the $50,000 threshold. # If tax due is accrued is it still to be wiped upon death? This is then converted to a certain number of shares, which are added to the base shareholding. 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. Examples are Private Portfolio Service Master funds (PPS), and ING property Securities Fund. Overseas share investments by New Zealand-based international share funds, such as WiNZ, will also be subject to the new rules. "It is an inherent feature of the new method that no losses are carried forward as each year is treated separately. will be your status as a New Zealand tax resident. IR330C - choose a tax rate for your schedular payments. # Drop it from the dividend declaration and have it included in the value of the shares? It also covers managed funds held overseas and … 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. 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. 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." For NZ tax purposes I have always shown these dividends in my annual tax return. A. "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 other country or territory has deducted tax. The normal rule applies, of course, that when someone dies taxes are paid on their income in the year of their death. 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? "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. Sorry for bombarding thee. My holdings would come under $50,000 on purchase. Nor does it include investments in Australian unit trusts listed on their stock exchange. But it might be pretty hard to argue that you had any other purpose. # Include the dividend as usual and not enter it in the value of the shares, or The $50,000 threshold. 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. 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. In the reader's example the reinvested dividends will be picked up in the opening market value of the shares each year." # Does "overseas investment", i.e. 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. Your second sentence is broadly speaking right. * * * 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 Probably the latter. 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. Generally New Zealanders don't have enough invested in overseas shares - in terms of reducing their risk by spreading their money into different investments. On your first question, that's one way of looking at it. January 13, 2007 Q. I have a portfolio of shares directly invested in overseas companies. # 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? Don't let the tax drive your decisions too much. Q. For example BHP Billiton and Rio Tinto are dual listed in Australia and Britain, but are they resident in Australia? He adds that "individual facts and circumstances are taken into account". Is it still April 1, 2007, i.e. The answer to your third question is: "Yes, you can ignore the tax." 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. That would save you some tax and some hassle. By the way, you won't have to prove each year that your shares cost less than $50,000. the value of my portfolio at that date would determine my tax liability for the 2007/2008 financial year? They facilitate international tax compliance in accordance with New Zealand tax law. 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. FIF-Exempt Overseas Income & Overseas Tax Credits Content also available for tax entities or on our global site.. A. Those people will have to list their relevant overseas share investments. In general, there are two methods in which you pay tax on your investments. "This is set at a maximum of 5 per cent of the investment's opening market value." Her advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. The amount of tax your employer takes may not be all the tax you need to pay. "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." They are all taxed under the new rules, as are New Zealanders' investments in UK investment trusts listed in New Zealand. 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. 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? 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. There's some compensation, though. # Under the earlier version of the tax bill, taxes could be carried forward into future years. Also Rinker's main business is in the United States, but is it resident in Australia? If you have a job to come to, it is a good idea to open an account before you get here. 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. Do any readers know of any? 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. Yes. They also jointly own shares costing $30,000. less than 10% of the units in a foreign unit trust. "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." Most New Zealand based fund managers have converted their retail funds into PIE funds. 1) Is this a $50,000 exemption or a $50,000 threshold? Go to www.taxpolicy.ird.govt.nz, and scroll down the homepage to February 23, "More on offshore investment changes". 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. 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. 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. 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. Perhaps you could answer a few points for your readers e.g. 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. Frawley says there are several websites that have foreign exchange calculators with historical data. 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. Tax residence under New Zealand’s domestic rules is determined by meeting one of two tests. Overseas pension income (see our separate guidance on this); Other overseas investment income, for example, dividends on shares in overseas companies. Tax Technical - Inland Revenue NZ. "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. 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. 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. We worked in Ireland for a number of years and received some shares as part of employee incentive schemes etc, ie. 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. # The $50,000 applies separately to each investor. Note that if you have invested less than $50,000, so that you are under the threshold, you will continue to be taxed on dividends - as well as realised gains if you are a trader - as in the past. I hope many readers whose letters won't make it into the column can find answers there. 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. 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? 2001 New Zealand Master Tax Guide, 26-185. Explanations of changes to legislation including Acts, general and remedial amendments, and Orders in Council. A. 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 … 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. # The new rules generally apply to shares only, although they will also apply to interests in some overseas super schemes and life insurance products. 