Investment Tax Changes Effective 1st April 2007

Removal of Grey List Countries
Removal of the Grey List countries with the exception of Australia.

New Zealand and Australian shares and managed funds exempt capital gains tax
Australian equities are considered domestic rather than international investments and are exempt capital gains tax for non-trading investors.

Note: dividends on Australian shares are taxed at 30% and the "franking credits" cannot be offset against your New Zealand tax liability.

Portfolio Investment Entity (PIE)
UK Pensions must be transferred into QROPS approved investments in New Zealand.  This means that the fund needs to be a 'superannuation' fund.  Superannuation funds through a New Zealand registered fund manager registered as PIE (Portfolio Investment Entity) the investment return (capital and income) is tax free for New Zealand shares and Australian shares (must have a franking account) and other investments outside New Zealand are taxed on the first 5% of the growth and income, at the investors marginal tax rate up to a maximum tax rate of 30%. 

The tax is paid by the fund manager and provided PIE funds are the only source of income there is no tax liability to the individual and no tax return is required.

Other Investments
Where you have other investments which are not part of the UK Pension transfer process there are a number of ways that these can be invested.

    Foreign Investment Fund (FIF) Regime
Under the de-minimis rules individual investors are exempt if they hold less than $50,000 (original investment value) in investments outside New Zealand (Australian direct share investments and investments held in PIE entities are exempt).  This exemption does not apply to investments held by Family Trusts.

For investments falling under the FIF Regime the investment return (capital and income) can be taxed either by the Fair Dividend Rules (FDR), or the Comparative Value Method (CV). The tax is paid by the individual and  is subject to provisional tax rules.  Its best to discuss this on an individual basis regarding the types of investments, risk/return profile and best tax structure for income or capital growth.  Please email Alison Renfrew, CLU, CFP to discuss your individual situation.