Thresholds & Exemptions

The $50,000 Cost Threshold: The Most Common Exemption

How it Works (COST vs Market Value)

• The FIF rules generally don't require you to do the complex calculations (like FDR or CV) if the total COST of all your attributing foreign investments was NZ$50,000 or less throughout the entire income year.
• Crucially, this threshold is based on COST, which is generally what you paid for the investments, not their current market value. Your investments could grow to be worth more than $50,000, but as long as the total amount you paid for all your overseas investments stays at or below $50,000 at all times during the year, you likely meet this exemption.
• If you fall under this threshold, you usually only need to pay tax on the actual dividends or distributions you receive from these investments.

Calculating Your Cost

• Your "cost" is typically the original purchase price of your investment (e.g., shares, ETF units) plus any brokerage fees you paid.
• This amount needs to be converted to New Zealand dollars based on the exchange rate on the day you purchased the investment. Keep records of your purchase details!
• There are specific rules for calculating cost if you acquired interests through things like share splits, or for non-monetary costs. (See our Glossary or the IRD guide IR461 page 22 for details).

What Counts Towards the $50k Cost?

• It's the total combined cost of all your investments that fall under the FIF rules (excluding already exempt investments like eligible ASX shares).
• Reinvested Dividends: If you automatically reinvest dividends to buy more units or shares, the cost of those new purchases does add to your total cost basis.
• Cash Dividends: Receiving cash dividends generally doesn't increase your cost basis (unless you use that cash to manually buy more shares).

Staying Under $50k

• Keep careful track of the NZD cost basis of all your FIF investments.
• Be mindful when buying new investments – ensure the additional cost doesn't push your total cost over the $50,000 limit.
• If you're near the limit, consider taking dividends as cash instead of automatically reinvesting them.

Common Mistakes & Pitfalls

• Exceeding the Threshold (Even Briefly): If your total cost goes over $50,000 on any day during the income year, the exemption is lost for that entire year. ALL your attributing FIF interests become subject to the main FIF calculation rules (FDR or CV etc.) for that year – the first $50k isn't deducted.
• Forgetting Brokerage Fees: Remember to include brokerage fees in your cost calculation.
• Incorrect FX Conversion: Use the exchange rate from the date of purchase.

Joint Ownership Example

• The $50,000 threshold applies per person.
• If you and your spouse/partner jointly own FIF investments that cost $100,000 in total, your individual shares of the cost would likely be $50,000 each. In this scenario, neither of you might exceed the threshold based only on the jointly held shares.
• However, if one person also held, say, $5,000 cost of FIF investments in their own name, their total cost ($50,000 + $5,000 = $55,000) would exceed the threshold, and they would need to apply the FIF rules, while the other person (with only $50,000 cost) might still be exempt.

ASX Listed Australian Shares Exemption

Many investments in Australian companies are exempt from the NZ FIF rules.

Rules Explained

• The exemption generally applies if the investment is in shares of a company that:
  • Is listed on the official ASX (Australian Securities Exchange) list.
  • Is resident in Australia (and not treated as resident elsewhere under a tax treaty).
  • Maintains an Australian franking account.
  • Is NOT "stapled stock".
• If exempt, you generally don't calculate FIF income for these shares, but you still need to declare any dividends received in your NZ tax return. Capital gains tax might apply if you bought the shares with the intention of resale or are a trader.

How to Check

• Verifying all the criteria can sometimes be tricky. IRD has developed an online tool to help you check if specific ASX listed shares are likely exempt.
• Visit IRD's Australian Share Exemption Tool →

Other Exemptions (Brief Overview)

Besides the $50k threshold and ASX shares, the FIF rules also generally don't apply to:

• Controlled Foreign Companies (CFCs): If you have a controlling interest (roughly 10% or more individually, or over 50% for a small group of NZ residents) in a foreign company, separate "CFC rules" usually apply instead of FIF.
• Certain Employee Share Schemes: Specific exemptions can apply to shares acquired under certain overseas employee share schemes.
• Venture Capital / Grey List Investments: Some exemptions exist for investments in certain venture capital situations or companies resident in specific "grey list" countries (like USA, UK, Canada, Japan, etc.) under particular conditions.
• Foreign Exchange Controls: In rare cases where foreign exchange controls completely prevent you from accessing or converting your investment.