View Full Version : ASX ETF - like S&P500 = NO FIF ?
Just a quick question and i'm sure someone will know. Is there an index ETF on the ASX exchange that tracks the S&P500? I'm looking for a direct ticker stock to buy and not through some managed fund. The reason being I find there's a lack of transparency with NZ managed funds that do advertise buying US equities & ETFs but do not mention about FIF or the full tax implication.
Snow Leopard
07-06-2021, 05:15 PM
Yes there is.
Yes there is.
Which ticker symbols? Thanks.
Snow Leopard
08-06-2021, 10:00 AM
I presume you have managed to search the ASX website for the options available by now.
I presume you have managed to search the ASX website for the options available by now.
I've been looking and came across IVV. I also made a quick phone call to Jarden and the adviser says none of those ETFs that have a majority foreign (outside NZ/ASX) exposure holding equities will be exempted from FIF. IVV also has a franking rate of 0% which will be like most ETFs that hold foreign content and therefore will never be exempted from FIF as ASX franking is a requirement.
Anotherwords, the adviser said to me, "You can't contract yourself to pick foreign holdings through a conduit (the ETF) when ultimately, the foreign holding is of non NZ/Aus based investments and therefore IRD will have in every right, to impose FIF". After all, the whole point of FIF is to tax overseas share investments that have a focus on capital gain growth (as NZ has no format CGT and such gains would be tax free without FIF).
I've been looking and came across IVV. I also made a quick phone call to Jarden and the adviser says none of those ETFs that have a majority foreign (outside NZ/ASX) exposure holding equities will be exempted from FIF. IVV also has a franking rate of 0% which will be like most ETFs that hold foreign content and therefore will never be exempted from FIF as ASX franking is a requirement.
Anotherwords, the adviser said to me, "You can't contract yourself to pick foreign holdings through a conduit (the ETF) when ultimately, the foreign holding is of non NZ/Aus based investments and therefore IRD will have in every right, to impose FIF". After all, the whole point of FIF is to tax overseas share investments that have a focus on capital gain growth (as NZ has no format CGT and such gains would be tax free without FIF).
SBQ. If you are looking for Aussie instruments that are exempt to the FIF regime then arguably the best place for you to check is with the IRD direct. There is a specific webpage you can refer to in the first instance (provided below). The FIF regime has quite a few idiosyncrasies which makes determining whether an instrument comes under the provisions or not much more difficult. Sadly it's not as straightforward as simply checking that the entity is in the ASX200!
https://www.ird.govt.nz/income-tax/income-tax-for-businesses-and-organisations/types-of-business-income/foreign-investment-funds-fifs/foreign-investment-fund-rules-exemptions/check-if-australian-shares-are-exempt-from-foreign-investment-fund-rules
I've been looking and came across IVV. I also made a quick phone call to Jarden and the adviser says none of those ETFs that have a majority foreign (outside NZ/ASX) exposure holding equities will be exempted from FIF. IVV also has a franking rate of 0% which will be like most ETFs that hold foreign content and therefore will never be exempted from FIF as ASX franking is a requirement.
Anotherwords, the adviser said to me, "You can't contract yourself to pick foreign holdings through a conduit (the ETF) when ultimately, the foreign holding is of non NZ/Aus based investments and therefore IRD will have in every right, to impose FIF". After all, the whole point of FIF is to tax overseas share investments that have a focus on capital gain growth (as NZ has no format CGT and such gains would be tax free without FIF).
SBQ. If you are looking for Aussie instruments that are exempt to the FIF regime then arguably the best place for you to check is with the IRD direct. There is a specific webpage you can refer to in the first instance (provided below). The FIF regime has quite a few idiosyncrasies which makes determining whether an instrument comes under the provisions or not much more difficult. Sadly it's not as straightforward as simply checking that the entity is in the ASX200!
https://www.ird.govt.nz/income-tax/income-tax-for-businesses-and-organisations/types-of-business-income/foreign-investment-funds-fifs/foreign-investment-fund-rules-exemptions/check-if-australian-shares-are-exempt-from-foreign-investment-fund-rules
SBQ. If you are looking for Aussie instruments that are exempt to the FIF regime then arguably the best place for you to check is with the IRD direct. There is a specific webpage you can refer to in the first instance (provided below). The FIF regime has quite a few idiosyncrasies which makes determining whether an instrument comes under the provisions or not much more difficult. Sadly it's not as straightforward as simply checking that the entity is in the ASX200!
https://www.ird.govt.nz/income-tax/income-tax-for-businesses-and-organisations/types-of-business-income/foreign-investment-funds-fifs/foreign-investment-fund-rules-exemptions/check-if-australian-shares-are-exempt-from-foreign-investment-fund-rules
Thanks for the link to IRD - it just confirms what the financial adviser said to me today. IVV is clearly not FIF exempt. The end of the story is this, the well regarded index ETF S&P500, which comprises of say 99% foreign (or maybe 1% NZ / Aus companies in it?) is a far cry to expect it to be FIF exempted. To be really FIF exempt, you basically have to own NZX listing and some ASX listings.
