Foreign Investment Fund (FIF) income
If you held overseas shares of which the total cost is $50,000 NZD or more at any point during the New Zealand tax year, you may need to follow the FIF rules as set by Inland Revenue (IRD) and disclose FIF income to IRD.
Investments that qualify for FIF income rules
A FIF is generally any overseas investment, including both listed companies and exchange-traded funds (ETFs). A notable exception is ASX-listed Australian companies, most of which are exempt from the FIF rules.
Investments that don’t qualify for FIF income tax rules
Some New Zealand funds focus on international investments—however the FIF rules don’t apply to them.
An example of this is an NZX-listed ETF that invests in a US-listed ETF that tracks a US index.
If an investor held $60,000 NZD total cost in Smart US 500 ETF (USF), which is listed on the NZX, the FIF rules would not apply to the investor directly;
If an investor held $60,000 NZD total cost in Vanguard S&P 500 ETF (VOO), which is listed on the NYSE, the FIF rules would apply to the investor directly;
To check which exchange an investment is listed on, find the exchange under the investment’s name in the Sharesies app.
How do I know if the FIF rules apply to me?
You can find an estimated total cost of the FIFs you hold through Sharesies by going to Settings > Tax Details > Foreign Investment Funds (FIF).
You can also view the total cost of the FIFs you held in your Holdings summary report by going to your Portfolio > Manage > Download Reports. This report shows the estimated NZD total cost of the FIFs you hold on a given date in the FIF cost (NZD) column.
If you hold overseas investments outside of Sharesies, you may also need to consider these as part of your tax obligations.
Under some circumstances, investors may be exempt from disclosing FIF income—for example, if you’re a transitional resident. For more information on exemptions see the IRD site.
I qualify for the FIF income tax rules, what now?
The Sharesies FIF income report is available after the end of each tax year and uses the Fair Dividend Rate (FDR) method and Comparative Value (CV) method to determine your FIF income. You can purchase and download a FIF income report by going to your Portfolio > Manage > Download Reports. Note that this can only be accessed by signing in through the Sharesies website in your browser as the report isn’t currently available via the iOS or Android app.
How do I know which FIF method to use?
Generally, individuals and family trusts can choose the method that gives the lowest taxable income for their total FIF portfolio (which includes anything held outside of your Sharesies account). You’ll need to choose the method that matches your situation.
The Fair Dividend Rate (FDR) method is typically used if your Portfolio value increased by 5% or more during the New Zealand tax year. This is considered the ‘default’ method by the IRD.
The Comparative Value (CV) method is typically used if your Portfolio value increased by less than 5% during the New Zealand tax year.
Please note that generally, you must apply the same calculation method to all your investments that qualify for the FIF rules.
Can I opt out of Resident Withholding Tax for my FIFs held in Sharesies?
If the cost of your FIFs has surpassed $50,000 NZD during the current tax year, you can elect for Sharesies to not withhold NZ resident withholding tax (RWT) on your behalf. From the time you opt out, Sharesies will not withhold RWT for any FIFs you hold in your Sharesies account. Sharesies will still withhold and pay tax to foreign tax authorities on your behalf where applicable (e.g. AU and US).
If your Sharesies account is above the $50,000 NZD threshold, you can opt out of Resident Withholding Tax on FIFs in Sharesies by going to Settings > Tax details > Foreign Investment Funds (FIF) > Edit.
If you have FIFs with other Sharesies accounts and/or other brokers, platforms or institutions and you have hit the $50,000 NZD threshold in total, you can email help@sharesies.co.nz to opt out.
If your situation changes, you can opt back in to Sharesies deducting RWT on your behalf by going to the tax details page mentioned above. You are responsible for your tax obligations with the IRD.
Will I automatically remain opted out of RWT for the following tax years?
If you’ve elected to opt out, you will remain opted out if the cost of your FIF holdings in your Sharesies account remains above the threshold at the start of the next NZ tax year (1 April). However, if the cost of your FIF holdings in your Sharesies account does not meet the threshold, you’ll automatically be opted back into RWT for your FIFs held in Sharesies.
Why might an investor opt out of Resident Withholding Tax for FIFs?
For some investors, it may be preferable to opt out of RWT for more control over their tax obligations. Opting out allows their tax obligations to be handled at year end, and generally allows the investor to determine the exact amount of their tax bill. It also may allow for any tax credits to be applied in the annual tax return.
It could also be helpful if the investor isn’t a New Zealand tax resident, as their taxes may be handled differently (RWT tax rules may not apply).
Sharesies does not provide tax advice. If you have any questions about your FIF income or any other tax reporting obligations, you should seek professional tax advice.