Similar to shares, capital gains on residential property are generally not taxed. Australia has a similar concept known as franking credits. For example, you may want to invest in a fund that tracks the performance of the top 50 NZ companies listed on the NZX (NZX 50). You can then use the lowest PIR out of those years. You can deduct expenses that relate to the rental from your income, such as insurance, rates, maintenance, and property management fees. ETF Data for Journalists » Here you will find consolidated and summarized ETF data to make data reporting easier for journalism. Investments in overseas companies and managed funds costing less than NZ$50,000 and Australian shares not included in the FIF regime will usually be treated under the normal income tax rules, when on the basis the shares were not acquired with an intention of disposal, shareholders only pay tax on dividend income they receive. Since banks' effective tax rates hover in the range of as high as 25% to 35%, these are likely to benefit more from the tax reform plan. Your KiwiSaver provider will handle all the taxes for you, so you don’t have to do anything apart from making sure they have your correct PIR. Our annual fee is 0.34% p.a. an ethical investment index). Kernel is 100% Kiwi owned and are committed to no-nonsense index funds with low, transparent fees. Kernel is a passive alternative to ETFs, offering six index funds that aim to offer value and diversification. In general, there are two methods in which you pay tax on your investments. Let’s take a look at what tax applies to different types of investments. Dividends automatically have RWT deducted at 33%, at the time the dividend is paid to you. Index funds and ETFs both charge annual management fees (expressed as a percentage), this fee comes out of the fund automatically on a daily basis. Recently a tax accountant contacted me regarding my post on comparing cost on ETF investing between SmartShares and Superlife. In this article, we’ll take a look at some of the more common investment tax … Once you have selected a method, and calculated your taxable income, you will need to pay tax on that income at your marginal tax rate. Both are regarded as long-term investments. Index ETFs. Let’s say they made an investment that would produce $4000 of interest income. Index funds have a number of advantages over ETFs, and we explore these in detail below. You do not have to include listed PIE income on your tax return, but if your marginal tax rate is less than 28% you may want to do so to claim any excess imputation credits to reduce your other taxable income. Further Reading:IRD – Questions & answers: Cryptocurrency and tax. The most common method to convert foreign amounts to NZD is to use the actual exchange rate on the day of each transaction. Kiwi Property Group, Vital Healthcare Property, Owning certain Australian shares, like Xero. Phew, that was a mission to write up, and I am just scratching the surface of tax in this article. What Happens If Your Investing Platform Shuts Down? The use of incorrect PIRs has been in the news in recent months, as the IRD have been warning hundreds of thousands of taxpayers to correct their PIRs. For example, if I earned an income of $45,000 two years ago, and last year doubled my income to $90,000, I can still use a PIR of 17.5%, If you’re on a 30% or 33% tax rate, as PIRs are capped at 28%, $2,000 of their interest income will be taxed at 30%, Capital gains on bonds are generally taxable, Fees you pay in relation to earning interest from P2P Lending (such as Harmoney’s service fee, or Lending Crowd’s Interest Flex) should be tax deductible, Capital losses on P2P Lending (such as write-offs), are generally not tax deductible, Most funds offered by local fund managers such as Milford and Devon, Most investment funds offered by our banks, Listed property shares E.g. 10 Top Investments for Young New Zealanders, Investing in the US Stock Market from New Zealand, Barefoot Investor-Friendly Financial Products in New Zealand. The content of this article is based on my personal opinion and should not be considered financial advice. ETF, ETFs, Hatch, Index Funds, Kernel, Money Education, Sharesies, SmartShares I’ve had a number of emails asking about the changes to Smartshares, in particular the introduction of their new S&P/NZX 50 ETF (NZG) and how it compares to their existing NZ Top 50 ETF (FNZ). As an investor, the rate at which you are taxed at depends on what kind of fund it is. For other cases… Further Reading:Money King NZ – NZ Dividend Calculator (Google Sheets)Sharesight – Calculating taxable gains on share trading in New Zealand. ETF tax differs depending on the location and domicile of the fund. New Zealanders must pay tax on their worldwide income to the IRD, including income from their investments in Foreign Investment Funds (FIFs). This income could be (copied from the IRD): The Income Tax Assessment determines whether you have a tax bill or tax refund for the year, correcting any under or over payment of tax (e.g. You don’t have apply the de minimis exemption if you’re a de minimis investor. Capital gains on shares are generally not taxable, that is unless the IRD considers you a “trader”. Further Reading:IRD – New Zealand tax residents with interest and dividends from New Zealand bank accounts and investmentsASB – What RWT rate should I use? Withholding tax on dividends can get trapped in an offshore investment entity (i.e. Shares you buy on Hatch would have 15% US tax deducted from their dividends. In rare instances, a provider will change a price or product before we've had a chance to update our information; double check prices first before making any decision. The purpose of imputation credits is to mitigate double taxation, given dividends are essentially a company’s