tmmonline.nz  |   landlords.co.nz        About Good Returns  |  Advertise  |  Contact Us  |  Terms & Conditions  |  RSS Feeds

NZ's Financial Adviser News Centre

GR Logo
Register free for JLL Future Cities Wellington here Dismiss
Last Article Uploaded: Monday, April 12th, 7:04AM

News

rss
Latest Headlines

FDR returns better, but more volatile

Research shows the impact of the new FDR tax regime on past performance of funds.

Tuesday, October 30th 2007, 6:48AM
Actuarial firm Melville Jessup Weaver had examined the impact of the new Fair Dividend Rate (FDR) tax regime.

By applying it to the results of global share and bond over the past seven years.

Under the previous tax regime all the gain or loss in global share funds were subject to tax. But now under the FDR regime, just 5% of the value of the investment is subject to tax.

MJW says a question exists about the tax basis of currency hedging and in this exercise it has assumed that any hedging losses or gains are taxed under the current CV basis.

The main conclusion MJW comes up with in the share sector is that under the FDR regime returns are expected to be higher, albeit it with more volatility.

Over the seven year period, FDR delivers an additional annual return of 5.1%.

MJW says that this is "a surprisingly low result, but heavily influenced by two initial bad years results."

It also notes that while the regime "delivers higher positive results, when the market is negative the net FDR result is substantially worse than the net CV result."

This negative net FDR result is lower than the gross result due to the fact that tax is paid irrespective of the return achieved.

MJW says there is a similar result from its analysis of global bond funds, namely the returns under FDR are better, but more volatile.

It says on an historical basis it is quite clear that investors should go for the FDR regime.

While the volatility is higher it is "not particularly so".

Looking back over the seven year period there is no one year result where an investor would be better off under the CV regime.

MJW says while FDR is favoured it appears many of the international bond funds are being taxed under the CV regime in total and others are invested in Australian unit trusts which are subject to FDR. However, the Australian dollar hedge is subject to the CV regime.

It says the latter funds have an advantage of around 40 basis points, net, annually over the former.

« News Round UpSovereign takes regulation bull by the horns »

Special Offers

Commenting is closed

 

print

Printable version  

print

Email to a friend
News Bites
Latest Comments
  • Are robots the future of advice?
    “Yeah/Nah another article talking financial advisers but really means to say financial planning... The bespoke needs of...”
    5 days ago by JPHale
  • [The Wrap] FSLAA isn't the only big change advisers need to be aware of
    “I watch with hope that FMA will decide to investigate potential and existing sharp practices that are nothing less than fraudulent,...”
    6 days ago by Chatterbox
  • Are robots the future of advice?
    “The majority of the 9,000 consumers surveyed globally said that they trust robots more than humans to help manage their personal...”
    6 days ago by All hat no cattle
  • Are robots the future of advice?
    “What a load of tripe - produced by someone with something to gain. The global experiment with RoboAdvice has demonstrated...”
    6 days ago by Pragmatic
  • Are robots the future of advice?
    “Of course Oracle would produce research supporting their products!! No surprise there. However, I doubt very much if serious...”
    6 days ago by dcwhyte
Subscribe Now

Weekly Wrap

Previous News
Most Commented On
Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA 4.55 2.29 2.59 2.65
ANZ 4.44 2.89 3.25 3.39
ANZ Special - 2.29 2.69 2.79
ASB Bank 4.45 2.29 2.59 2.65
Basecorp Finance 5.49 - - -
Bluestone 3.49 3.34 2.99 3.34
BNZ - Classic - 2.29 2.59 2.79
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
BNZ - Std, FlyBuys 4.55 2.89 3.19 3.39
BNZ - TotalMoney 4.55 - - -
Lender Flt 1yr 2yr 3yr
CFML Loans 4.95 - - -
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.45 - - -
Credit Union Baywide 5.65 3.95 3.85 -
Credit Union South 5.65 3.95 3.85 -
First Credit Union Special 5.85 2.95 3.45 -
Heartland Bank - Online 2.50 1.99 2.35 2.45
Heretaunga Building Society 4.99 ▼3.40 ▲3.50 -
HSBC Premier 4.49 2.25 2.35 2.65
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - ▲2.25 - -
ICBC 3.69 2.25 2.35 2.65
Kainga Ora 4.43 2.67 2.97 3.13
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 3.40 3.20 3.50 3.50
Kiwibank - Offset 3.40 - - -
Kiwibank Special 3.40 2.35 2.65 2.65
Liberty 5.69 - - -
Nelson Building Society 4.95 3.20 3.24 -
Pepper Essential 4.79 - - -
Resimac 3.39 3.35 2.99 3.35
Lender Flt 1yr 2yr 3yr
SBS Bank 4.54 2.79 2.79 3.15
SBS Bank Special - 2.29 2.29 2.65
Select Home Loans 3.49 3.34 2.99 3.34
The Co-operative Bank - First Home Special - 2.09 - -
The Co-operative Bank - Owner Occ 4.40 2.29 2.59 2.79
The Co-operative Bank - Standard 4.40 2.79 3.09 3.29
TSB Bank 5.34 3.09 3.29 3.45
TSB Special 4.54 2.29 2.49 2.65
Wairarapa Building Society 4.99 3.55 3.49 -
Westpac 4.59 3.09 3.29 3.39
Westpac - Offset 4.59 - - -
Lender Flt 1yr 2yr 3yr
Westpac Special - 2.29 2.69 2.79
Median 4.55 2.73 2.99 2.80

Last updated: 7 April 2021 10:22am

About Us  |  Advertise  |  Contact Us  |  Terms & Conditions  |  Privacy Policy  |  RSS Feeds  |  Letters  |  Archive  |  Toolbox
 
Site by Web Developer and eyelovedesign.com