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. If this is you, Sharesies can’t handle your tax for you and you should seek tax advice. Frawley says you won't have to go to much trouble to pay the tax. # The total return on the shares - including dividends and any gain in price - during the tax year. If you have a job to come to, it is a good idea to open an account before you get here. The idea is to be able to recognise certain franking credits for New Zealand tax purposes. 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 simply be asked if they cost more than that, in which case you will pay the tax. 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"? Dividends/income received from such investments are not directly taxable. A. 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. Haddon said he was not convinced the proposals were good for 'New Zealand inc'. February 17, 2007 Q. Tax residence under New Zealand’s domestic rules is determined by meeting one of two tests. That's a pity that you're planning to reduce your portfolio. Read our guide on using the NZ FIF report to see how easy it is. Mary Holm is a columnist for the New Zealand Herald. But the rules have since changed, and there is no longer any situation in which taxes will be carried forward. 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. In fact, New Zealand has the least cash circulating per person than any other OECD country. 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. Is it still April 1, 2007, i.e. IR330C - choose a tax rate for your schedular payments. If that total rises above $50,000, you will be taxed under the fair dividend rate rules. Her website is www.maryholm.com. Dividends/income received from such investments are not directly taxable. Mary Holm is a seminar presenter, author and publisher. It also covers managed funds held overseas and … Basically, as long as you buy no more non-Australasian shares, you stay outside the new rules forever. Q. 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. # Drop it from the dividend declaration and have it included in the value of the shares? Do I have to revalue on April 1, 2008 or does the $50,000 exemption last forever? That means that if the cost of your overseas shares is $51,000, all of those shares are subject to the new rules. A. Overseas share investments by New Zealand-based international share funds, such as WiNZ, will also be subject to the new rules. All investors will see is lower returns. # If tax due is accrued is it still to be wiped upon death? "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. 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. 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. Thanks very much. Australasian shares are usually lower than that. an insurer under a life insurance policy (and the policy is not offered or entered into in New Zealand). If you should be paying the tax but don't, you are likely to be in trouble if you are audited. 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 I guess investors will get used to noting the value of their international shares on April 1 each year, and keeping track of dividends. 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. For older data, you may have to ask your bank. # Include the dividend as usual and not enter it in the value of the shares, or A. 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. So you would be taxed under the current regime, which means your dividends would all be taxed. 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. However, what will happen on April 1, 2008? And that means, says Frawley, "it is not appropriate to recognise capital losses". A. There's some compensation, though. Each quarter a dividend investment statement is mailed stating the gross dollar dividend value, federal tax taken and then the net amount. They also jointly own shares costing $30,000. 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! "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." the value of my portfolio at that date would determine my tax liability for the 2007/2008 financial year? 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. Examples are Private Portfolio Service Master funds (PPS), and ING property Securities Fund. 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. There are no dumb questions. i.e. Tax for non-resident taxpayers. As a consequence of the new tax law coming into force I will be reducing the portfolio substantially. 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. 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. "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." Q. But even if we ran nothing else for weeks, I couldn't answer them all in the column. Still, I don't know your circumstances, and it may make good sense for you. Tax Technical - Inland Revenue NZ. # The $50,000 applies separately to each investor. the other country or territory has deducted tax. On currency changes, the situation is the same, really. # Does "overseas investment", i.e. If the rules do apply to you, when calculating your 2007/08 taxes, start with the value of your offshore shares next April 1. You asked for older data on foreign exchange rates, for people calculating whether the new $50,000 tax threshold applies to them. A tax resident is taxed on worldwide income, with a tax credit allowed if taxes are paid overseas on foreign sourced income. It's a swings and roundabouts thing. 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). 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. Explanations of changes to legislation including Acts, general and remedial amendments, and Orders in Council. For NZ tax purposes I have always shown these dividends in my annual tax return. FIF-Exempt Overseas Income & Overseas Tax Credits Content also available for tax entities or on our global site.. Those people will have to list their relevant overseas share investments. # Will investors now have to give a statement of assets each year to the IRD? 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." March 10, 2007 Q. I follow your columns on taxing of overseas shares because I have shares and unit trust investments in Canada. No tax will be payable if the shares make a loss, after taking the dividends into account. Because of this, many New Zealanders invest only locally or in Grey List countries. 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. Your second sentence is broadly speaking right. Frawley says there are several websites that have foreign exchange calculators with historical data. 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. 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 The new rules don't apply to individuals whose non-Australasian overseas shares cost less than $50,000. "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. February 3, 2007 Q. I have some questions regarding the $50,000 exemption with respect to the new overseas tax legislation: The funds will handle the changes. 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. 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." * * * 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." 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. 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 … 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. Under the new fair dividend rate method no tax would be payable in such an income year." March 24, 2007 Q. 2001 New Zealand Master Tax Guide, 26-185. You don't have to do any more calculations in subsequent years. If you are not a tax resident, you pay tax on investments you have in New Zealand. 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? 