FIF Income in New Zealand: A Plain-English Tax Guide for Investors
FIF Income in New Zealand: A Plain-English Tax Guide for Investors
16th July 2025
Stephen Ryan
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Disclaimer: The FIF rules are technical, so the below article is an oversimplification with the aim of explaining the core of the FIF rules without getting bogged down by jargon. For how the FIF rules apply to you, get in touch with us by clicking here.
If you own overseas shares, ETFs, or managed funds - even through Forsyth Barr, Craigs, or Sharesies - you might be liable for FIF (Foreign Investment Fund) tax. Here's what it means, what IRD looks for, and how to stay compliant.
What Is FIF Income?
What Is FIF Income?
FIF stands for Foreign Investment Fund. It's a tax regime used by Inland Revenue to capture income from overseas investments held by NZ tax residents. You may be subject to FIF tax if you've brought more than $50k NZD of:
Foreign shares like Apple, Alphabet, Microsoft, etc
Managed funds with offshore exposure
ETFs and Index Funds like Vanguard International Shares Select, iShares, etc.
Foreign life insurance or superannuation schemes
Why Does This Matter?
Why Does This Matter?
Most investors are surprised to learn that:
You pay tax on calculated income, not actual dividends received
Some overseas tax credits are claimable, some are lost
The $50k de miminis is only for individuals, so Trusts and Companies with any FIF exposed investments are liable from the first dollar invested.
Sometimes PIEs are more tax efficient, sometimes they're not.
There is significant tax planning opportunities around investment purchasing and structuring.
Inland Revenue is actively auditing FIF & crypto investors.
Failure to disclose FIF income is considered non-compliance and could trigger penalties or reassessments.
Investment examples where FIF probably applies
Investment examples where FIF probably applies
US shares via a brokers like IBKR, ASB, or Sharesies
Managed Funds with investments in Overseas companies from Craigs, Forsyth Barr, or Jarden
Index Funds like Vanguard, or S&P500 via InvestNow, Simplicity, or Kernel
Investment Examples where FIF doesn't apply
Investment Examples where FIF doesn't apply
ASX-Listed companies on IRD's exempt list
NZ PIE Funds with International Shares
Overseas Bonds, Notes, or Term Deposits
How Is FIF Income Calculated?
How Is FIF Income Calculated?
*Disclaimer: This section is highly simplified, and there are other less common methods available that are not mentioned here. This article is an oversimplification with the aim of explaining the core of the FIF rules without getting bogged down by jargon
If your offshore investments cost more than NZD $50,000 for an individual ($100,000 for a joint holding), you must calculate your taxable FIF income. There are two main methods, and you can switch between them from year to year, but you must be consistent in using the same method for all your investments in a given year - you can't cherry pick one method for some investments and another method for others:
1. Fair Dividend Rate (FDR)
1. Fair Dividend Rate (FDR)
You are taxed on 5% of the opening market value of your offshore investments.
Example:
Opening market value = $200,000
FIF income = 5% of $200k = $10,000
Tax payable ≈ $3,300 (at 33%)
2. Comparative Value (CV)
2. Comparative Value (CV)
You pay tax on the actual increase in value plus dividends.
Losses are reduced to $nil, and are not carried forward.
Example:
Start value = $200,000
End value = $195,000
Dividends = $2,000
FIF income = ($195k + $2k) - $200k = –$3,000
No tax payable, but the loss is not carried forward to offset future income.
Common Mistakes
Common Mistakes
❌ Misreporting income from Vanguard Funds, These are foreign shares, even if bought in NZ dollars
❌ Misreporting income from Vanguard Funds, These are foreign shares, even if bought in NZ dollars
❌ Not claiming the correct fees, brokerage fees for buying and selling are typically not deductible for long-term investors, while portfolio management fees are
❌ Not claiming the correct fees, brokerage fees for buying and selling are typically not deductible for long-term investors, while portfolio management fees are
❌ Applying FIF rules on a portfolio costing < $50k. While you can elect into the FIF rules, you may not need to report FIF income at all if under the threshold (individuals only)
❌ Applying FIF rules on a portfolio costing < $50k. While you can elect into the FIF rules, you may not need to report FIF income at all if under the threshold (individuals only)
❌ Using a mix of FDR and CV methods, You must choose one method consistently for all relevant investments
❌ Using a mix of FDR and CV methods, You must choose one method consistently for all relevant investments
❌ Over or underclaiming overseas tax credits. Some distributions come with overseas tax credits attached, the extent to which you can claim these is on a case-by-case basis.
❌ Over or underclaiming overseas tax credits. Some distributions come with overseas tax credits attached, the extent to which you can claim these is on a case-by-case basis.
What You Should Do
What You Should Do
Review your foreign holdings each tax year
Check whether your total offshore cost exceeds $50k (individuals)
Choose FDR or CV depending on performance and documentation
Ensure your accountant calculates and files this correctly
Keep portfolio records, valuation history, and dividend reports
Why Choose Step Ahead Accounting
Why Choose Step Ahead Accounting
We work with investors across Dunedin and wider New Zealand who have portfolios with:
Forsyth Barr, Craigs, Jarden, ANZ, Sharesies, InvestNow, and others
Complex trust structures and family investment companies
Large offshore portfolios that trigger FIF income and other cross-border tax issues
We handle your FIF tax calculations, maximise tax efficiency, and keep you compliant with Inland Revenue with zero jargon and full transparency.
Ready to Optimise Your Investment Tax?
Ready to Optimise Your Investment Tax?
Book your free Investment Tax Review - we’ll look at your portfolio and let you know if FIF rules apply, and how to manage it right.
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