I don’t suppose anyone has created a custom tax preset for New Zealand’s complicated FIF system and is willing to share their calculation?
I’ve taken a stab at it a couple of times but never made much progress.
Can you provide some good source articles on how it works and explain it a little bit?
Haha, ok…
Following is my understanding and interpretation of FIF Tax rules, for detailed info see PDF on this page.
FIF = Foreign Investment Fund (applies to almost all investments not domiciled in New Zealand). They call it an income tax but the calculation is effectively a wealth tax.
Tax calculation is based on cost basis converted to NZD, the foreign exchange conversion rate can be either the rate at close of day that the transaction took place, the mid-month rate, or the rolling 12-month average (the latter two values can be sourced on the IRD website, apparently). Whichever of those 3 is chosen has to be applied to all transactions.
There are a few different ways to calculate FIF “income” but most common are FDR (Fair Dividend Rate) and CV (Comparative Value).
FIF Exemption threshold: If the cost basis of all foreign investments is less than $50,000 NZD, FIF tax does not apply until cost basis > $50k.
FDR:
Take the market value (MV) on 1/April (converted to NZD), if this value is greater than $50,000 NZD, pay tax on 5% of the MV.
Eg. if I have $200,000 NZD of TSLA shares, 5% of this would be $10,000, multiplied by my income tax rate of 33% = $3,300 tax to pay.
However, if a buy and sell of a particular asset occurs in the same income year (1/April - 31/March) then the Quick Sale Adjustment rules take effect: Calculate the “Peak holding Differential” by taking the maximum number of shares held within the income year, subtract the number of shares held at the beginning and end of the income tax year, and take the lower number. EG. On 1/April hold 500 shares, buy 300 shares and then sell 50.
(500 + 300) - 300 = 500
(500 + 300) - 50 = 750
The Peak Holding Differential is the lower of 500 and 750, so 500.
Take the average cost of the shares acquired within that income tax year (let’s say 300 shares @ $250 NZD) to calculate the Peak Holding Method amount = 5% * 300 * 250 = $3750
Take the lesser of that value and the actual profit calculated using the average price of all shares purchased in that income tax year, in this example we’ll say the 50 shares were sold for $400 ea so (50 shares * 400) - (50 shares * 250) = $7500.
So the lesser would be $3750.
Right, that’s the FDR Method, an investor can also calculate tax owing using the CV Method and select whichever is lower (again you have to select either the FDR Method or CV Method for all investments, you can’t simultaneously use FDR for your TSLA shares and CV for your rental property portfolio in Nepal).
CV:
CV is much simpler, effectively Market Value on 31/March - Market Value on 1/Apr + Dividends - acquisition costs (such as exchange fees and foreign dividend tax).
Yes, all investors in NZ hate this system, this year is my first year being above the 50k threshold so I am currently looking for an accountant to help me with it.
I’m hoping I can convert my portfolios to joint accounts with my partner which raises the exemption threshold to 100k (for joint accounts only).
Oh my… sorry to hear that 
We Poles tend to complain about everything, but we have a truly simple 19% cgt, I’ll now use NZ tax system as a contr argument in such discussions 
But jokes aside, I assume that with CV you always pay tax on the market value change, while with FDR there is this QSA scheme that has a different logic. All of the above is calculated per asset, not whole portfolio…
With the current implementation I think it would be hard to implement it. I plan to add mid-year tax year start, which would mostly enable the CV method. But the previous year’s value might be tricky.
As I’ll be doing a round of improvements around taxes, I’ll think how to better enable this case. The biggest hurdle is that taxes are calculated per lot, and these rules require tracking the whole asset, plus making some portfolio-wide decision at the end. Maybe a solution would be to calculate just the CV as easy estimation, and provide some helper information to assess FDR.
Capitally is meant to help you with assessing your tax standing, not necessarily replace an accountant, and I would definitely use one with such a system.
More or less, yes, CV looks simpler but you pay tax on capital appreciation which could be massive.
Let’s look at my RKLB position: 2500 shares @ $6.46 NZD purchased after 1/Apr/24
FDR = 5% * MV at 1/Apr/24 = 0 * 33% (income tax rate) = $0
CV = $111,000 (MV at year end) - 0 (MV at year start) - $16,000 acquisition costs = $94,000 * 33% (income tax rate) = $31,350
… First time I’ve actually looked at that, I hope I’ve got that wrong, $31,000 in tax on paper gains, with that value alone, I think I’ll be going FDR this year lol.
You always pay FIF tax on either the CV method or the FDR method (technically there are two additional methods, but I believe they are quite niche and won’t apply to me) if your cost basis goes above 50k (100k for joint accounts, if I have a 80k individual portfolio and a 80k joint portfolio, I would pay FIF tax but my partner wouldn’t).
You would calculate the CV and FDR for every asset, add all CV values together, add all FDR values together and then select the lesser of those two values. Think about it this way, when filing taxes for the year, you tell the IRD whether you are filing as FDR or CV for that particular year.
I honestly expected this to be the answer and that’s all good.
I’ve used Sharesight in the past, which is actually a New Zealand company, but I haven’t paid for the highest tier subscription which is required to calculate FIF tax, I’ve found Capitally much more useful since switching.
As there’s no FIFO requirement, this will actually be much simpler once there’s support for Average Cost - which keeps a single “variable lot” for each position.
It’ll still be tricky to implement two systems to compare at the end, but maybe doable. The only downside of this system, is you cannot track the tax in realtime, as the tax calculation event is at April 1st. But you will be able to just include the next April 1st to see the current tax estimate (possibly with FDR/CV chosen).
I hope to be able to deliver before tax time, but it’s very hard to estimate anything lately due to many competing priorities.
Oh, great to hear that! I always thought that Sharesight is an Aussie thing. Btw, future Capitally tiered plans will have tax support from the very lowest one.
If this wasn’t possible with the current implementation, I wouldn’t expect it to get much (if any) dev time, let alone high priority dev time, I can’t imagine there are many Capitally users itching for FIF support lol.
Personally, I’d much rather see support for double-entry transactions, better support for cash importing and at least some recognition of Options.
I know you’ve got a lot on your plate and am a happy customer so far.