kiora
09-06-2021, 04:45 AM
Anyone dealt with this platform?
https://blackbullmarkets.com/en/trading/index-cfds/
Anyone dealt with this platform?
https://blackbullmarkets.com/en/trading/index-cfds/
A "Credit For a Difference" has been spoken in another thread (re: the collapse of Bill Hwang's Archegos Hedge Fund) and it may be the CFD terms used in NZ/Australia may not be the same as in the US. I am uncertain how CFD for the retail market in NZ/Aus would apply to the global market when CFD are illegal to retail traders in the US; again it may be due to the difference in terminology like many things. Ie. A "Bank Cheque" issued by a bank in NZ vs "Bank Draft" issued by a bank in the US (both are the same instrument with different wording. Sometimes I come across the same wording in finance but has a different meaning abroad. The CFD does not mean taking a 'short position'.
Also as mentioned in a different thread, the issue of CFDs has conditions that affect the outcome of these contracts. Namely 'dividends' as mentioned in that blackbullmarket link, affecting the outcome for asset price and the timeliness when these contracts expire.
justakiwi
09-06-2021, 10:24 AM
To be really FIF exempt, you basically have to own NZX listing and some ASX listings.
Not correct SBQ. Under certain circumstances an individual/entity doesn't need to come under the FIF regime at all.
First up and as i assume you already know, there is the NZD50K threshold, which if kept under makes adherence & related compliance paperwork for the small investor a LOT simpler.
Secondly, for those with overseas holdings exceeding the value of NZD50K there are other strategies & approaches one can deploy (don't worry - all very legal!) which means that one can elect NOT to be under the FIF regime. Of course the devil is in the detail, and there will be pro's & con's to being under FIF or not, as opposed to the alternative pathways. Plus, there are a variety of considerations particular to each individual's specific circumstances that needs to be considered. All quite technical and not suitable to being disseminated here on ST in generic form.
The short story is DYOR, ideally with your Tax Accountant/Advisor.
Not correct SBQ. Under certain circumstances an individual/entity doesn't need to come under the FIF regime at all.
First up and as i assume you already know, there is the NZD50K threshold, which if kept under makes adherence & related compliance paperwork for the small investor a LOT simpler.
Secondly, for those with overseas holdings exceeding the value of NZD50K there are other strategies & approaches one can deploy (don't worry - all very legal!) which means that one can elect NOT to be under the FIF regime. Of course the devil is in the detail, and there will be pro's & con's to being under FIF or not, as opposed to the alternative pathways. Plus, there are a variety of considerations particular to each individual's specific circumstances that needs to be considered. All quite technical and not suitable to being disseminated here on ST in generic form.
The short story is DYOR, ideally with your Tax Accountant/Advisor.
You base my question on the basis that FIF is exempted under $50K NZD? This is a joke - even justakiwi knows the funds i'm dealing with (and for many of those that have invested in shares for a very long time nearing retirement), have well in excess of $50K NZD.
The issue of FIF has been batted many times in other threads. The wording by IRD's FIF manual seems to be interpreted differently by individuals here. ie. buying multiples of shares under $50K to assume that it exempts from FIF. I prefer to take the common sense approach and i'm sure all the financial advisers in NZ will agree. $50K is a threshold of ALL TOTAL assets that the individual has abroad. It would be senseless to think otherwise - and this is just only 1 example. One does not simply elect out of FIF just like one doesn't elect out of paying other taxes.
I am doing my research and fact checking. As the financial advisers tell me, the goal for FIF is to address taxation on large capital gains on foreign shares, namely US equities that have a tax system that favours capital gains on growth stocks instead of paying dividends (ie like Berkshire Hathaway). If FIF had some leeway for ASX listings being exempted from FIF, then perhaps I thought there would be some way to invest in a similar ETF holding such as the S&P500 (by Australian listings). However, it seems there's a fair % of ASX listings that do not qualify for FIF exemption.
Using the FIF lookup link that FTG provided for the current taxation year, can someone explain to me why a NZ company XERO ticker XRO trading on the ASX is not FIF exempted? While an Australian operated company BHP shows up as being FIF exempted?
So far i've not seen any benefit of investments going under FIF so perhaps you can elaborate this from a retirement planning point of view who this would be advantageous? My friends in Canada appear to have retirement plans where their share investments grow tax free (deferred taxation at retirement) and in many cases, have tax free registered accounts for education and TSFA which is 100% tax free for the intended purpose (ie saving for education, or disabilities). Yes I know we live in NZ, but I don't think it's fair that the productive working society, those who transition into the work force and work until retirement, that their investments are penalising them as the pay tax on those investment gains. This is a huge disincentive when the rich in NZ are able to buy multiple houses without paying any tax on the capital gain. They can hold the houses in a trust, and all the capital gains are tax free. The worker pays into a Kiwi Saver plan, in either a PIE fund or some other fund (FIF or not), and is still subjected to taxes every year.
