You also must apply the same calculation method across all your FIF investments for the year E.g. Using the FDR method, if you make additional contributions to your investment over the year, you are only taxed on the opening value of your investment as at 1 April. There are two ways you can make money from property – rental income and capital gains. We link to other websites throughout this website, but take no responsibility for the content they publish. He pointed out that apart from the admin fee and management cost, investors also need to consider the tax implication when investing. Costs include the cost of buying units, along with foreign income tax paid by you directly on income of the FIF. It is a somewhat common misconception that if you earn over $70,000 for example, all the money you earn is taxed at 33%. Let’s say they made an investment that would produce $4000 of interest income. First of its kind exchange traded fund focuses on qualified dividend income Hint: click [read more] to view a detailed summary for each ETF, including the applicable management fees and a link to a website with more information about your chosen ETF. For other cases… These exchange traded funds seek to replicate and track a benchmark index as closely as possible. The price you pay may also not align to the actual underlying value of the units in the fund. Information about tax on FIFs deserves a section of its own – see section D below, Further Reading:InvestNow – PIEs and PIE tax – your questions answeredThe Smart and Lazy – Different Tax on Smartshares and SuperLife ETF. However, there are some key differences to be aware of that this guide details. ​. This tax is paid when you sell your investment in a fund, or at the end of the tax year (31 March), which is why you may receive a tax bill from platforms like InvestNow in April. Once you have selected a method, and calculated your taxable income, you will need to pay tax on that income at your marginal tax rate. If you hold other kinds of overseas investments, the way they are taxed may differ. Quick Links . Index funds and ETFs have some key differences when it comes to tax and buying and selling costs, as we outline below: Tax - New Zealand ETFs are classed as listed PIEs, which means the tax rate is fixed at 28%.If you pay a lower tax rate, you'll have to claim the overpaid tax from the IRD on your tax return at the end of the financial year. To declare your rental income, you must complete an IR3R form for each rental property, as part of your tax return, and keep any records of income and expenses for 7 years. Tax on FIF investments need to be declared and paid in New Zealand Dollars. You should always do your own research and seek advice from a tax professional before applying the information in this article. expense you pay, particularly when it comes to tax on your investments. I will provide more specific info on each case below as you read along. Since banks' effective tax rates hover in the range of as high as 25% to 35%, these are likely to benefit more from the tax reform plan. De minimis investors can apply the de minimis exemption and simply pay tax on the actual dividends from their FIF investments, rather than following the FIF tax rules. If you buy an ETF in a non-NZD currency, the value of your investment in New Zealand Dollars will change as the exchange rate goes up and down. Examples of MRPs are: Listed PIEs are PIEs that are listed on the sharemarket. Invest in managed funds. There some exceptions where you do not have to declare any rental income, like for some holidays homes and boarders. The FIF rules appear daunting compared to investing in PIE funds, but can actually work out in your favour. It’s important to give your fund manager or fund platform your correct PIR, as you can’t claim back any overpaid tax with MRPs. Further Reading:IRD – IRD numbers for individuals. Paying tax on investments and savings in NZ. Those using a PIR too low have been hit with a tax bill, while those using a PIR too high are not entitled to a refund of their overpaid tax. You can choose to apply the above FIF rules (particularly if they work out in your favour), but if you do so, you must use them for the next four years. This means that tax is only paid on half of the capital gain. Most salary and wage earners do not have to complete a tax return, as all of their taxable income will be covered by the above Income Tax Assessment. If you don’t need to file a tax return, there are some cases where it may be beneficial for you to still do so. Am a little unclear, can someone wiser please clarify- we live in Australia, hold Australian domiciled etfs and are clear on tax implications of various funds. The most common method to convert foreign amounts to NZD is to use the actual exchange rate on the day of each transaction. However, one advantage that traders have is that they can claim capital losses on shares to reduce their taxable income. ... (ETFs). For example: If you hold less than $50,000 in FIF investments, you are a de minimis investor. Your consumer guide to Index Funds is sponsored by our friends at, A portfolio of investments, following an index such as the NZX 20, or S&P500, or an index specific to an industry (i.e. E.g. View SuperLife's funds. 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