Still, I don't know your circumstances, and it may make good sense for you. But the man's total, $5000 plus $15,000, keeps him under the threshold. For example: A woman owns shares costing $40,000 and her husband owns shares costing $5000. There will be market-crash years when we are glad we are in the new regime rather than the current one. 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. If that total rises above $50,000, you will be taxed under the fair dividend rate rules. But even if we ran nothing else for weeks, I couldn't answer them all in the column. 2) The $50,000 threshold takes into account brokerage fees if these are part of the cost of buying the shares. # Does "overseas investment", i.e. Most New Zealand based fund managers have converted their retail funds into PIE funds. the other country or territory has deducted tax. IR330C - choose a tax rate for your schedular payments. will be your status as a New Zealand tax resident. March 24, 2007 Q. From 1 October … 2001 New Zealand Master Tax Guide, 26-185. The $50,000 threshold. i.e. Sorry if this is a dumb question, but I would like an answer. 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. 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? 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. There's some compensation, though. By the way, you won't have to prove each year that your shares cost less than $50,000. 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? It's a swings and roundabouts thing. Do I have to revalue on April 1, 2008 or does the $50,000 exemption last forever? When the deceased person was not resident in New Zealand at the time of death, the estate is classified as a foreign trust. All investors will see is lower returns. January 13, 2007 Q. I have a portfolio of shares directly invested in overseas companies. A tax resident is taxed on worldwide income, with a tax credit allowed if taxes are paid overseas on foreign sourced income. The FIF regime was introduced to prevent NZ taxpayers using offshore entities to avoid or defer their NZ tax obligations. "If the shares make a loss then no tax is payable," adds Frawley. See www.rbnz.govt.nz/keygraphs/graphdata.xls and click on Excel tab 8. # 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? Your second sentence is broadly speaking right. 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 Merger considerations and certain other corporate actions may be deemed dividends, resulting in withholding tax being payable on the capital value of your shareholding. # 5 per cent of the market value of their shares at the start of the tax year, or: The RBNZ also holds monthly NZ dollar/US dollar data going back to 1970, used in the calculation of the trade-weighted index. 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)? A. In the reader's example the reinvested dividends will be picked up in the opening market value of the shares each year." If, however, you have larger holdings or plan to grow your international holdings, it's probably better just to pay the tax. How does one calculate the conversion to NZ dollars? Pre-register here! * * * Australasian shares are usually lower than that. 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. They facilitate international tax compliance in accordance with New Zealand tax law. But the rules have since changed, and there is no longer any situation in which taxes will be carried forward. 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. If you have a job to come to, it is a good idea to open an account before you get here. The dumb people are those who don't ask. Our sub-custodian deducts your tax at source, and pays the overseas tax authority directly. 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. It's irrelevant what happens to their value after purchase. # The $50,000 applies separately to each investor. The idea is to be able to recognise certain franking credits for New Zealand tax purposes. That would save you some tax and some hassle. A. 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. Q. Generally New Zealanders don't have enough invested in overseas shares - in terms of reducing their risk by spreading their money into different investments. Basically, as long as you buy no more non-Australasian shares, you stay outside the new rules forever. Act articles 2020 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005. 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? And over the years, there'll be ups and downs. 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. I hope many readers whose letters won't make it into the column can find answers there. You will simply be asked if they cost more than that, in which case you will pay the tax. But how are dividends on shares purchased during the year treated? 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. I've had trouble finding any other calculators that cover a range of currencies and give daily data earlier than that. Her advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. This way the opening value of overseas investment is zero. He adds that "individual facts and circumstances are taken into account". Nor does it include investments in Australian unit trusts listed on their stock exchange. Alternatively, the couple could have jointly owned shares totalling up to $100,000. 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. However, what will happen on April 1, 2008? Predictably, perhaps, Peter Frawley of Inland Revenue has a different perspective. As a consequence of the new tax law coming into force I will be reducing the portfolio substantially. FIF-Exempt Overseas Income & Overseas Tax Credits Content also available for tax entities or on our global site.. 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." These investments are usually called FDR prohibited or CV enforced investments. February 17, 2007 Q. If you should be paying the tax but don't, you are likely to be in trouble if you are audited. 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. # Will investors now have to give a statement of assets each year to the IRD? less than 10% of the units in a foreign unit trust. The answer to your third question is: "Yes, you can ignore the tax." # The total return on the shares - including dividends and any gain in price - during the tax year. If that is the case, you will be subject to tax only on overseas income or gains remitted to the UK. Dividends/income received from such investments are not directly taxable. 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. * * * 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)". 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. Is it still April 1, 2007, i.e. 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. 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. # Personal investors have an exemption of $50,000 of the original cost (not current valuation) before the tax is payable. It won't matter whether the value of your overseas shares changes because of changes in the share price in the home country or because of currency fluctuations. You are also liable for tax in New Zealand, on any dividends from your overseas holdings. In such cases income is calculated under the comparative value method for as long as the person owns the investments. 1) Is this a $50,000 exemption or a $50,000 threshold? 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. Yours is one of many questions I've received about the tax changes. If you are not a tax resident, you pay tax on investments you have in New Zealand. 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. And that would be a sure-fire way of boring most readers witless. But a capital gains tax on those shares could see investors move towards more investment in overseas shares. In effect, then, part of the tax will sort of be on capital gains. 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 … 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. # Under the earlier version of the tax bill, taxes could be carried forward into future years. A. 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 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." My holdings would come under $50,000 on purchase. Taxable gains on shares in New Zealand. Tax for non-resident taxpayers. beyond Australia, mean just shares or does it include assets like property, bonds and cash? 