Not trying to be hard on you but let's be real here. What are the advantages please?
I had Platinum Funds for about 15 years. Every year ,in line with Australian requirements of paying out what they made, I received large distributions all taxable at 33c/$. Once FIF came into the picture my amount of tax reduced considerably due to the fact that 5% of the opening balance was less than what I was getting as a distribution along with the odd year of a decrease in value in the funds allowing use of the CV method.
We have been over this before, and you didn't agree, but the $50,000 minimus is a cost price calculation, not a value calculation.
XRO's omission from list is, I think, simply due to the fact it does not pay a dividend.
You base my question on the basis that FIF is exempted under $50K NZD? This is a joke - even justakiwi knows the funds i'm dealing with (and for many of those that have invested in shares for a very long time nearing retirement), have well in excess of $50K NZD.
The issue of FIF has been batted many times in other threads. The wording by IRD's FIF manual seems to be interpreted differently by individuals here. ie. buying multiples of shares under $50K to assume that it exempts from FIF. I prefer to take the common sense approach and i'm sure all the financial advisers in NZ will agree. $50K is a threshold of ALL TOTAL assets that the individual has abroad. It would be senseless to think otherwise - and this is just only 1 example. One does not simply elect out of FIF just like one doesn't elect out of paying other taxes.
I am doing my research and fact checking. As the financial advisers tell me, the goal for FIF is to address taxation on large capital gains on foreign shares, namely US equities that have a tax system that favours capital gains on growth stocks instead of paying dividends (ie like Berkshire Hathaway). If FIF had some leeway for ASX listings being exempted from FIF, then perhaps I thought there would be some way to invest in a similar ETF holding such as the S&P500 (by Australian listings). However, it seems there's a fair % of ASX listings that do not qualify for FIF exemption.
Using the FIF lookup link that FTG provided for the current taxation year, can someone explain to me why a NZ company XERO ticker XRO trading on the ASX is not FIF exempted? While an Australian operated company BHP shows up as being FIF exempted?
So far i've not seen any benefit of investments going under FIF so perhaps you can elaborate this from a retirement planning point of view who this would be advantageous? My friends in Canada appear to have retirement plans where their share investments grow tax free (deferred taxation at retirement) and in many cases, have tax free registered accounts for education and TSFA which is 100% tax free for the intended purpose (ie saving for education, or disabilities). Yes I know we live in NZ, but I don't think it's fair that the productive working society, those who transition into the work force and work until retirement, that their investments are penalising them as the pay tax on those investment gains. This is a huge disincentive when the rich in NZ are able to buy multiple houses without paying any tax on the capital gain. They can hold the houses in a trust, and all the capital gains are tax free. The worker pays into a Kiwi Saver plan, in either a PIE fund or some other fund (FIF or not), and is still subjected to taxes every year.
Not trying to be hard on you but let's be real here. What are the advantages please?
SBQ, "tut tut". Yet again you appear to be making a few glib assumptions & hence some rather broad sweeping statements here. Sorry, I'm going to call you out on a couple of them, but there are too many for me to invest my time in addressing each & every one.
Let's remember SBQ that you started this thread with a simple question... ASX ETF - like S&P500 = NO FIF. I simply responded to your question, providing a web link to assist you & other STers in determining whether an ASX listed entity is exempt under the FIF regime or not. I also suggested that depending on an individual's/entity's particular circumstances, coming under the FIF regime MAY actually not be required or the best pathway.
To clarify & correct you
- At no point did I claim to know your (or any other ST members for that matter) financial position ("claimed" and/or actual)
- At no point did I claim that the advantages of coming under FIF outweighed (or not) not doing so; or vise-versa.
For what it is worth, my opinion is that the NZ FIF regime is an absolute dog. Significantly over-engineered, creating heavy compliance costs and many unintended consequences. When followed, the regime materially impacts real Net returns, which in turn goes on to change the behaviours of NZ investors.
But as you say, there are plenty of other FIF threads on ST where any further detailed discussion is more suited.
SBQ, apologies if you find this a bit harsh, but I assume that you genuinely wish to acquire more knowledge and improve your understanding with points discussed on ST, rather than it primarily being a soap box for yourself? If so, I would respectfully suggest expending your energy on posturing is not going to get you very far, let alone earning the enduring respect of fellow ST participants. I suggest you should take twice the time to properly read others' posts, and output half the amount you seem to currently keenly dispense.
You say that you are nearing retirement, so I can only assume that you have some reasonable life (and investing) experience. Experience that some others can surely learn from.
Maybe focus on the quality of your posts rather than the quantity. :-)
Snow Leopard
09-06-2021, 04:19 PM
You base my question on the basis that FIF is exempted under $50K NZD? This is a joke - even justakiwi knows the funds i'm dealing with (and for many of those that have invested in shares for a very long time nearing retirement), have well in excess of $50K NZD.
