"Amount" can be the cost of acquiring your FIFs, including brokerage fees if these formed part of the cost of acquiring your investment. Cost is not their market value. This means you do not have to track changing market values over time.
Amount of investments in certain circumstances
|If ...||then ...|
|you acquired some investments before 1 January 2000 and some investments on or after that date||
for the investments acquired before 1 April 2000:
|you inherited outright the investment in a FIF from a close relative within the second degree of relationship to the deceased person||you would treat the investment as if you were the original purchaser, ie the amount you would use is the original cost to the deceased person.|
|the investment was transferred to you as part of a matrimonial agreement||the amount is deemed to be the original cost to the transferor, as if the transferee had originally acquired the shares themselves.|
|the investment was gifted to you, ie there was no cost to you||the amount is the market value on the day the shares were transferred into your name.|
|you took the investment in lieu of dividends||
the amount is the net value of the dividends you would have received.
You would be treated as having received the dividends and then purchasing shares with the proceeds of the dividends.
|If ...||then ...|
|you and your spouse (or de facto or civil union partner) jointly hold offshore investments which cost $100,000 or less||both of you would not be subject to the new FIF rules, because your interests did not exceed the $50,000 threshold.|
|one spouse (or de facto or civil union partner) holds offshore investments individually which cost $20,000 in addition to the jointly held investments which cost $100,000||the spouse (or partner) holding the jointly held investment would not be subject to the new FIF rules, because their investments do not exceed the $50,000 threshold, but the other spouse or partner (with individual and joint holdings) would be subject to the new FIF rules.|
An attributing interest includes:
a direct income interest in a foreign company or unit trust, eg
- shares in a foreign company, except shares in certain Australian companies, or
- units in a foreign unit trust, except units in certain Australian unit trusts, or
- a right to benefit from a foreign superannuation scheme, either as a beneficiary or a member, or
- a right to benefit from a life insurance policy where a certain foreign investment fund is the insurer and the policy was not offered or entered into in New Zealand.
When you hold investments to receive income such as to derive dividends from shares, and you:
- do not intend to make a profit from selling the shares, and
- are not a share trader
the holding of the shares is considered to be on capital account.
The CFC rules apply to New Zealand resident shareholders with interests of 10% or greater in a foreign company that is controlled by New Zealand residents and their associated entities.
An entity that values its investments each day, is known as daily unit valuer. Where the valuation period is more than a day (for example, a month or a quarter) the entity needs to apply the quick sale rules to shares bought and sold during the respective valuation period. For example, a unit trust that values its investments quarterly would apply the quick sale rules to any shares that are bought after the start of the quarter and sold before the end of the quarter.
The following small range of trusts are not subject to the new FIF rules if the amount of their attributing interests in FIFs is below the NZ$50,000 threshold:
a testamentary trust:
- arising on the death of a deceased person and the current income year begins on or before the date that is five years after the person's death, and/or
- where the settlor of the trust is the estate of a deceased person and a court order requires the proceeds of damages or compensation to be settled on the trust for the beneficiaries of the trust.
a compensatory trust, where the settlor of the trust is:
- a relative or legal guardian of a beneficiary of the trust, or a person associated with a relative or legal guardian of a beneficiary of the trust, and
- required by a court order to pay damages or compensation to the beneficiary.
- the settlor of the trust is the ACC.
A company that is not resident in New Zealand or is treated under a double tax agreement as not being resident in New Zealand.
A superannuation scheme created outside New Zealand to provide retirement benefits to natural persons or paying benefits to another superannuation fund. It may be a trust, a unit trust, a company or a statutory scheme (not being an arrangement under the Social Security Act 1964).
An overseas scheme or arrangement in which you can participate in the income and gains (capital and income) from the unit trust's money, investments, and other property - see Note below. As an investor you would be classed as a beneficiary of the unit trust. For New Zealand FIF purposes, a foreign unit trust is treated as a foreign company.
Excludes a trust for the benefit of debenture holders, a superannuation fund, an employee share purchase scheme, funeral trusts or any other trust declared by Order in Council not to be a unit trust
Market value is generally, but not restricted to the listed share prices. Other information that is verifiable and may be used includes published unit prices or the net asset values at which units can be redeemed. However, exit values that incorporate a penalty for early withdrawal or redemption would not be acceptable.
Opening value is:
- (IV) independent valuation of the market value of the interest at the start of the relevant income year, if you held the interest at the start of the income year
- (CA) cost, if acquired in the 2005-06 or 2006-07 income years (only applicable for 2008 income year)
- (AA) audited set of accounts - the amount that is shown as the net asset value of the interest in audited financial statements of the person for the relevant income year made available to the general public in the relevant income year
- (ZO) zero, if acquired in the year, or
(LP) last year plus FIF income. For the second to fourth income years of using the cost method where you have not reset the value by using IV or AA during those years, you can arrive at the opening value by using:
- the previous year's opening value, and
- add the previous year's cost method FIF income for that investment.
An individual person, not a company or other entity.
The NZ$50,000 minimum threshold does not apply to family trusts (that are not an eligible trust) such as discretionary trusts, because of the risk of multiple trusts being used for the benefit of the same individuals.
Total of the pooled amounts for each foreign company using the formula 5% x quick sales x average cost.
A portfolio interest is where a person holds less than a 10% interest in a FIF.
A non-portfolio interest is where a person holds a 10% or greater interest in an FIF but is not a CFC interest.
When you actively buy and sell your investments on a regular basis with the intention of making pecuniary profits from the investments, your investments will be considered to be held on revenue account.
Stapled stock is an investment that can only be disposed of if it is attached to a right in another company.
Date published: 19 Jun 2012