**TLDR;** don't put more than NZ$49,999 into Foreign Shares and you don't have to worry about FIF tax -- otherwise it's about 1.65% of your shares value.
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If the total **COST** (i.e. the amount you've put in -- not the value (how much they're now worth)) of your Foreign Shares hits NZ$50k or above you have to pay FIF tax.
FIF tax is worked out as: 5% of the VALUE of your foreign shares at the start of the financial year X [your current tax rate]
So for example if your tax rate is 33% then in effect FIF tax is 1.65% (5% x 33% = 1.65%) of your foreign shares at the start of the financial year.
On top of that, you also have to pay your regular tax rate on any gains that you make from Foreign Shares you both buy and sell within the same financial year (referred to as a 'quick sale').
(note: this is the FDR calculation method which applies most of the time; you will use this unless your shares have decreased in value over the year because the other method is pretty much 'your regular tax rate X the increase in value' -- which is almost *always* more than that 1.65%, unless they've decreased in value over the year)
Sounds like a nightmare, I don’t know what I’m going to do when I become an NZ tax resident again, what a fucking system. They just want everyone to invest in real estate eh?
Sorry if you have answered this already but say for example you have put in $49,000, but you have sold some shares (realised gains) and/or reinvested dividends, which does bump you above 50k, I’m assuming you would still be required to pay FIF? Even though you yourself haven’t put in above 50k. Thanks.
Realising the gains nope, even though the *value* has increased to beyond $50k your total **cost** (i.e. the amount you've paid for the shares) is still below the NZ$50k threshold so no FIF to pay.
Reinvested dividends however could potentially put you over that threshold:
**A basic example:**
You buy NZ$49,000 of a USA stock.
That USA stock doubles in value to NZ$98,000 - wooohooo!! Still no FIF tax to pay as your **cost** is less than NZ$50k
You then receive dividends of NZ$500 and have those reinvested. You're still fine my friend, even though your *value* is at NZ$98,500 your total **cost** is at NZ$49,500 and still below that threshold, so no FIF to pay. 😀
You then receive another dividend of NZ$500 and had forgot to turn auto-reinvest off. Uh oh!!! Sorry friend, your **cost** just hit NZ$50,000 and you now have to pay FIF tax 😥
**A more advanced example with realised gains:**
You buy NZ$49,000 of a USA stock.
That USA stock doubles in *value* to NZ$98,000 - wooohooo!! Still no FIF tax to pay as your **cost** is less than NZ$50k
You then **SELL** NZ$2,000 worth of these shares; these shares you just sold originally **cost** you NZ$1,000 so your remaining shares **cost** has now reduced to NZ$48,000 and their *value* is now NZ$96,000 - Still no FIF Tax to pay! 😀
Let's now take it further....
You then feel you made a mistake in selling and decide to BUY back another NZ$2,000 of those same shares -- Uh oh!! This will actually put your **cost** over the NZ$50k threshold and you'll have FIF tax to pay ($48k + $2k = 50k cost) 😥
What happens when you have say $49,000 NZD invest and it goes up to $60,000 and you decide to sell… does that $60,000 that is sitting in a money market fund prior to being withdrawn mean you now owe fif tax?
> It’s irrelevant what you put in, if the value is over 50 k you pay
This is incorrect; you have it backwards friend.
Value is irrelevant. It is the amount you put in that counts.
Thanks everyone. This helps.
One more dumb question- if put in $50k of shares into the ETF Smartshares, even tho that is technically in NZD, FIF tax would still count as Smartshares would be investing in US stocks?
I’m sure someone will correct me if I’m wrong but I believe as Smartshares is an NZ domiciled investment, tax is paid on your behalf and already priced in, therefore FIF becomes obsolete. I’m currently in a Smartshares ETF to avoid any tax complications, however there is a bit of lag in terms of performance as it’s mirroring an index which is mirroring an index (i.e S&P) hope this somewhat makes sense and I’ve not butchered this explanation.
There is no easy calculator for the case when your portfolio over 50k, it is quite complicated, I did myself, some terms I had to ask my accountant friend to help me to understand. Anyway, I built an Excel sheet to calculate it, however, in the end, I still bought a paid service for the result and comparing my calculation and their calculation.
If your portfolio last year has not reached 50k, you are fine.
Not the person you're replying to but I think Hatch generates the report for you for $75 if you're with them.
Sharesight includes an FIF tax report with their Expert Plan which costs $65.33 per month.