The issue of FIF has been batted many times in other threads. The wording by IRD's FIF manual seems to be interpreted differently by individuals here. ie. buying multiples of shares under $50K to assume that it exempts from FIF. I prefer to take the common sense approach and i'm sure all the financial advisers in NZ will agree. $50K is a threshold of ALL TOTAL assets that the individual has abroad. It would be senseless to think otherwise - and this is just only 1 example. One does not simply elect out of FIF just like one doesn't elect out of paying other taxes.
I am doing my research and fact checking. As the financial advisers tell me, the goal for FIF is to address taxation on large capital gains on foreign shares, namely US equities that have a tax system that favours capital gains on growth stocks instead of paying dividends (ie like Berkshire Hathaway). If FIF had some leeway for ASX listings being exempted from FIF, then perhaps I thought there would be some way to invest in a similar ETF holding such as the S&P500 (by Australian listings). However, it seems there's a fair % of ASX listings that do not qualify for FIF exemption.
Using the FIF lookup link that FTG provided for the current taxation year, can someone explain to me why a NZ company XERO ticker XRO trading on the ASX is not FIF exempted? While an Australian operated company BHP shows up as being FIF exempted?
So far i've not seen any benefit of investments going under FIF so perhaps you can elaborate this from a retirement planning point of view who this would be advantageous? My friends in Canada appear to have retirement plans where their share investments grow tax free (deferred taxation at retirement) and in many cases, have tax free registered accounts for education and TSFA which is 100% tax free for the intended purpose (ie saving for education, or disabilities). Yes I know we live in NZ, but I don't think it's fair that the productive working society, those who transition into the work force and work until retirement, that their investments are penalising them as the pay tax on those investment gains. This is a huge disincentive when the rich in NZ are able to buy multiple houses without paying any tax on the capital gain. They can hold the houses in a trust, and all the capital gains are tax free. The worker pays into a Kiwi Saver plan, in either a PIE fund or some other fund (FIF or not), and is still subjected to taxes every year.
Not trying to be hard on you but let's be real here. What are the advantages please?
I am an idiot.
By mistake I gave good rep to this post when I meant to give it FTG. I think these 3 letter acronym names confuse me.
Actually I find the post to be in part offensive and believe it shows the posters total ignorance caused by their narrow-mindedness and total unwillingness to deviate from their prejudices.
Snow Leopard
09-06-2021, 04:27 PM
....XRO's omission from list is, I think, simply due to the fact it does not pay a dividend.
The IRD website explains that XRO does not come under FIF at all because it is a NZ company.
You treat it the same as, for example, Mainfreight or Turners.
I had Platinum Funds for about 15 years. Every year ,in line with Australian requirements of paying out what they made, I received large distributions all taxable at 33c/$. Once FIF came into the picture my amount of tax reduced considerably due to the fact that 5% of the opening balance was less than what I was getting as a distribution along with the odd year of a decrease in value in the funds allowing use of the CV method.
We have been over this before, and you didn't agree, but the $50,000 minimus is a cost price calculation, not a value calculation.
XRO's omission from list is, I think, simply due to the fact it does not pay a dividend.
From what I recall, switching on years between FIF & CV does not apply to managed funds like PIE but rather, is only allowed for private individuals. As long as the funds that hold the equities can determine a fair market value (ie. any share on the stock exchange), then the FDR must be used.
https://www.taxtechnical.ird.govt.nz/new-legislation/act-articles/taxation-international-investment-and-remedial-matters-act-2012/applying-the-fif-rules/choice-of-fif-calculation-method
"In order to use the cost method, the FIF interest must be an ordinary share and the person must not be able to obtain a market value for the interest except by independent valuation. If a person is able to obtain a market value without an independent valuation (for example, if the FIF is listed on a stock exchange), they will usually be required to apply the fair dividend method."
Another site makes the same reference in a response to the question: https://investnow.co.nz/expect-pay-tax-fif-investment-pie-fund/
"For example, global share PIE funds always pay the FDR tax, even when returns are negative. In contrast an individual in a FIF fund can choose to move from the FDR methodology, and use what is called the CV (Comparative Value) methodology for calculating their tax (provided they use the same methodology for all their FIF investments in any given year)"
Perhaps you can elaborate how your Platinum Fund is able to switch between FIF valuations?
The $50K threshold is a bit of a misnomer and it does not apply to anyone that is in a managed fund contribution scheme such as Kiwi Saver or PIE. This threshold is to address individuals that invest directly (not through a fund). Hatch's website has a good example https://www.hatchinvest.nz/learn-articles/tax-50000-fif
Basically what it means, when the total cost breaches $50K, FIF kicks in. The example where the person puts $10K every year for 5 years, FIF kicks in on the 5th year.
As for XRO - that's is a for sure kick in the NZ investors face? A NZ company that once traded on the NZX, free of capital gains for NZ investors owning. Then does an expatriation move to the ASX. Voila, NZ investors on XRO get screwed on the tax benefit. So basically what you're saying is to be FIF exempted, the corporation must be paying sufficient dividends? How about the man utility companies on the NYSE that pay dividends? Why aren't those FIF exempted? This is the kind of non-sense unfair playing field I don't understand with NZ tax laws ; what kind of thinking do these politicians come up with (Michael Cullen!!!)
