Tax settings tweak could help grow local ETFs

Exchange traded funds have soared in popularity globally, largely driven by retail investor uptake in the US, with platforms such as Robinhood offering zero commission. Advisors Good Returns spoke to say despite the number of choices on the market both locally and globally, ETFs remain expensive for New Zealand investors and they are rarely the most tax efficient option to achieve the desired exposure.

NZX-owned investment manager Smart recently expanded its suite of ETFs to 44, offering access to both New Zealand-only ETFs, offshore ETFs and bundled products. Smart’s ETFs are treated as PIEs and taxed at 28%, although chief executive Anna Scott says it is not a perfect arrangement.

“We've looked at some of the tax treatments versus an unlisted product in the inner workings of the fund, and they're not apples with apples treatment by the IRD in some cases.

“So we are saying if you do want to see growth in some of these markets, you've got to level the tax treatment tools that you've got available in terms of running the different structures of funds.”