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  1. #11
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    TEM would certainly come under the FIF regime. But IMO, basing your investment decisions purely on tax considerations will lead to bad investment decisions. I guess the main consideration would be, does TEM have a net dividend yield of 1.65%? If it does, holding TEM will be cashflow positive for the holder. If not you will have to make sure you have enough income from other investments to cover your annual tax bill. It follows that if the underlying investment in TEM is good, then TEM should be a good long term investment for the holder.

    SNOOPY

    Thanks Snoopy and others for your replies, dividend yield for current share price of about $13.50 is app 0.6%. Just to clarify Snoopy, the FIF if investing over the tresshold does this mean tax on 5% of invested amount but no further tax on foreign dividends in NZ?

  2. #12
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    Quote Originally Posted by lissica View Post
    Is that $50k in one investment or of your total overseas investments? And what if the initial investment was less than $50k and moved in value to greater than $50k?
    Good questions. No problem if you start at under $50K and it grows, i.e. the exemption is based on the cost price. If you invest more than $50K you're in for a lot of drama with FIF calculations each year...good for us accountants, not so good for investors. I'll look into whether you can have more than one investment and still be exempt as soon as time allows, from memory, I seriously doubt it, but I'll get back to you on that one.
    Last edited by Beagle; 02-12-2010 at 09:20 PM.

  3. #13
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    The $50k is a total of purchase price for investments that fall under the FIF Regime. It applies to individual investors but (mostly) does not apply to trusts except for some exceptions.

    It is possible to pay less tax under FIF in the following scenarios:

    1. Buying investments at a yield greater than 5%
    2. If your transaction would normally be on revenue account (i.e. trading) and you make (on average) more than 5% per trade.

    There are a few other threads on FIF elsewhere.

    After the initial effort to build a spreadsheet that worked, I haven't found it too much drama, other than twice as much record-keeping as previously. But by entering all the dividends and trades into a spreadsheet as I go, it has been a reasonably quick process to print out and complete the tax return at year end.

  4. #14
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    Thanks Roger and Liz, will look into it. What about companies, is it the same as with trusts?

  5. #15
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    If you invest more than $50K you're in for a lot of drama with FIF calculations each year...good for us accountants, not so good for investors.
    Agreed. That's what accountants are for though. Mine earns his dosh. I give him a rather messy pile of paperwork each year, he asks me a dozen questions. I pay the bill. Easy.

  6. #16
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    Quote Originally Posted by lissica View Post
    Thanks Roger and Liz, will look into it. What about companies, is it the same as with trusts?
    Here's a link to it. I run a small sole practice and don't have any clients with exposure to the FIF regime so, I'm sorry I don't have an intricate knowledge of the subject.

    I like to keep life as simple as possible so I put in less than $50K in Templeton Emerging markets and that's my one shot at the emerging market growth story.

    http://www.ird.govt.nz/toii/fif/changes/

  7. #17
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    Quote Originally Posted by Roger View Post
    Here's a link to it. I run a small sole practice and don't have any clients with exposure to the FIF regime so, I'm sorry I don't have an intricate knowledge of the subject.

    I like to keep life as simple as possible so I put in less than $50K in Templeton Emerging markets and that's my one shot at the emerging market growth story.

    http://www.ird.govt.nz/toii/fif/changes/
    Thanks again Roger. I had a look at this when the FIF first came out, and made sure that all our shares qualify to be excluded from the FIF (ie our Australian holdings mainly). But yeah, I've been thinking about diversifying out of just Australia and NZ too. Will read up on that link, thanks

  8. #18
    ShareTrader Legend Beagle's Avatar
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    Quote Originally Posted by lissica View Post
    Thanks again Roger. I had a look at this when the FIF first came out, and made sure that all our shares qualify to be excluded from the FIF (ie our Australian holdings mainly). But yeah, I've been thinking about diversifying out of just Australia and NZ too. Will read up on that link, thanks
    You're welcome. I find it hard to target growth stocks in N.Z. as the only ones I like, e.g. Ryman are very expensive on a P/E basis. Call me a cynic but I think the effects of the GFC have many years to work there way out of the global system so I'm more interested it investments that can pay a sustainable and decent dividend yield. KIP is my top pick in this regard and being part of the PIE regime they're paying a tax paid 7% return. Low risk and very attractive divvy yield is the way to go for the next few years in my opinion, but I've become more conservative after being beaten around the head by the GFC, but who hasn't ?

  9. #19
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    I also do my calculation by spreadsheet but then redo it using the IRD calculator just to back up my figures. The calculator once you work out how to cover all the transactions does work well. Still garbage in garbage out if you don't do it correctly. I have had to pay less tax since the new FDR has applied as the 5% has always been less than the distributions I used to pay tax on. As well one year I paid nothing because of reduction in value of investments. They recovered the next year.

    https://interact1.ird.govt.nz/forms/fifcalc/

  10. #20
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    Quote Originally Posted by forest View Post
    Just to clarify Snoopy, the FIF if investing over the tresshold does this mean tax on 5% of invested amount but no further tax on foreign dividends in NZ?
    Income under FIF is 'deemed' 5% of the financial year total sum opening balance of all of your 'overseas' (excludes most Australian) investments. Marginal tax rate is 33%? Then the tax you will pay on you FIF opening balance is 0.33 x 5%= 1.65%. Usually there will be some overseas tax deducted on overseas dividends (which are not separately declarable in NZ), that may be offset against your deemed NZ FIF tax liability. But a UK listed market 'tax credit' is not claimable as offsetting your NZ tax bill, because that 'tax credit' is in effect a UK bonus savings incentive for UK residents. UK dividends are paid without any withholding tax deducted, which is why you get no UK w/h tax credit in NZ.

    SNOOPY
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