FIF Tax Regime - Any Spreadsheets?

[Lizard]

I just tried to check up on whether a share was in or out of the ASX All Ords to determine whether I should be allowing for it under FIF or not. Turns out that S&P now require visitors to create a logon (with forgettable password) to view this. The info is only provided in Excel file form and the logon feature doesn't seem to work using Safari browser (or at least my version of).

Have accessed it for now, but guess I'll be back to using Yahoo, though the accuracy may be less reliable.

[Steve]

Most of the larger broking firms [Craigs, Forbar etc] have up-to-date lists of what's in/what's out available...

[Lizard]

I have just hit a query with the FIF regime. One share I bought during the year moved into the ASX All Ords and therefore moves out of the FIF regime as of 1 April. Although I have not sold the shares, do I need to now treat this as a "quick sale" (due to transfer out of FIF rather than sale) and include it under the FDR method or can I leave it out as I am entitled to do for FIF purchases bought during the year and held? The latter would be something of a small loophole I feel (though of very limited usefulness), so suspect IRD would require the first treatment.

[Snoopy]

I have just hit a query with the FIF regime. One share I bought during the year moved into the ASX All Ords and therefore moves out of the FIF regime as of 1 April. Although I have not sold the shares, do I need to now treat this as a "quick sale" (due to transfer out of FIF rather than sale) and include it under the FDR method or can I leave it out as I am entitled to do for FIF purchases bought during the year and held? The latter would be something of a small loophole I feel (though of very limited usefulness), so suspect IRD would require the first treatment.

I am somewhat bemused by your phrasing, Lizard, that I have highlighted

"Can I leave it out as I am entitled to do for FIF purchases bought during the year and held?"

I wasn't aware there was an option! If you don't hold a share at the start of the financial year, then it can't come under the FIF regime, can it? Or if I put it another way, because your opening balance is zero, then your deemed return, based on a multiple of that opening balance, must be zero. So there are no tax consequences.

If you buy and sell during the same year on market, then as you correctly identify Lizard, the share is caught under the quick sale provisions of the FIF regime.

Is there a loophole here? Let's have a look at two possible cases.

Case A: If you start:

1/ with an Oz share that is not part of the ASX all ordinaries, and
2/through your shares's capital growth that share gets included in the ASX All Ords for the next tax year then
3/the capital gain during the year immeditaely prior to inclusion in the FIF regime is excluded from any income calculation for the just gone tax year.

Case B: If you start:

1/ with an Oz share that is not part of the ASX all ordinaries, and
2/through a market downturn that share gets included in the ASX All Ords for the next tax year because your share has declined less than the other shares around it, then
3/the capital loss during the year immeditaely prior to inclusion in the FIF regime than you incur is excluded from any offset to your income calculation for the just gone tax year.

You can argue that both cases are 'unfair treatment'. But the 'unfairness' is equally reflected whether you make a real gain or a real loss. So I would argue there is no loophole to exploit.

SNOOPY

[Lizard]

Snoopy, your answer confuses me - if a share moves into the All Ords, it falls OUT of the FIF regime (not into it) and back under the same treatment as NZ shares. If it had remained in the FIF regime, it would not have formed part of a fair dividend rate calculation for the year in which it was purchased (though it would be included in a comparative value method, but FDR will be the preference for most investors this year I would imagine). However, having moved into the All Ords, it now falls out of the FIF regime. The question is, using the FDR method, do I now have to call it a "quick sale" (even though I didn't sell it) and therefore include it in the total amount to which the FDR is applied.

Another former poster has just directed me to a link which seems to answer it - and confirms that I now do have to treat it as a quick sale and include it in the FDR calculation. (Something to consider - if you are buying a share outside the All Ords on the 31 March and it moves into the All Ords on the 1 April, you will be assumed to have made 5% on it for tax purposes if you are using FDR).

[777]

Personally I would just work on treating it as not in the FDR calculation. No one in the IRD would know exactly when a share becomes FDR qualified or unqualified. As long as you have included any income from it somewhere you at least have not tried to hide it. The whole thing is complex and I am sure very few tax payers get it 100% correct as there must be many examples of shares changing in or out of the FIF regime.

[Snoopy]

No one in the IRD would know exactly when a share becomes FDR qualified or unqualified.