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. For older data, you may have to ask your bank. Each quarter a dividend investment statement is mailed stating the gross dollar dividend value, federal tax taken and then the net amount. 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 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. 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. This is your personal tax rate. Our Kids Accounts fees are just $0.50 to buy or sell up to 50 shares. Overseas share investments by New Zealand-based international share funds, such as WiNZ, will also be subject to the new rules. As noted above, being a New Zealand tax resident, you'll generally pay tax on your worldwide income. between 10% and 40% of the shares in a foreign company which is not a CFC. PIR: Prescribed Investor Tax Rate. 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. Her website is www.maryholm.com. I will include more in the next few weeks. 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. The normal rule applies, of course, that when someone dies taxes are paid on their income in the year of their death. This is then converted to a certain number of shares, which are added to the base shareholding. "This is set at a maximum of 5 per cent of the investment's opening market value." 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"? Yes. In that case, you will pay tax on the yield amount. You asked for older data on foreign exchange rates, for people calculating whether the new $50,000 tax threshold applies to them. Unfortunately, in your case that means that your shares don't qualify for the threshold. 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! The new rules don't apply to individuals whose non-Australasian overseas shares cost less than $50,000. One is www.oanda.com/convert/classic, which goes back to January 1990. This will certainly help some people. For NZ tax purposes I have always shown these dividends in my annual tax return. It also covers managed funds held overseas and … Or do the shares have to be held specifically 50/50 in each individual name? A. 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). Also Rinker's main business is in the United States, but is it resident in Australia? By the way, if you sell and then buy back less than $50,000 worth, you would be under the $50,000 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. at no cost to us. "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. "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." 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? Frawley says you won't have to go to much trouble to pay the tax. 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. "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. Probably the latter. The woman's total would be $40,000 plus $15,000 (half of $30,000), which brings her over the threshold. And that means, says Frawley, "it is not appropriate to recognise capital losses". 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." 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. Q. For example BHP Billiton and Rio Tinto are dual listed in Australia and Britain, but are they resident in Australia? Individuals will pay tax, at their personal tax rate, on the lower of: Multinational Enterprises - Compliance Focus 2019 (PDF 941KB) Download guide Compliance focus documents from previous years. Mary Holm is a seminar presenter, author and publisher. Because of this, many New Zealanders invest only locally or in Grey List countries. 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. 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? 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. "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. They come into the regime the following year. 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." They also jointly own shares costing $30,000. # Not all investors will have to give a statement of assets - only those to whom the new rules apply. If you get interest and dividends from overseas, there are different rules depending on your situation. 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. A. 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. "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." Read our guide on using the NZ FIF report to see how easy it is. I must admit that sounds like a fair amount of hassle to me. Income Tax Act 1994, ss CF 6, LC 6, NG 1(2)(a). "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. 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. Haddon said he was not convinced the proposals were good for 'New Zealand inc'. If the rules do apply to you, when calculating your 2007/08 taxes, start with the value of your offshore shares next April 1. 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. In contrast, a non-resident is taxable only on New Zealand-sourced income. 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. "It is an inherent feature of the new method that no losses are carried forward as each year is treated separately. So you would be taxed under the current regime, which means your dividends would all be taxed. Browse new legislation. Explanations of changes to legislation including Acts, general and remedial amendments, and Orders in Council. 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. 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 $50,000 threshold is based on the original cost of offshore shares. To make things easier for those working out their eligibility for the threshold, Inland Revenue has come up with a compromise. # If tax due is accrued is it still to be wiped upon death? 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. As Frawley points out, when you calculate the tax, it will be based on the current market value. the value of my portfolio at that date would determine my tax liability for the 2007/2008 financial year? But changes in New Zealand's exchange rate with one country will to some extent be offset by changes with another country. However, help is at hand. In fact, New Zealand has the least cash circulating per person than any other OECD country. Q. # Include the dividend as usual and not enter it in the value of the shares, or If this is you, Sharesies can’t handle your tax for you and you should seek tax advice. This is an annual tax on the rise in value of your holdings, not a tax on the sale. "Broadly, under the new method tax is paid on 5 per cent of the share portfolio's opening market value each year. The authority has ruled that the man's family links and some property investments he kept in New Zealand counted against him. 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). But it might be pretty hard to argue that you had any other purpose. 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? The new overseas tax legislation will affect many investors. We have a couple of shares which were bought some years ago for around 2000 and are now worth 55,000. No tax will be payable if the shares make a loss, after taking the dividends into account. You don't have to do any more calculations in subsequent years. March 10, 2007 Q. I follow your columns on taxing of overseas shares because I have shares and unit trust investments in Canada. Overseas investments include: pension schemes. We've collated for you a selection of questions Mary has answered since the taxation legislation passed late last year. The IR330C form is the IR form you need to complete to choose the rate of tax you have deducted from your payments. Holdings will probably then be well over $ 50,000 exemption does not generally to. Revenue is being unfair, if it leaves it up to $ exemption! Of shares directly invested in overseas shares is $ 51,000, all of those shares could see move! To 50 shares determined by meeting one of two tests other calculators that cover a of! That means that your shares do n't think the diversification gains of owning offshore shares outweigh the disadvantage paying. How tax on overseas shares nz one calculate the tax. does this investment strategy make sense for the rules... 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