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  1. #1
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    Default Overseas shares - IRD's IR3

    Hi all

    I don't have $50k and this is just a curious post. It's that time of the year, I had a look at the IR3.

    I failed to locate a overseas shares section in the IR3. There is overseas income section but the help section says that seems to be income when you are overseas working.

    If I had $50k acquired cost of overseas shares. If I had overseas dividend does this get reported in the "dividend" of the IR3 the same as the NZ dividends? What about the FIF's FDR or CV methods - where in the IR3 does this go in?

    With the CV method. What is the definition of the opening and closing market value? Say a person had Facebook shares and just left it there for the full year. Is that the 1 April and the 31 March?


    Cheers.

  2. #2
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    All overseas income goes in the overseas box.

    FIF income is the lesser of 5% of the balance at the 31st Mar of the year before (ie 1st Apr of tax year you are calculating) or CV if less than 5% (using the same opening balance and closing balance). Any dividends paid are used in calculating both. Buying and selling during the year needs to considered as well.

  3. #3
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    Quote Originally Posted by 777 View Post
    All overseas income goes in the overseas box.

    FIF income is the lesser of 5% of the balance at the 31st Mar of the year before (ie 1st Apr of tax year you are calculating) or CV if less than 5% (using the same opening balance and closing balance). Any dividends paid are used in calculating both. Buying and selling during the year needs to considered as well.

    Ok. Thanks for that. Makes sense.

    So it's 31 March of the previous year and the current 31 March?

    I don't but let's say if I have less than $50k and I get dividends, this dividend still goes in the overseas section?

  4. #4
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    Quote Originally Posted by rayonline View Post
    Ok. Thanks for that. Makes sense.

    So it's 31 March of the previous year and the current 31 March?

    I don't but let's say if I have less than $50k and I get dividends, this dividend still goes in the overseas section?
    Yes on the March dates. For 2018 tax return the fif is calculated using the 31/3/17 value and 31/3/18 value.

    There is a good write up on it on the IRD site.



    Yes. If if less than $50,000 you just declare the dividends in NZ$ in the overseas income and claim any tax paid on those dividends as tax paid overseas.

  5. #5
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    Quote Originally Posted by 777 View Post
    Yes on the March dates. For 2018 tax return the fif is calculated using the 31/3/17 value and 31/3/18 value.

    There is a good write up on it on the IRD site.



    Yes. If if less than $50,000 you just declare the dividends in NZ$ in the overseas income and claim any tax paid on those dividends as tax paid overseas.
    Thanks for that
    I have the FIF guide printed out but maybe I missed the part about the March dates.

  6. #6
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    Hello - is it possible to post the link for those dates 31Mar17-31Mar18 as I can't see it..perhaps I'm having a moment?! Thanks!

  7. #7
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    NZ tax year is 1st April to 31st March. Nothing more complicated than that.

  8. #8
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    Finished mine last week, always a mission as bits and pieces all over the place. Clicked the button with trepidation expecting I would be owing them money, but turned out they owed me, and it already in the bank account. Fairly impressive speed on their part.
    Am making an early vow to keep on top of it through the year this time round rather than just chucking all the bits of paper in a box

  9. #9
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    I'm now doing my 2020 IR3 and IRD seem to stump me each year on the FIF return. I previously used the IRD tool to calculate the amount of FIF income so I know how much is due (and have uploaded this into the IR3 online return as overseas income) but on completing the FIF part of the IR3 online it seems this is not acceptable in that I've got to put all the information in again, either in another version of an online document or into an online excel spreadsheet.

    Has anyone else had this issue or am I going about it the wrong way?

  10. #10
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    Quote Originally Posted by kiwico View Post
    I'm now doing my 2020 IR3 and IRD seem to stump me each year on the FIF return. I previously used the IRD tool to calculate the amount of FIF income so I know how much is due (and have uploaded this into the IR3 online return as overseas income) but on completing the FIF part of the IR3 online it seems this is not acceptable in that I've got to put all the information in again, either in another version of an online document or into an online excel spreadsheet.

    Has anyone else had this issue or am I going about it the wrong way?
    The IRD's FIF on line calculator is just that. Nothing is saved for reference purposes by the IRD when you use it. I don't do my tax return on line so I don't know if there is any way to link the calculator to your own IR3 tax return. But I have never seen a 'button' to do it. So I suspect the answer is 'no'.

    SNOOPY
    Industry shorthand sees BNZ employees still called 'bankers' but ANZ employees now called 'anchors'. Westpac has opted out of banking industry shorthand...