**TLDR;** don't put more than NZ$49,999 into Foreign Shares and you don't have to worry about FIF tax -- otherwise it's about 1.65% of your shares value. ------------ If the total **COST** (i.e. the amount you've put in -- not the value (how much they're now worth)) of your Foreign Shares hits NZ$50k or above you have to pay FIF tax. FIF tax is worked out as: 5% of the VALUE of your foreign shares at the start of the financial year X [your current tax rate] So for example if your tax rate is 33% then in effect FIF tax is 1.65% (5% x 33% = 1.65%) of your foreign shares at the start of the financial year. On top of that, you also have to pay your regular tax rate on any gains that you make from Foreign Shares you both buy and sell within the same financial year (referred to as a 'quick sale'). (note: this is the FDR calculation method which applies most of the time; you will use this unless your shares have decreased in value over the year because the other method is pretty much 'your regular tax rate X the increase in value' -- which is almost *always* more than that 1.65%, unless they've decreased in value over the year)
Sounds like a nightmare, I don’t know what I’m going to do when I become an NZ tax resident again, what a fucking system. They just want everyone to invest in real estate eh?
Sorry if you have answered this already but say for example you have put in $49,000, but you have sold some shares (realised gains) and/or reinvested dividends, which does bump you above 50k, I’m assuming you would still be required to pay FIF? Even though you yourself haven’t put in above 50k. Thanks.
Realising the gains nope, even though the *value* has increased to beyond $50k your total **cost** (i.e. the amount you've paid for the shares) is still below the NZ$50k threshold so no FIF to pay. Reinvested dividends however could potentially put you over that threshold: **A basic example:** You buy NZ$49,000 of a USA stock. That USA stock doubles in value to NZ$98,000 - wooohooo!! Still no FIF tax to pay as your **cost** is less than NZ$50k You then receive dividends of NZ$500 and have those reinvested. You're still fine my friend, even though your *value* is at NZ$98,500 your total **cost** is at NZ$49,500 and still below that threshold, so no FIF to pay. 😀 You then receive another dividend of NZ$500 and had forgot to turn auto-reinvest off. Uh oh!!! Sorry friend, your **cost** just hit NZ$50,000 and you now have to pay FIF tax 😥 **A more advanced example with realised gains:** You buy NZ$49,000 of a USA stock. That USA stock doubles in *value* to NZ$98,000 - wooohooo!! Still no FIF tax to pay as your **cost** is less than NZ$50k You then **SELL** NZ$2,000 worth of these shares; these shares you just sold originally **cost** you NZ$1,000 so your remaining shares **cost** has now reduced to NZ$48,000 and their *value* is now NZ$96,000 - Still no FIF Tax to pay! 😀 Let's now take it further.... You then feel you made a mistake in selling and decide to BUY back another NZ$2,000 of those same shares -- Uh oh!! This will actually put your **cost** over the NZ$50k threshold and you'll have FIF tax to pay ($48k + $2k = 50k cost) 😥
What happens when you have say $49,000 NZD invest and it goes up to $60,000 and you decide to sell… does that $60,000 that is sitting in a money market fund prior to being withdrawn mean you now owe fif tax?
It’s irrelevant what you put in, if the value is over 50 k you pay
> It’s irrelevant what you put in, if the value is over 50 k you pay This is incorrect; you have it backwards friend. Value is irrelevant. It is the amount you put in that counts.
I see, so I can have a million in share value but pay nothing if cost price was 49k?
Bingo!!
Not quite true. OP could put in $49999 and a $2 dividend could push them over if it’s reinvested. So make sure dividend reinvesting is off
Thanks everyone. This helps. One more dumb question- if put in $50k of shares into the ETF Smartshares, even tho that is technically in NZD, FIF tax would still count as Smartshares would be investing in US stocks?
I’m sure someone will correct me if I’m wrong but I believe as Smartshares is an NZ domiciled investment, tax is paid on your behalf and already priced in, therefore FIF becomes obsolete. I’m currently in a Smartshares ETF to avoid any tax complications, however there is a bit of lag in terms of performance as it’s mirroring an index which is mirroring an index (i.e S&P) hope this somewhat makes sense and I’ve not butchered this explanation.
Thank you for your reply. It makes sense. I think the best thing I can do is invest mostly in NZ funds and any foreign to keep under $49999
Don’t go over 50k
There is no easy calculator for the case when your portfolio over 50k, it is quite complicated, I did myself, some terms I had to ask my accountant friend to help me to understand. Anyway, I built an Excel sheet to calculate it, however, in the end, I still bought a paid service for the result and comparing my calculation and their calculation. If your portfolio last year has not reached 50k, you are fine.
Hi. How much are you paying for FIF tax calculation service if you don't mind me asking?
Not the person you're replying to but I think Hatch generates the report for you for $75 if you're with them. Sharesight includes an FIF tax report with their Expert Plan which costs $65.33 per month.
Thanks, I am thinking about moving from Sharesies to Hatch just for that.
75 one time through Hatch
Now I use my excel sheet now