What’s changing with offshore investments?
The Government has announced changes to how some overseas investments are taxed for New Zealand residents. These changes are aimed at making things simpler and fairer, especially for smaller investors.
Higher threshold before FIF applies
At the moment, many people with modest amounts in overseas shares or funds have to deal with the complex Foreign Investment Fund (FIF) rules. The Government is doubling the “de minimis” threshold from $50,000 to $100,000 of cost for most overseas investments (excluding many Australian shares).
In practice, this means:
New way of taxing foreign shares
For people with larger overseas investments, the Government is introducing a new way to calculate tax called the revenue account method.
Under this method, rather than paying tax each year on a deemed return of 5% of your opening portfolio value (FDR) or on the actual movement in your portfolio (CV), you pay tax only when you sell an investment. Tax is paid on actual dividends and the realised gain.
Next steps
The detailed rules, start dates and eligibility criteria still need to be confirmed in legislation. Once that is in place, we will let you know if you benefit from the higher threshold.
