Foreign investment fund
My client is a New Zealand resident investor in an Australian technology investment fund. The fund is listed on the Australian Stock Exchange and is set up as a limited liability trust. My client receives regular investment statements from the fund which are split into the following categories: dividends; interest; trading gains; investment gains; and foreign exchange gains. Are the investment gains taxable in New Zealand? ANSWER
1 Comment
- Answer
- Yes. The fund described appears to be a unit trust. A unit trust for New Zealand tax purposes includes any scheme or arrangement set up for subscribers, purchasers or contributors to participate in income and gains, including capital gains. Unit trusts are taxed in the same way as companies ¾ in other words, all distributions are treated as dividends.
In addition, for New Zealand domestic tax law purposes, your client's interest in the fund is an interest in a foreign investment fund. Your client would, therefore, potentially have to disclose his or her interest in the fund and possibly pay New Zealand income tax on the change in market value of his or her interest in the fund over the income year, adjusted for cash flows such as distributions.
There are a number of exceptions which
should apply to take the fund out of this taxing regime. The exceptions
are quite specific. Without knowing the exact terms of this fund
or the level of investment, it is difficult to make an unequivocal
call on whether the foreign investment fund rules will apply.
However, if the fund is Australian resident and subject to Australian
income tax, your client's interest should fall outside the FIF
regime on the basis that it is an interest in a "grey list"
resident fund. See s CG 15(2)(b).
| « Forgiveness of debt owed by family trust | Tax implications of company migrating from New Zealand (Brierley) » |
Special Offers
Comments from our readers
Commenting is closed
|
|
Printable version |
|
Email to a friend |
The issue is that some of our investments are standard stock ASX equities but they are NOT listed in the IRD schedule of exempt companies. The probably fall outside the ASX 500 list. Does this mean that they are included in the FIF regime? None of them pay a dividend as they are junior mining, resource or start-ups.
The 'stapled' securities add up to a lot less than $NZ50,000. However, if we add our excluded holdings then we will exceed the $50K. Which is way too low anyway.