Again, it would be great if someone in industry can directly clarify what i've said. It's too easy to make assumptions instead of finding the facts. If the references i've made are out of date, then I stand corrected.
The IRD website explains that XRO does not come under FIF at all because it is a NZ company.
You treat it the same as, for example, Mainfreight or Turners.
Yes a NZ company that does NOT trade on the NZX. If it were a dual listed company, then it would give the option for NZ investors to buy Xero on the NZX and benefit from tax free capital gains? Correct me if i'm mistaken.
SBQ I look at it as an individual investing off shore. You appear to be creating a fund or some such thing, way out my area.
As far as my treatment of my investment in Platinum Funds units the following cut and paste from the IRD site explains it.
This calculator is for New Zealand tax residents who have investments in foreign companies with a purchase price of more than NZ$50,000 or who choose to use the FDR method under the FIF rules
Your direct income share in the FIF must be less than 10% at all times in the income year if the investment is not in a grey list country, and at any time if it is in a grey list country.
You can calculate your taxable income in four different ways:
Use the combined FDR and CV calculator to compare and choose the lesser liability
Use only the FDR method to calculate your taxable income
Use only the CV method for your guarantee return investments
Use the cost method if you don’t know the market value of your investment, but have an independent valuation
Snow Leopard
09-06-2021, 09:24 PM
From what I recall, switching on years between FIF & CV does not apply to managed funds like PIE but rather, is only allowed for private individuals. As long as the funds that hold the equities can determine a fair market value (ie. any share on the stock exchange), then the FDR must be used....
....Again, it would be great if someone in industry can directly clarify what i've said. It's too easy to make assumptions instead of finding the facts. If the references i've made are out of date, then I stand corrected.
It is clear that most of what you think you understand and continually criticize about the NZ tax regime is incorrect.
We are not going to get anywhere educating you until you clear your mind and then start again from the ground up.
Yes a NZ company that does NOT trade on the NZX. If it were a dual listed company, then it would give the option for NZ investors to buy Xero on the NZX and benefit from tax free capital gains? Correct me if i'm mistaken.
The IRD website explains that XRO does not come under FIF at all because it is a NZ company.
You treat it the same as, for example, Mainfreight or Turners.
Which part did you not understand?
SBQ I look at it as an individual investing off shore. You appear to be creating a fund or some such thing, way out my area.
As far as my treatment of my investment in Platinum Funds units the following cut and paste from the IRD site explains it.
This calculator is for New Zealand tax residents who have investments in foreign companies with a purchase price of more than NZ$50,000 or who choose to use the FDR method under the FIF rules
Your direct income share in the FIF must be less than 10% at all times in the income year if the investment is not in a grey list country, and at any time if it is in a grey list country.
You can calculate your taxable income in four different ways:
Use the combined FDR and CV calculator to compare and choose the lesser liability
Use only the FDR method to calculate your taxable income
Use only the CV method for your guarantee return investments
Use the cost method if you dont know the market value of your investment, but have an independent valuation
I'm not speaking from the individual that invests DIRECTLY as you are correct in the options of choice in FIF for individuals. I'm referring to all those managed funds, Kiwi Saver Funds, PIEs, you name it, where individuals send their contributions into these funds and the managers take your contributions, added them with the many other contributions from other investors, and then go buy and sell shares in their fund / portfolio. These holdings if purchasing say US equities will fall under FIF by the fund manager's liability. Furthermore, i've read (can't find the link) but such $50K FIF exemption no longer applies to each individual client that invests into such fund (well how can that be tracked and computed?). Again correct me if i'm wrong but all the info we read on IRD under FIF applies to the individual that has direct ownership of the assets. Am I missing something here?
It is clear that most of what you think you understand and continually criticize about the NZ tax regime is incorrect.
We are not going to get anywhere educating you until you clear your mind and then start again from the ground up.
Which part did you not understand?
If you find what i've said, and all the references I made online is inaccurate, then by all means, show it. At least bring it to the table instead of spewing your arrogance.
There are many articles online about the problems of NZ's FIF and IRD's treatment of foreign pensions for those looking to reside in NZ. Why? the complexities? If my findings are incorrect, then please elaborate on how the following articles are incorrect about NZ's grossly messed up taxing scheme:
https://www.interest.co.nz/personal-finance/64624/terry-baucher-explains-latest-twist-taxation-foreign-pension-funds-and-finds
"The principal issues which were unclear were whether foreign superannuation schemes were subject to the Foreign Investment Fund (FIF) regime, and what was the tax treatment on transfer?