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. A. The woman's total would be $40,000 plus $15,000 (half of $30,000), which brings her over the threshold. Her advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. * * * Over the past 12 months Mary Holm has dealt with a mountain of correspondence on the tax changes on foreign shares in her regular Weekend Herald column, Money Matters. Inland Revenue is being unfair, if it leaves it up to the taxpayer to determine a company's residency. The New Zealand stock exchange is the NZX and the Australian stock exchange is the ASX. 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. Some searching questions, answered here by Peter Frawley of Inland Revenue: 1) The $50,000 is a threshold. 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? By compiling all your portfolio data in one place, Sharesight eliminates the paper-chase and headaches normally associated with performance and tax reporting. 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 … 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 IR330C form is the IR form you need to complete to choose the rate of tax you have deducted from your payments. Regardless of tax, any investor in overseas shares needs to learn to ride those waves. Go to www.rbnz.govt.nz/statistics/, click on "Exchange rates" on the left side, and then on "B1 historical series". 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. I will include more in the next few weeks. 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. Pre-register here! They facilitate international tax compliance in accordance with New Zealand tax law. This is an annual tax on the rise in value of your holdings, not a tax on the sale. PIR: Prescribed Investor Tax Rate. Our Kids Accounts fees are just $0.50 to buy or sell up to 50 shares. Yes. 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. However, Frawley says "The Reserve Bank monthly data will be acceptable to Inland Revenue for the purposes of applying the $50,000 threshold." 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)? 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 will be your status as a New Zealand tax resident. But changes in New Zealand's exchange rate with one country will to some extent be offset by changes with another country. 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 new rules have been designed to minimise investors' compliance costs," he says. 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. For example: A woman owns shares costing $40,000 and her husband owns shares costing $5000. 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. Generally, I think the diversification gains of owning offshore shares outweigh the disadvantage of paying the tax. It also covers managed funds held overseas and … # The Aussie exemption doesn't include companies that are not resident in Australia, even if they are listed on the Australian stock exchange. Perhaps you could answer a few points for your readers e.g. This is then converted to a certain number of shares, which are added to the base shareholding. "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." Wages and salaries are usually paid directly into a bank account. My holdings will probably then be well over $50,000 (I've had them a long time). 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 are also liable for tax in New Zealand, on any dividends from your overseas holdings. 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). Do any readers know of any? # Not all investors will have to give a statement of assets - only those to whom the new rules apply. "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 will certainly help some people. For example BHP Billiton and Rio Tinto are dual listed in Australia and Britain, but are they resident in Australia? New Zealand tax law treats the estate of a deceased person as a trust. 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? Probably the latter. In the reader's example the reinvested dividends will be picked up in the opening market value of the shares each year." A. 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? Unfortunately, in your case that means that your shares don't qualify for the threshold. As Frawley points out, when you calculate the tax, it will be based on the current market value. Tax for New Zealand tax residents. 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." A. Overseas pension income (see our separate guidance on this); Other overseas investment income, for example, dividends on shares in overseas companies. 1) Is this a $50,000 exemption or a $50,000 threshold? Q. The $50,000 threshold is based on the original cost of offshore shares. 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. However, investors in these funds won't have to deal with the new taxes on their tax returns. There will be market-crash years when we are glad we are in the new regime rather than the current one. Taxable gains on shares in New Zealand. In general, there are two methods in which you pay tax on your investments. Our sub-custodian deducts your tax at source, and pays the overseas tax authority directly. 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. We have a couple of shares which were bought some years ago for around 2000 and are now worth 55,000. Q. The RBNZ also holds monthly NZ dollar/US dollar data going back to 1970, used in the calculation of the trade-weighted index. Overseas investments include: pension schemes. Most New Zealand based fund managers have converted their retail funds into PIE funds. 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 effect, then, part of the tax will sort of be on capital gains. 2) The $50,000 threshold takes into account brokerage fees if these are part of the cost of buying the shares. In contrast, a non-resident is taxable only on New Zealand-sourced income. But a capital gains tax on those shares could see investors move towards more investment in overseas shares. Some good practical questions, which David Carrigan of Inland Revenue has answered as follows: Nor does it include investments in Australian unit trusts listed on their stock exchange. However, with the new system due to be implemented this year, what does one do? 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 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. The FIF regime was introduced to prevent NZ taxpayers using offshore entities to avoid or defer their NZ tax obligations. If you get interest and dividends from overseas, there are different rules depending on your situation. But if you do buy more shares, you need to add the cost of those purchases to the original costs of your current holdings. 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. "If the shares make a loss then no tax is payable," adds Frawley. 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? I've had trouble finding any other calculators that cover a range of currencies and give daily data earlier than that. The normal rule applies, of course, that when someone dies taxes are paid on their income in the year of their death. The dumb people are those who don't ask. # 5 per cent of the market value of their shares at the start of the tax year, or: This means a New Zealand resident receiving an inheritance from an overseas estate is treated as receiving a distribution from a foreign trust. To get started, simply sign up for a FREE Sharesight account and add your holdings. 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? Does this investment strategy make sense for the first year, or is it too good to be true? It's irrelevant what happens to their value after purchase. 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? We've collated for you a selection of questions Mary has answered since the taxation legislation passed late last year. However, help is at hand. 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. If, however, you have larger holdings or plan to grow your international holdings, it's probably better just to pay the tax. 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 … 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."

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