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  1. #21
    Junior Member
    Join Date
    Nov 2019


    Dean Riley, head of group tax at Kiwi Bank, covers the FIF trader/investor distinction in this seminar :

  2. #22
    Join Date
    Nov 2018


    Quote Originally Posted by steve9 View Post
    Dean Riley, head of group tax at Kiwi Bank, covers the FIF trader/investor distinction in this seminar :
    Not really crystal clear under FIF. Again like most financial advisers in NZ, they always come out saying "go seek a tax specialist...."

    Shortly after the FIF question they briefly talked about US Estate Duties on Joint account holders. The lady may not be crystal clear on US estate taxes ; she did say YES for sole individual that dies, their US holding will attract US estate taxes regardless of amount (interestingly, for US residents the threshold for estate / death taxes doesn't apply unless after $11.5M). But on the issue of joint accounts ; she should clarify too that the joint account holder that dies is also subjected to US estate taxes on their 'original' contribution portion to buy the asset. She should also mentioned there's a $60K NRA exemption. But i'm not holding any faith to these NZ financial advisers... more or less they're all out farming it by telling clients "Go see a tax specialist". I can assure in Canada or in the US, CFP registered advisors won't tell you to go see a tax specialist and will have most of that tax info at hand.

    "If assets are held jointly, each individuals contribution to the acquisition of the US asset should be carefully documented. If contribution amounts are not clearly understood, the IRS could operate a “worst-case scenario” approach and include 100% of the value of the asset within the estate of the first joint owner to die."

  3. #23
    On the doghouse
    Join Date
    Jun 2004
    , , New Zealand.


    Quote Originally Posted by SBQ View Post
    Hold on there... FIF has nothing to do with what 'purchase price' being under $50K.

    How about from IRD's point of view. Do you really think IRD will allow people to make foreign share purchases under $50K and let it compound 10 or 20 years which could end up over $500K or $1M and the NZ resident not pay a $1 in tax? I don't think so....
    One last note on SBQs -wrongful- interpretation of how FIF works.

    The SBQ view is actually entirely logical. How is it fair that someone (Person A) invests $NZ49,999 in an FIF investment that grows for thirty years to be worth $NZ500,000 and then brings that capital back to NZ with no tax payable? Yet another person (Person B) pays $NZ50,001 for a yield type FIF share that might hardly grow at all, yet that second person has to pay FIF tax every year for 30 years? The answer is - it isn't logical, it doesn't make sense, it isn't fair, until you think about how 'fair' rules could be enforced.

    If the FIF scheme was triggered when your investor running balance exceeded $NZ50k, our investor would have to keep a daily ticker feed of their share investment and the exchange rate on that day to get an instantaneous read out of the exchange rate as well, so that everything can be converted back to $NZ. Unless our investor had such a set up, he could inadvertently break the FIF rules by not noticing that his investment had popped up in value to over $50k (and so breaking a threshold) before coming back down again. It gets more complicated again if you have more than one FIF investment. You would have to co-ordinate the ticker feeds and currency value feeds of all your investments and add them together, every day.

    Now imagine you did not do all of this and the IRD decided to investigate you. They would have to download all the price information themselves, and run the same exercise that you did not download. By the time they co-ordinated all the dividend information as well, we might be looking at several hundred hours work. And only at that point could they start figuring out what your tax obligations might be. And at the end of it all they might find that your approach of 'just paying tax on dividends' might have resulted in a greater tax bill anyway! The whole thing would be an administrative nightmare, that would more than likely in administrative costs, chew through the extra tax reigned in anyway.

    Now consider the purchase price based approach. When you make your FIF purchase you will very likely have a contract note converted to NZD. That document will be a proof of purchase in an NZD amount that can be easily verified by the IRD by just looking at it. There is no need to gather any more information. That is administratively workable, in a sense that the 'running balance approach' is not.

    Thus what seems to be an illogical way of doing things is the only practical way to go, even though from the perspective of 'Person B' it is not fair.

    Last edited by Snoopy; Today at 12:45 PM.
    Industry shorthand sees BNZ employees still called 'bankers' but ANZ employees now called 'anchors'. Westpac has opted out of banking industry shorthand...


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