The $50,000 Foreign Investment Funds (FIF) Rule Every NZ Investor Should Know

If you’ve invested in overseas shares (like Hatch, Sharesies or similar platforms) and the total cost of your investments went over $50,000, you may be taxed in a way that’s completely different from what most people expect.

This isn’t about actual profits or dividends.

It’s about what Inland Revenue (IRD) assumes you could have earned, not what you actually did.

Here’s a simple guide to:

• What the Foreign Investment Funds (FIF) rules mean
• What you can do to stay on top of it at tax time

What is the $50,000 Rule?
Foreign Investment Funds (FIFs) are a type of offshore investment that are subject to special tax rules in New Zealand.

If the total cost of your overseas shares (not the current value) goes over $50,000 NZD at any time during the tax year (1 April to 31 March), you need to calculate and declare FIF income in your tax return.

FIF income is attributed to the investor. This means you could be taxed even if you haven’t received any cash income. Once you cross the $50,000 threshold, you must calculate income under the FIF rules for all such investments – not just the amount above the threshold.

If no exemptions apply, your FIF income must be calculated using one of these methods:

• Cost Method (CM)
• Comparative Value (CV)
• Fair Dividend Rate (FDR)
• Deemed Rate of Return (DRR)
• Attributable FIF Income Method

What Should You Do?

Here are five practical steps to make tax time easier:

1. Check how much you spent on overseas shares between 1 April and 31 March. If it ever went over $50,000 NZD, the FIF rules likely apply.
2. Download your FIF Tax Report from your investment platform (like Hatch or Sharesies). Some platforms charge a small fee for this, but it’s worth it.
3. Send the report to your accountant. They’ll use it to calculate your FIF income accurately.
4. Ask early. If you’re unsure about whether the rules apply to you, check before filing.
5. You can also try the IRD’s free calculator. I have put the link at the end of this article.

Are There Any Exemptions?

Yes – but they’re limited.

Some types of investments may be exempt from the FIF rules, such as:

• Portfolios that stayed under the $50,000 cost threshold throughout the year
• ASX-listed Australian companies with a franking account
• Certain Australian unit trusts and super schemes

If you’re unsure whether your investments are exempt, check with your accountant.

Changes might be coming

IRD is currently reviewing how FIF rules affect migrants and returning Kiwis, especially those facing tax on paper gains.

Proposals include:

• Delaying tax until shares are actually sold
• Allowing migrants to use a method based on actual returns (not assumed ones)

These changes are still under review — but they show growing concern around how blunt the current rules are.

Takeaways

But if you know how they work, and have the right info, you can

• Stay compliant;
• Reduce your tax bill; and
• Reduce your risk of an IRD review

– Baqir Hussain, FCCA

Director, Finex Chartered Certified Accountants