“Probably”, and “Not sure” in case you’ve forgotten. "
and it seems like the media has got a wind of the reporter's claim:
https://www.stuff.co.nz/business/money/78361237/migrants-say-they-are-being-handed-tax-bills-they-cannot-pay
(https://www.stuff.co.nz/business/money/78361237/migrants-say-they-are-being-handed-tax-bills-they-cannot-pay)
And over in the UK - it seems they've got a bit of wind on the same issue:
https://uk-pension-transfer.co.nz/tax-foreign-superannuation
As for XRO vs Mainfreight or Turners. The latter 2 trade on the NZX and therefore the NZ resident investor gets the benefit of tax free capital gain + dividend imputation credits (if any) on divs (likewise for the Kiwi Saver funds that buy those 2 companies on the NZX). For Xero, the excuse is they pay no dividends, and therefore is NOT exempted from FIF. Meaning the NZ resident owning XRO on the ASX has to pay FIF tax (and again, i'm speaking from a cost basis of well over $50K as it seems that threshold keeps coming up in discussions). All 3 of these companies are based in NZ. Is it a requirement that companies must pay dividends before NZ shareholders can get the benefit of being FIF exempted? That's what I don't understand. Again, correct me if i'm wrong.
SPG
Yes you are right in your last sentence about it being about individuals.
If you invest in any of those Funds then there is no more tax to concern you as the funds handle it all and being PIE income does not need any attention.Those funds send you an annual tax statement which you simply file in your trash. That info appears in your myIR with the IRD simply for them to ensure you are using the correct PIR. With regard to the $50,000 it would not apply to these investments because it would not be necessary however if you want to invest direct in an offshore based fund or foreign shares as well then I am sure you must be able to use it. If not then every Kiwisaver member could not which would rule out a lot of people using it and then the exemption would have little purpose.
I have investments in PIE Funds (Mike Taylor) and Kiwisaver, but if I was to invest direct offshore again then I wouldn't hesitate to apply the $50,000 if I needed it.
I do think it would be worth your while to find a specialist on FIF and take your personal situation to them. It would cost you an hour of their time but would be beneficial.
SPG
Yes you are right in your last sentence about it being about individuals.
If you invest in any of those Funds then there is no more tax to concern you as the funds handle it all and being PIE income does not need any attention.Those funds send you an annual tax statement which you simply file in your trash. That info appears in your myIR with the IRD simply for them to ensure you are using the correct PIR. With regard to the $50,000 it would not apply to these investments because it would not be necessary however if you want to invest direct in an offshore based fund or foreign shares as well then I am sure you must be able to use it. If not then every Kiwisaver member could not which would rule out a lot of people using it and then the exemption would have little purpose.
I have investments in PIE Funds (Mike Taylor) and Kiwisaver, but if I was to invest direct offshore again then I wouldn't hesitate to apply the $50,000 if I needed it.
I do think it would be worth your while to find a specialist on FIF and take your personal situation to them. It would cost you an hour of their time but would be beneficial.
Thanks for clarifying. I agree without a doubt, the individual gets a better tax treatment under FIF than if it was a ie PIE Fund which has to use FDR year after year (no switching to CV on years of paper loss). I remember some years ago the managed fund industry crying out because of online discount brokers like Sharesies and Hatch taking away their clients. I think for the vast majority, that $50K cost basis exemption makes things attractive.
It's great to be informed through the forum but as you say, best to seek financial advise. Well I did but none of the financial advisors could give me tax advice and said I should see a tax accountant instead. When time comes nearer, then I will but I will only go to the big larger accounting firms like KPMG, Delloite etc. as they have a much larger tax library and will put it to them straight in comparison to say if one moves overseas etc. Cheers!
As for XRO vs Mainfreight or Turners. The latter 2 trade on the NZX and therefore the NZ resident investor gets the benefit of tax free capital gain + dividend imputation credits (if any) on divs (likewise for the Kiwi Saver funds that buy those 2 companies on the NZX). For Xero, the excuse is they pay no dividends, and therefore is NOT exempted from FIF. Meaning the NZ resident owning XRO on the ASX has to pay FIF tax (and again, i'm speaking from a cost basis of well over $50K as it seems that threshold keeps coming up in discussions). All 3 of these companies are based in NZ. Is it a requirement that companies must pay dividends before NZ shareholders can get the benefit of being FIF exempted? That's what I don't understand. Again, correct me if i'm wrong.
I think SL is saying that its not considered foreign and therefore doesn't need an exemption. While it IS listed on the ASX it is a NZ company so the answer on this forum is simple but you seem to be overcomplicating it.
https://app.companiesoffice.govt.nz/companies/app/ui/pages/companies/1830488
I think SL is saying that its not considered foreign and therefore doesn't need an exemption. While it IS listed on the ASX it is a NZ company so the answer on this forum is simple but you seem to be overcomplicating it.
https://app.companiesoffice.govt.nz/companies/app/ui/pages/companies/1830488
I get that - and no one is disagreeing that Xero is not a NZ company, this is very obvious.