The New Zealand IRD871 document is a complete list of ASX codes showing exactly on what date a particular share is added to or leaves the ASX. IIRC I printed the IRD871 off the web, so *every* IRD employee will potentially know this stuff.

As long as you have included any income from it somewhere you at least have not tried to hide it.

I think the point is that most of these emerging companies are either loss making or retaining what earnings they do have to grow with . If so, they may not be required to have an Ozzie IRD franking account. for such a share there will be no dividend income for the shareholdeer, and therefore no income to hide either. They could quite easily pass under the radar at the shareholder bank account and declared dividend level.

SNOOPY

[Snoopy]

Snoopy, your answer confuses me - if a share moves into the All Ords, it falls OUT of the FIF regime (not into it) and back under the same treatment as NZ shares. If it had remained in the FIF regime, it would not have formed part of a fair dividend rate calculation for the year in which it was purchased (though it would be included in a comparative value method, but FDR will be the preference for most investors this year I would imagine). However, having moved into the All Ords, it now falls out of the FIF regime. The question is, using the FDR method, do I now have to call it a "quick sale" (even though I didn't sell it) and therefore include it in the total amount to which the FDR is applied.

Another former poster has just directed me to a link which seems to answer it - and confirms that I now do have to treat it as a quick sale and include it in the FDR calculation. (Something to consider - if you are buying a share outside the All Ords on the 31 March and it moves into the All Ords on the 1 April, you will be assumed to have made 5% on it for tax purposes if you are using FDR).

Yes, you are quite right Liz. I was talking about the shares going into the ASX as though they were going into the FIF regime, when in fact the shares going into the ASX are *leaving* the FIF regime as you point out.

In your first post on this subject you noted the shares you have purchased that have gone into the ASX All Ordinaries were purchased during the year. That means they were not in the FIF regime calculation at the start of the tax year because you did not own them then. They are covered in the 'quick sale' provision of the FIF regime as you point out. But I'm not sure that you are assumed to have made 5% unless you actually do make 5% or more. If you make between 0 and 5% then I thought that you got to declare the actual gain, not 5%. But as you know I don't trade my own shares, so maybe my interpretation of this is wrong?

Of course it is possible that your share goes into the ASX All Ordinaries (drops out of the FIF regime) yet you have still made a loss on your holding because the ASX all ordinaries fell further than your share did (other doing worse was the cause of your share going inot the ASX, not your's doing well). Given that these FIF calculations are done on your collective basket of shares, not the individual shares, I would have thought you could offset this 'quick loss' against other FIF gains (using the comparative value option). Is that how you see it?

SNOOPY

[Lizard]

But I'm not sure that you are assumed to have made 5% unless you actually do make 5% or more. If you make between 0 and 5% then I thought that you got to declare the actual gain, not 5%. But as you know I don't trade my own shares, so maybe my interpretation of this is wrong?

Of course it is possible that your share goes into the ASX All Ordinaries (drops out of the FIF regime) yet you have still made a loss on your holding because the ASX all ordinaries fell further than your share did (other doing worse was the cause of your share going inot the ASX, not your's doing well). Given that these FIF calculations are done on your collective basket of shares, not the individual shares, I would have thought you could offset this 'quick loss' against other FIF gains (using the comparative value option). Is that how you see it?

SNOOPY

Hi Snoopy,

Under the FIF regime, it doesn't matter whether trading or investing, the treatment is exactly the same. An individual investor chooses between either the FDR method or the comparative value method, but whichever method used has to be applied to all holdings in any given year. An investor who made more than 5% on their overall portfolio of FIF holdings would be better off using the FDR method - so therefore pay against an assumed 5% fair dividend rate, inclusive of those trades on which they made a loss or gained less than 5%.

Under the comparative value method, the situation I mentioned would not matter, but it is only advantageous to use CV in a "bad" year where overall returns were below 5%. Actually, this could well be the first year under which the majority of investors caught by the FIF regime choose to use FDR.

[Steve]

Actually, this could well be the first year under which the majority of investors caught by the FIF regime choose to use FDR.

And think of the potential windfall of UOMI that the IRD may gain from those Trusts & Companies who have a tax bill as a result of the 5% FDR income. I suspect most would not have considered to pay some voluntary provisional tax to minimise UOMI despite overseas sharemarkets having a stellar year...