profits, which they may have already paid company tax on. In NZ - let's say our family who are retired NZers, living in NZ - invest 500,000 into Simplicity balanced fund for arguments sake. Are you investing in too many funds? At Sharesies, we make things easy by paying income tax on your investments for you. This means if the NZD gets stronger against, for example, the USD, any ETFs held in USD will reduce in value (in NZD). Listed PIEs include: Dividends from listed PIEs may contain Excluded income. For Australian investors, ETFs create tax complications because instead of classifying them as ordinary company shares, the ATO classifies ETFs as trusts. Active ETFs. Index funds, and ETFs that track an index, are growing in popularity because of the diversification benefits, lower fees, and typically consistent outperformance compared to actively managed funds. View our MDZ Stock Quote. The term deposits offered through InvestNow are not PIEs. Multi-rate PIEs (MRPs) are the most common type of PIE fund and are taxed at your PIR. Check here to see if the ASX listed company you own is exempt. Examples of MRPs are: Listed PIEs are PIEs that are listed on the sharemarket. This ETF has total assets of almost US$450 billion, and has an annual management fee of 0.04% p.a. SmartShares NZ Dividend ETF (DIV) Designed to … You need to work out your rate based on the income from each of the past two tax years. These exchange traded funds seek to replicate and track a benchmark index as closely as possible. If the two holders of a joint account have different RWT rates or PIRs, the investment provider will usually tax the account at the higher rate. Index Funds and ETFs invest in shares, but not always. It’s important to give your fund manager or fund platform your correct PIR, as you can’t claim back any overpaid tax with MRPs. We are a journalistic online resource with the aim of providing New Zealanders with the best money guides, tips and tools. Cumulative Value (CV) – Closing value plus gains, minus opening value plus costs. expense you pay, particularly when it comes to tax on your investments. These are taxed at your PIR, so are beneficial for those who have a PIR that’s lower than their RWT rate. I’d say the most important things to know are: Found this article helpful? InvestNow Tip: Use the ‘Fund Type’ dropdown on InvestNow’s Fund Search page to filter funds by type. In many cases, Resident Withholding Tax (RWT) or PIE tax is automatically deducted from you at a certain point in time, like when the income is paid – in the same way PAYE tax is deducted from your salary or wages. Using the Exchange Traded Fund (ETF) Selector below, you can view a list of all available ETFs that Direct Broking has access to on the New Zealand (NZ) and Australian (AU) share markets. ETFs held for more than a year are taxed at the long-term capital gains rates, which goes up to 23.8%, including the 3.8% Net Investment Income Tax, while those held for less than a … ... (ETFs). You can keep your dividend statements, and claim this back via your tax return, as there are provisions to avoid double taxation between NZ and other countries. However, a tax return is required if you need to declare some source of income that the IRD isn’t aware of yet. In NZ we use marginal tax rates. $60 a year (regardless of the number of investment options you invest in, or the number of times you change investment options). You can choose to apply the above FIF rules (particularly if they work out in your favour), but if you do so, you must use them for the next four years. Your free guide to Five Low-Fee NZ Index Funds, ... Summary: Hatch provides access to over 2,700 companies and over 450 ETFs, with Vanguard's S&P 500 ETF being one of the most index funds popular.in the world. Administration fee. We link to other websites throughout this website, but take no responsibility for the content they publish. I won’t get into detail into the calculations, but fortunately InvestNow and services like Sharesight can perform the calculations for you, or you can use IRD’s calculator. You will still need to pay tax on their dividends, but unlike imputation credits, New Zealanders cannot claim franking credits. He pointed out that apart from the admin fee and management cost, investors also need to consider the tax implication when investing. Principal launches PQDI ETF to help U.S. taxpayers boost after-tax income. You need to choose the correct tax rate or you could face an unexpected bill at the end of the tax year. Another example, is someone who earns $68,000. Popular examples of Foreign Investment Funds (FIFs) are anything you buy through Hatch, or Australian Unit Trusts (AUTs) you can find on InvestNow. In NZ, investors also need to think about tax, with the key element of this being our Portfolio Investment Entity (PIE) tax regime. If you hold other kinds of overseas investments, the way they are taxed may differ. Returns and Fees Frequently Asked Questions Legal Documents NZ Super Rates Invest For Children. Therefore, any investor with a lower PIR pays too much tax, which they can’t request back from the IRD until the following May via a tax return (assuming they have other taxable income they can offset against). This $4,000 would push them into the highest tax bracket, but not all their income would be taxed at 33%: This person could elect to either have a RWT rate of 30% (and have extra tax to pay at the end of the year), or a RWT rate of 33% (and receive a tax refund at the end of the year). ​We cannot accept liability for any decision made based on our information. This could be income from (copied from the IRD): There are other reasons you may need to complete a tax return, such as leaving or arriving in New Zealand part-way through the tax year. 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