Common Questions (FAQ)

Is the $50,000 threshold based on what my investments are worth now, or what I paid for them?

It's based on COST, not current market value. This generally means the total amount you originally paid for all your applicable foreign investments, including brokerage fees, converted to NZD at the time of purchase. Your portfolio's market value can grow well above $50,000, but you might still be under the cost threshold. Learn more about the cost threshold.

Do dividends I receive count towards the $50,000 cost threshold?

Generally, receiving cash dividends does not increase your cost basis. However, if you reinvest those dividends to buy more shares or units, the cost of those new purchases does get added to your total cost. Be mindful of this if you're close to the $50k limit.

What happens if my total cost goes just over $50,000 for only part of the year?

If your total cost exceeds NZ$50,000 on any day during the income year, the exemption is lost for that entire year. You'll need to apply the main FIF calculation rules (like FDR or CV) to all your attributing interests for that whole year. Careful tracking is important!

How does the $50,000 threshold work for joint accounts (e.g., with my partner)?

The threshold applies per individual. If you jointly own investments that cost $100,000, each of you is typically considered to have a $50,000 cost interest from that holding. If neither of you has other FIF investments, you might both remain under the threshold. However, you need to consider any FIF investments held individually as well.

Are all shares listed on the Australian (ASX) market exempt?

Not necessarily, but most shares in Australian-resident companies listed on the ASX are exempt if they meet specific criteria (like maintaining a franking account and not being stapled stock). Check the specific share using IRD's guidance or tool. Learn more about the ASX exemption.

Which calculation method should I use - FDR or CV?

For ordinary shares/ETFs, individuals often have a choice. The FDR (Fair Dividend Rate) method taxes 5% of the opening market value (plus quick sales). The CV (Comparative Value) method taxes the actual increase in value plus distributions. As an individual, you can often calculate both and use the method that results in the lower taxable income (but not less than $0). The best choice can vary year-to-year depending on market performance. Learn more about FDR vs CV.

Can I claim a tax loss if my investments went down using the FIF rules?

Generally, no if using the FDR method. If using the CV method for standard shares where you had the choice between FDR/CV, any calculated loss is reduced to zero. Losses might be claimable under CV only in specific situations, like for certain types of 'non-ordinary' shares where CV was mandatory.

What is the Quick Sale Adjustment (QSA) and when does it apply?

The Quick Sale Adjustment (QSA) is part of the FDR calculation that applies when you buy and sell shares within the same tax year. It's designed to ensure the FIF rules appropriately tax "quick sales" where you might have made a significant gain.

The QSA uses the lower of two calculations:

1. Your actual realized gain from the quick sale (using FIFO accounting)
2. The "peak holding method": 5% × peak holding differential × average cost of units bought during the year

Importantly, the final QSA amount is capped at your actual gain. This means you'll never pay tax on more than what you actually made from the quick sale, even if the peak holding method calculation is higher.

What exchange rate do I use to convert amounts to NZD?

You need to convert all foreign currency amounts (costs, values, dividends, proceeds) to NZD.

Does my investment platform (Sharesies, Hatch, Stake, etc.) calculate my FIF income for me?

It varies. Some platforms might provide reports that help with FIF calculations (e.g., transaction summaries, potentially calculated gains/losses), but most do not calculate your final FIF income figure ready for your tax return. You are ultimately responsible for the calculation and declaration. Check your platform's specific help section or reporting features.

How do I track my 'cost basis' accurately, especially with platforms like Hatch where cash might sit in a money market fund?

Careful record-keeping is key! Track the NZD cost (including brokerage) for every purchase. Be aware that on some platforms (like Hatch, historically), uninvested cash might be held in a way that could potentially be considered part of your FIF cost basis if it's technically an interest in a foreign fund. This is complex and platform-specific - always check directly with your platform about how they treat cash balances and cost basis reporting.

If I'm near the $50k cost threshold, should I reinvest dividends?

Reinvesting dividends means buying more units/shares, which increases your total cost basis. If you are close to the $50k limit, taking dividends as cash (and potentially withdrawing them from the platform) might be a strategy to avoid exceeding the cost threshold. Learn more about managing your cost threshold.

Help! I think I should have calculated FIF income in past years but didn't. What should I do?

It's best to address this proactively. You can make a voluntary disclosure to Inland Revenue (IRD). If you do this before they start an audit, penalties may be significantly reduced or waived. You may need to refile past tax returns. Consider seeking advice from a tax professional or contacting IRD directly.

Can I just ignore FIF tax? Will IRD find out?

Ignoring your tax obligations is risky. IRD receives financial information from many overseas countries automatically through international agreements (like the Common Reporting Standard - CRS). They can cross-reference this with filed tax returns. Failing to declare FIF income can lead to penalties and interest.

I just moved to NZ / My transitional residency is ending. What applies to me?

Once your transitional residency period ends (or if you didn't qualify), you generally become subject to NZ tax on your worldwide income, including needing to consider the FIF rules. There is a new proposed "Revenue Account Method" for those becoming NZ tax resident from 1 April 2024 onwards, which might simplify things for certain investments held before migrating. Learn more about recent changes. Check your residency status carefully.

I'm a US citizen living in NZ. Are there special FIF issues?

Yes, potentially. Because the US taxes citizens on worldwide income based on actual realized gains/dividends, while NZ's FIF rules (especially FDR) tax deemed income, there's a risk of double taxation. NZ tax paid on deemed FIF income might not be creditable against US tax liability when the investment is eventually sold. The new proposed Revenue Account Method (described above) might help some people in this situation. Specialist cross-border tax advice is highly recommended.

What's the difference between FIF tax and the tax on PIE funds?

PIE funds (Portfolio Investment Entities) are NZ-based managed funds. Even if they invest overseas, the fund handles the tax calculations (often similar to FIF rules internally), and you are taxed at your Prescribed Investor Rate (PIR), capped at 28%. You don't do separate FIF calculations for PIE fund investments. FIF rules apply when you directly own the foreign investment (or via a non-PIE NZ vehicle).