What is not obvious is, why should a NZ company be subjected to FIF - just because they trade on an overseas stock exchange? It's not a complicated question and it may be simply that NZ has very skewed tax laws just like the difference between owning multiple houses vs owning foreign shares under FIF. We can turn the tables around and question why foreign companies listed on NZX get the benefit of being FIF exempt for NZ shareholders?
I'm not trying to pick battles here and i'm not being ignorant. I've spoken to local financial advisors around FIF and not surprisingly, they don't give me a clear distinct answer because taxation is not part of the CFP role in NZ (but they are mandatory knowledge for CFP in Canada and in the US). All the questions I see answered in Canadian 'money guide online advice blah blah blogs' start from the angle of taxation when it comes to investments in retirement planning (and it covers all different asset classes). I mean something so critical to the overall end disposable income to the investor and yet taxation is not clearly spelled out in NZ. It is complicated (well complicated enough that IRD themselves don't appear to know what they're doing for those bringing their pension over from the UK to NZ: ref my online link above).
Perhaps the biggest con I see is one should not have to pay $300/hour for a tax accountant, just to find out why some NZ companies (like XRO) attract FIF while some others don't.
Snow Leopard
10-06-2021, 10:40 AM
Statement of Fact:
XRO, a NZ company listed on the ASX, is not subject to the FIF rules.
What am I missing here from IRD's FIF Exemption Checker:
https://www.ird.govt.nz/income-tax/income-tax-for-businesses-and-organisations/types-of-business-income/foreign-investment-funds-fifs/foreign-investment-fund-rules-exemptions/check-if-australian-shares-are-exempt-from-foreign-investment-fund-rules
The wording for BHP:
The ASX Ticker Code you have entered relates to BHP Group Ltd.
Based on the information you have provided, the income from the shares qualifies for the Australian share exemption provided the shares were held at 1 April 2020 or were acquired on the market during the year.
This means income from the shares is taxed under the general income tax rules, the same as investments in New Zealand. They are not attributing interests for tax purposes and therefore fall outside the FIF rules.
The wording for XRO:
Result: XRO
The ASX Ticker Code you have entered relates to Xero Ltd.
Based on the information you have provided, your income for 1 April 2020 to 31 March 2021 does not qualify for the Australian share exemption.
This is because Xero Ltd is a New Zealand company and not a FIF. Income from the shares is taxed under the general income tax rules.
Clarify?
The wording for XRO:
Result: XRO
The ASX Ticker Code you have entered relates to Xero Ltd.
Based on the information you have provided, your income for 1 April 2020 to 31 March 2021 does not qualify for the Australian share exemption.
This is because Xero Ltd is a New Zealand company and not a FIF. Income from the shares is taxed under the general income tax rules.
Clarify?
I believe , but dont know for absolute sure that it is exactly what has been said
it doesnt qualify for an exemption - because it doesnt need to. because it is not foreign.
thats how I read it.
who is missing the point here ? I dont think its me but could be ?
GTM 3442
11-06-2021, 08:42 AM
Also for IVV as mentioned above. . .
Result: SPY
The ASX Ticker Code you have entered relates to SPDR S&P 500 ETF Trust.
Based on the information you have provided, your income for 1 April 2020 to 31 March 2021 does not qualify for the Australian share exemption.
Other exemptions apply to certain ASX listed investments under certain circumstances. Please consult your accountant, tax advisor, broker, or the relevant investment fund.
If the investment is a FIF, the income will generally be taxed under the:
fair dividend rate (FDR) method
comparative value (CV) method
cost method (CM)
deemed rate of return (DRR)
You can find information about these methods on our website under Foreign investment funds
Xero does not qualify for the Australian exemption because as a New Zealand company it does not come under the FIF rules to start with, regardless of where or where not it is listed.
Xero does not qualify for the Australian exemption because as a New Zealand company it does not come under the FIF rules to start with, regardless of where or where not it is listed.
More clarity needs to be given on IRD's website, specifically the exact wording what is FIF and what is not FIF and what is exempt from FIF (if they're foreign based or not?)
If Xero re-established a new head quarters in Australia (ie how Burger King moved to Canada in the merger with Tim Hortin's Donuts), where would Xero fit in under FIF? One can't simply assume that if a company started out in NZ, and leaves ; where is the disclosure of this when a person looks at the IRD's FIF checker online to find it's status?
Likewise if a foreign company chooses to establish a head quarters in NZ (ie. Restaurant Brands that holds NZ based fast foods such as KFC, Pizza Hut, Carl Jr) - these are clearly foreign brands but since they trade on the NZX, they are simply exempt from FIF.
This is the kind of information that NZ financial advisors don't know and don't care to advise their clients. What % of the profits are gone abroad for say KFC despite they are FIF exempted as having a separate parent entity established in NZ. The complexities involved are mind boggling. If was is in Canada, my choice of buying a company on the TSX vs NYSE is very clear. We look at the corporate tax rates, and state / prov tax rates and that's pretty much about it. The individual investor pays CGT regardless if the shares were owned on the TSX or on the NYSE. (many Canadian companies enjoy dual listing Can / US).