  11. #11
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    If it is your first year with foreign investments and you hold more than $50K at 31/3/20 using fair dividend rate

    the opening balance at 1/4/19 is $0 so does that mean $0 tax this year? I am finding it confusing

    Thanks in advance

  12. #12
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    Quote Originally Posted by tango View Post
    If it is your first year with foreign investments and you hold more than $50K at 31/3/20 using fair dividend rate

    the opening balance at 1/4/19 is $0 so does that mean $0 tax this year? I am finding it confusing

    Thanks in advance
    Once you exceed the $50K threshold, then FIF applies for that whole taxation year.

    Short answer, yes FIF applies because you started with a $0 balance and ended with more than $50K during the tax period.

    This paper gain tax does not apply on the final year you withdraw all the funds out. That is the only advantage I see with FIF as a person in the last year of investing could amassed a large capital gain, but would not have to declare it under FIF if the account was closed and all the cash proceeds held in NZ terms. As the FIF calculation goes, they look at the total portfolio balance from April 1st to end of March 31st. If the shares were held for many years and that last final year was a whopper, you would pocket that capital gain as long as you sold and held the account under the $50K threshold before March 31st.

  13. #13
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    Quote Originally Posted by SBQ View Post
    Once you exceed the $50K threshold, then FIF applies for that whole taxation year.

    Short answer, yes FIF applies because you started with a $0 balance and ended with more than $50K during the tax period.

    This paper gain tax does not apply on the final year you withdraw all the funds out. That is the only advantage I see with FIF as a person in the last year of investing could amassed a large capital gain, but would not have to declare it under FIF if the account was closed and all the cash proceeds held in NZ terms. As the FIF calculation goes, they look at the total portfolio balance from April 1st to end of March 31st. If the shares were held for many years and that last final year was a whopper, you would pocket that capital gain as long as you sold and held the account under the $50K threshold before March 31st.
    Thanks so much.

    Am I right in thinking that the fair dividend rate calculation is on the opening balance of $0 this year?

    That would mean no tax to pay this year but next year I get hit with 5% of the opening value?

  14. #14
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    So to clarify... on the first year that you have foreign investments if you use fair dividend rate (FDR) then there is $0 to pay because the opening balance was nil but next year I pay 5% tax on the balance at 1/4/20. Right?

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    Quote Originally Posted by tango View Post
    So to clarify... on the first year that you have foreign investments if you use fair dividend rate (FDR) then there is $0 to pay because the opening balance was nil.
    Yes.

    but next year I pay 5% tax on the balance at 1/4/20. Right?
    No.

    5% of your opening balance is deemed as your FIF income and you pay tax on that amount.

    If your marginal tax rate is 30% then you will end up paying 0.3 x 5% = 1.5% of the opening balance.

    Of course if your buy and hold balance (including dividends and accounting for exchange rate valuation changes) has shrunk during the year then as an individual you will pay no FIF tax at all for that year.

    SNOOPY
    Last edited by Snoopy; 25-06-2020 at 03:39 PM.
    Industry shorthand sees BNZ employees still called 'bankers' but ANZ employees now called 'anchors'. Westpac has opted out of banking industry shorthand...

  16. #16
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    Quote Originally Posted by Snoopy View Post
    Yes.



    No.

    5% of your opening balance is deemed as your FIF income and you pay tax on that amount.

    If your marginal tax rate is 30% then you will end up paying 0.3 x 5% = 1.5% of the opening balance.

    Of course if your buy and hold balance (including dividends and accounting for exchange rate valuation changes) has shrunk during the year then as an individual you will pay no FIF tax at all for that year.

    SNOOPY
    THANK YOU!

    This has been doing my head in but I think I have it sussed now

    Fun times... I see the advantage of only holding New Zealand stocks

  17. #17
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    so glad to get that done for the year!
    Last edited by tango; 30-06-2020 at 04:31 PM.

  18. #18
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    Quote Originally Posted by tango View Post
    THANK YOU!

    This has been doing my head in but I think I have it sussed now

    Fun times... I see the advantage of only holding New Zealand stocks
    Is it an advantage? An over-emphasis by shareholders wanting dividend instead of capital gains (the former with tax at RWT unless there's some credit imputation which is marginal)?

    The reason FIF came about was due by overseas emphasis of capital gains and as we all know, in NZ there is no CGT. So FIF had to come out to address this advantage. Who stand to gain the most under FIF? -> IRD

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