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  1. #11
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    Quote Originally Posted by 777 View Post
    As an investor in Platinum Funds I have been treated better under the FIF system than I was before. This is because their distribution is reasonably high.
    It would be very interesting for me if you could give some rough idea of what your tax-related costs were pre- and post-FIF, if you have them handy? Nothing super specific, but the problem I have is that I don't know what costs are incurred if FIF is avoided. To me it seems like non-FIF investments should result in much less tax (assuming the share prices grow rather than large dividends being paid). Thanks!

  2. #12
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    Quote Originally Posted by Aaron View Post
    I didn't say I knew any FIFs that paid a dividend greater than 5% but if you know of one tell me. If your friend is an investment advisor you would be better asking him/her about this as I am not an investment advisor and as an amateur any advice I give should be carefully double checked and totally relying on it would be crazy.
    Ask your friend when the GFC2 is going to arrive I am getting sick of waiting.
    I wish I knew one! :-) As I said, I'm likely to just invest in 'total market index' funds....which certainly won't cover the FIF taxes. I'm in the same boat as you with GFC2 - I've got cash and am waiting to sink it in - although as the saying goes "time in the market is better than trying to time the market". I only just got the cash - and I'm not sure I'll be waiting long to invest it.

  3. #13
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    Quote Originally Posted by JonathanGiles View Post
    It would be very interesting for me if you could give some rough idea of what your tax-related costs were pre- and post-FIF, if you have them handy? Nothing super specific, but the problem I have is that I don't know what costs are incurred if FIF is avoided. To me it seems like non-FIF investments should result in much less tax (assuming the share prices grow rather than large dividends being paid). Thanks!
    Bare on mind the requirement for Australian Funds have to distribute fund profits so the 5% is exceeded a lot of the time. I don't hold my Australian shares in my family trust, as I do with Platinum, so don't have that complication. All distributions were taxable prior to FIF but now just form part of the return ,so some years the return is less than 5% so less tax is paid. The fluctuation of the exchange rate can have a big affect on yearly calculation. ie. a good distribution but not a great capital return, but no or little tax paid on the distribution.

    Have to go and will be off line until tomorrow.
    Last edited by 777; 14-01-2015 at 10:55 AM.

  4. #14
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    Earlier in this thread I asked about Australian Vanguard stocks on the ASX (notably VTS and VGS). Whilst I appreciate that these stocks represent ownership of various international shares, my question was whether the IRD is looking at the VTS / VGS shares, or the shares owned by VTS / VGS. To me it seems reasonable to expect that it is the former. If that is true, according to the IRD [1], the criteria for determining FIF exemption is as follows:

    When you hold shares in a company that:



    the shares are exempt from being an attributing interest in a FIF. Where these shares are held on capital account, the only income to be returned is the dividend income.
    [1] http://www.ird.govt.nz/toii/fif/how-...tax-exemption/

    Thoughts?

  5. #15
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    My understanding is it is the shares of the etf that are treated for fif. aus etf's for Aussies have a different tax treatment for them going by the statements that are posted out. I just pay tax on the dividends. As I have shares in STW 200 ASX it is the gain and dividends which would be worked out under the fif system and not the individual companies they own. I looked at this and decided that for me getting involved in a system of fif tax was just going to be too much hassle and record keeping for the benefit it may have. It just added another area of complexity unless I was going to put money just in etf's and not individual shares. Because you pay on unrealised gains if you get less than 5% yield but if you are buying selling it's a way of not worrying about being classed as a trader if you are not already considered a trader by ird. You can always ring IRD with your questions. But if you have an accountant they would be best paced to advise on the set up for the FIF tax system. Plus you could do a dummy portfolio on owning etfs and the fif obligations to see if it is worth it for you.

  6. #16
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    Just because a company is ASX listed, does not mean that it is Australian resident (the NZ dual listed ones being a perfect but irrelevant example). News Corp is ASX listed but I m pretty sure is a US tax resident now after it reincorporated in the US (dont quote me on this).

    Note, if you invest in a NZ fund so that you are not subject to FIF, the fund still will be. So you avoid the admin but not the tax burden. If you are just trying to avoid the admin, Sharesight apparently does it automatically in its premium plan (I only use their common plan as I dont do overseas direct investment so cant comment).

  7. #17
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    Thanks guys for your insights. My main objective in asking wasn't to avoid the admin (I'm resigned to having Sharesight / my accountant handle that), it was more of an exercise in understanding whether paying the FIF taxes eroded all benefit from investing overseas (where the markets are bigger / more diversified and have lower expense ratios). I'm still not sure what the answer is there, but at least I know that I can (most probably) ignore ASX and just do VTI directly in the US (via my E*Trade account). This is my preference as I already have funds over there.

  8. #18
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    In regards to your question about costs. Well, if you are involved in the FIF tax requirements with an accountants input it will cost more than investments where the dividends are the only part to be included as for me I can do that on a simple spread sheet with currency conversion.It always struck me as strange that etf's,as they are simple to invest in over a long time, attract the fif tax. Talk about making things difficult for NZers to get ahead.

  9. #19
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    Quote Originally Posted by G on View Post
    In regards to your question about costs. Well, if you are involved in the FIF tax requirements with an accountants input it will cost more than investments where the dividends are the only part to be included as for me I can do that on a simple spread sheet with currency conversion.It always struck me as strange that etf's,as they are simple to invest in over a long time, attract the fif tax. Talk about making things difficult for NZers to get ahead.
    It would seem to me, based on a bit of (simplified) spreadsheeting, that the addition of FIF taxes makes an investment in overseas total market ETFs (e.g. VTI) totally unfeasible.

    My (again, very simplified) calculations suggest that at 1-5% share growth, tax eats 33% of any gross earnings (using the CV method). Once you get past 5%, I believe FDR is the better method, and the percentage of tax begins to drop, but still, within the 6-10% share growth range, the lowest the tax percentage becomes is 17%.

    I hope I'm wrong, but given these calculations, one must begin to think that international investment is being actively rejected by the government, in favour of local investment. To me this is terrible - I want the opportunity to diversify and invest for the long term with the minimum of fees and taxes. I have a strong suspicion (again, backed up by a quick spreadsheet) that SmartShares, with its higher expense ratio, may still come out on top over FIF taxes investments.

    I'd appreciate peoples thoughts, and advice on how else one might invest to minimise long term costs.

    Thanks!

    P.S I should note that my calculations assumed all taxes were paid 'out of pocket' - that the initial capital invested was left untouched and allowed to grow every year.
    Last edited by JonathanGiles; 14-01-2015 at 01:59 PM.

  10. #20
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    I wouldn't have thought that the FIF regime is much worse than anything else depending on your return on investment. Assuming you are on the top tax rate of 33% tax will eat 33% of your net taxable earnings no matter what the investment. What is the difference between paying tax on a dividend earning company in NZ that has minimal growth or paying tax on 5% of the value of a FIF investment assuming (you would hope for the risk involved) it will generate growth of at least 5% or more but pay next to no dividends. Like you say if the FIFs grow by less than 5% use the CV method and no tax to pay if it goes backward (although you will have to pay tax on the regrowth which is the real unfair part of the FIF regime).
    You could buy a dividend paying company on the ASX that is on the exempt list. You pay tax on the dividends(no franking credit allowed, come on Aussie remember CER). The FDR is just a replacement for dividends. You are right to worry about tax but I would be more concerned with finding an investment that is going up instead of down. Any growth over 5% is tax free on your FIF.
    That said I would also like to hear how other people invest overseas particular in passive/index funds.

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