Snow Leopard
07-07-2021, 06:27 PM
More clarity needs to be given on IRD's website, specifically the exact wording what is FIF and what is not FIF and what is exempt from FIF (if they're foreign based or not?)
If Xero re-established a new head quarters in Australia (ie how Burger King moved to Canada in the merger with Tim Hortin's Donuts), where would Xero fit in under FIF? One can't simply assume that if a company started out in NZ, and leaves ; where is the disclosure of this when a person looks at the IRD's FIF checker online to find it's status?
Likewise if a foreign company chooses to establish a head quarters in NZ (ie. Restaurant Brands that holds NZ based fast foods such as KFC, Pizza Hut, Carl Jr) - these are clearly foreign brands but since they trade on the NZX, they are simply exempt from FIF.
This is the kind of information that NZ financial advisors don't know and don't care to advise their clients. What % of the profits are gone abroad for say KFC despite they are FIF exempted as having a separate parent entity established in NZ. The complexities involved are mind boggling. If was is in Canada, my choice of buying a company on the TSX vs NYSE is very clear. We look at the corporate tax rates, and state / prov tax rates and that's pretty much about it. The individual investor pays CGT regardless if the shares were owned on the TSX or on the NYSE. (many Canadian companies enjoy dual listing Can / US).
If a Canadian person chooses to establish them-self in New Zealand should he learn to live with the local tax system instead of whining continuously about how it is better in some frigid snow bound foreign la-la-land where all is dried moose meat & maple syrup?
https://curiocity.com/wp-content/uploads/2021/03/247wallst.com-247ws-524763-winter-weather.jpg
8 wild facts about Canadian winter that you might not know (https://curiocity.com/8-wild-facts-about-canadian-winter-that-you-might-not-know/)
[ with the usual apologies to my Canadian friends ]
Snoopy
08-07-2021, 07:46 PM
More clarity needs to be given on IRD's website, specifically the exact wording what is FIF and what is not FIF and what is exempt from FIF (if they're foreign based or not?)
Likewise if a foreign company chooses to establish a head quarters in NZ (ie. Restaurant Brands that holds NZ based fast foods such as KFC, Pizza Hut, Carl Jr) - these are clearly foreign brands but since they trade on the NZX, they are simply exempt from FIF.
This is the kind of information that NZ financial advisors don't know and don't care to advise their clients. What % of the profits are gone abroad for say KFC despite they are FIF exempted as having a separate parent entity established in NZ. The complexities involved are mind boggling.
Short Answer
RBD is an NZ company, and so is exempt from FIF for shareholders.
Long Answer
Restaurant Brands (RBD) operates -under licence- KFC, Pizza Hutt, and Taco Bell restaurants around the Pacific rim. RBD was floated on the NZX late last century by U.S headquartered Pepsico, who, at that time, owned what was to eventually become the separate listed entity 'YUM Brands!' (YUM). At the time of the RBD float, Pepsico reduced their holding in RBD to zero. RBD was not and never has been a 'headquarters' for any American entity. RBD may have been floated originally by the Americans. But it has been an NZ company from day 1.
The restaurant concepts you talk about are owned by master franchise holder 'YUM Brands!', which is a US registered company (except for Carls Junior which is franchised from another U,S corporation) . RBD has only ever owned the restaurants, or leases to the restaurants. RBD have never owned the brands KFC., Pizza Hut and Taco Bell, under which monikers the restaurants trade. YUM only owns a few restaurants themselves. In the case of KFC, 99% globally are franchised.
YUM generally earns money by taking a percentage of the turnover of those KFC/ Pizza Hut / Taco Bell restaurant owners from around the globe that have licensed their restaurant concepts. RBD is a bit shy as to what the franchise fee they pay to YUM each year is (I think they have a confidentiality agreement that may mean they cannot disclose it). But disclosure from similarly listed restaurant owning companies that operate the KFC, Pizza Hut and Taco Bell concepts overseas would suggest the franchise fee is around 5% of turnover. That isn't straight profit for YUM. YUM provide marketing support, product development, training manuals and, in the case of KFC, shipments of the top secret 11 herbs and spices that give KFC its globally repeatable flavour. The franchise fees are are part of the 'Cost of goods sold' that is not broken down in the RBD financial statements. But if my estimate of a franchise fee of 5% of sales is correct:
0.05 x $892.359m = $42.6m
The franchise fees are roughly equivalent to the normalised profit that RBD made last year, so are very substantial.
The fact that Mexican owned 'Global Valar S.L.' now own 75% of RBD makes RBD a foreign controlled New Zealand company. But it doesn't change the fact that RBD is a New Zealand company, even though 75% of profits now go off shore. So you see, once you know the background story as to how RBD works, the tax situation becomes clear. I sincerely hope your mind is now 'unboggled' on RBD, SBQ.
SNOOPY
discl: I know all this because I am a foundation RBD shareholder, I still own shares in both RBD and YUM, and I make my FIF declaration relating to my ownership of YUM annually
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