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. I must admit that sounds like a fair amount of hassle to me. And I don't think the new tax rules are harsh enough to warrant most people getting out of international shares. The woman's total would be $40,000 plus $15,000 (half of $30,000), which brings her over the threshold. A. "Broadly, under the new method tax is paid on 5 per cent of the share portfolio's opening market value each year. The RBNZ also holds monthly NZ dollar/US dollar data going back to 1970, used in the calculation of the trade-weighted index. The New Zealand stock exchange is the NZX and the Australian stock exchange is the ASX. 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. For some investments, New Zealanders are not allowed to use the FDR method. Merger considerations and certain other corporate actions may be deemed dividends, resulting in withholding tax being payable on the capital value of your shareholding. # Will investors now have to give a statement of assets each year to the IRD? The FIF tax must be paid even if none of the earnings ever come into New Zealand and even if you receive no dividends. See www.rbnz.govt.nz/keygraphs/graphdata.xls and click on Excel tab 8. This means a New Zealand resident receiving an inheritance from an overseas estate is treated as receiving a distribution from a foreign trust. 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. Do I have to revalue on April 1, 2008 or does the $50,000 exemption last forever? But changes in New Zealand's exchange rate with one country will to some extent be offset by changes with another country. 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. Still, I don't know your circumstances, and it may make good sense for you. 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 Wages and salaries are usually paid directly into a bank account. Simply the best portfolio management tool for DIY investors. And that would be a sure-fire way of boring most readers witless. 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. 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." Act articles 2020 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005. The deutschmark was replaced by the euro from January 1999. Carrigan adds, "The $50,000 exemption does not generally apply to trusts and estates. 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. Or do the shares have to be held specifically 50/50 in each individual name? A tax resident is taxed on worldwide income, with a tax credit allowed if taxes are paid overseas on foreign sourced income. Unfortunately, in your case that means that your shares don't qualify for the threshold. 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. 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. But the man's total, $5000 plus $15,000, keeps him under the threshold. This is your personal tax rate. But if you do buy more shares, you need to add the cost of those purchases to the original costs of your current holdings. 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? i.e. You will simply be asked if they cost more than that, in which case you will pay the tax. Dividends/income received from such investments are not directly taxable. 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. In contrast, a non-resident is taxable only on New Zealand-sourced income. From 1 October … Mary Holm is a seminar presenter, author and publisher. 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. 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." 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 17, 2007 Q. Nevertheless, strictly speaking the new tax is not a capital gains tax. We have a couple of shares which were bought some years ago for around 2000 and are now worth 55,000. 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 If that is the case, you will be subject to tax only on overseas income or gains remitted to the UK. 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. 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? In fact, New Zealand has the least cash circulating per person than any other OECD country. However, what will happen on April 1, 2008? You don't have to do any more calculations in subsequent years. A. Alternatively, the couple could have jointly owned shares totalling up to $100,000. And that means, says Frawley, "it is not appropriate to recognise capital losses". Q. The IR330C form is the IR form you need to complete to choose the rate of tax you have deducted from your payments. One is www.oanda.com/convert/classic, which goes back to January 1990. The funds will handle the changes. Australasian shares are usually lower than that. If that total rises above $50,000, you will be taxed under the fair dividend rate rules. Is taxable dividend income still capped at 5 per cent of the opening value of the portfolio (ie. Inland Revenue has recently published two papers clarifying a lot of the issues people are asking about. an insurer under a life insurance policy (and the policy is not offered or entered into in New Zealand). But how are dividends on shares purchased during the year treated? 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 … However, Frawley says "The Reserve Bank monthly data will be acceptable to Inland Revenue for the purposes of applying the $50,000 threshold." Yours is one of many questions I've received about the tax changes. 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. Frawley says you won't have to go to much trouble to pay the tax. As noted above, being a New Zealand tax resident, you'll generally pay tax on your worldwide income. For older data, you may have to ask your bank. Tax for non-resident taxpayers. Inland Revenue is being unfair, if it leaves it up to the taxpayer to determine a company's residency. For other cases, … If you should be paying the tax but don't, you are likely to be in trouble if you are audited. PIR: Prescribed Investor Tax Rate. Basically, as long as you buy no more non-Australasian shares, you stay outside the new rules forever. I will include more in the next few weeks. A. Inland Revenue has no plans to publish such a list. The authority has ruled that the man's family links and some property investments he kept in New Zealand counted against him. Her website is www.maryholm.com. This way the opening value of overseas investment is zero. A. 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. # The total return on the shares - including dividends and any gain in price - during the tax year. 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. There will be market-crash years when we are glad we are in the new regime rather than the current one. Does this investment strategy make sense for the first year, or is it too good to be true? 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. # 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. "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. And over the years, there'll be ups and downs. 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).