[Mr Brillo]

HI

Not sure if this is of help to anyone, but...

If you moved to NZ after April 6th 2006, you have 48 months where (most of) your overseas investment income is tax free.

So, if you have a savings account, (i.e sold a house or just have a large sum saved) it would seem sensible to me, until the exchange rate improves and you only need to transfer smallish sums infrequently, to use an instant access offshore sterling account, such as this one from Bradford and Bingley International.

http://www.bbi.co.im/offshore-savings-accounts/offshore-internet-banking/e-access-account.aspx

Any comments would be gratefully received, before I commit to it!

[Super_BQ]

As far as I know, that 4 year tax exemption is world wide starting from the day you arrive in NZ.

Though this may seem attractive to newcomers to NZ, be aware of new changes in the FIF in the following link.

www.taxpolicy.ird.govt.nz/publications/files/vol3offrep06.doc

Basically if you hold more than $50,000 NZ value in shares outside NZ/Australia, the paper profits will be taxed by IRD if you exceed a small threshold return.

Though I assume you're holding cash (savings account) so this may not apply to you. I'm sure this will hit many of those that intend to move to NZ but without realising the impact it has on overseas stock portfolios.

I just don't understand Dr. Culleen's thinking as any finance person knows that in order to diversify risk in your investment portfolio, one must not just look at NZX & ASX companies...

[Trigirl]

Though this may seem attractive to newcomers to NZ, be aware of new changes in the FIF in the following link.

under the 4 year exemption you will still be exempt from FIF taxes too.

if you read some of the background to the new rules effectively as NZ has no capital gains tax you can completely avoid paying tax on investments held in jurisdications (like the UK) where it is more normal for some companies to reinvest profits rather than paying them out in dividends. in NZ and australia the corporate tax systems favour companies that pay out their profits as dividends - and hence most of them do exactly that.

these rules attempt to put NZ companies on the same tax footing as overseas companies when looking to attract investment from NZ based individuals - whether they manage to do that I think remains to be seen.

luckily given the exemption its not something i need to worry about for 4 years!

[Super_BQ]

yep. 4 year tax exemption is FULLY inclusive. But my point being is when a new resident comes to NZ, they may find that AFTER 4 years, their overseas investments will be suject to further taxation.

UK is NOT exempt! Only exclusion is investments in Australia (for that matter I don't understand why because strickly speaking, they're a foreign country just like Canada is to the US).

The majority of New Zealand do not know much about investments in financial markets. (or a lack of tax planning). When a company issues dividends, not only the company pays tax but ALSO the shareholders are taxed again (minus the dividend tax credit). Anotherwords, does this maximise the goal of a retirement portfolio?

Maximising shareholder wealth does not mean issuing dividends. Though in the case of blue chip (lower risk value) companies such as a electric power company; where their growth is limited; then dividends may be their only option to show shareholder wealth.

In the case where investors have 30 or 40 years of their life before they cash in their portfolio, capital gains is almost ALWAYS preferred than dividends.

Most people seem to miss that keeping profits within the company is advantageous in many respects. Primarily the balance sheet will show an increasing of assets (by retained earnings) and naturally, the share price will rise to reflect this gain. Results in a capital gain and we all know that captial gains aren't taxed in NZ (unless speculated).

Growing companies that need capital have only 3 ways of raising funds for their ventures. A) They can get a bank loan B) They can issue shares and C) They can issue corporate bonds

Option B is the cheapest because option A & C require payment of interest over the principle amount. HOWEVER, there's another option that is even better than A,B,&C. That is the PROFITS that the company makes. If these very profits are used up by paying dividends, then the company can't grow ;

Over the past 2 years, the IRD tax dept. has re-iterated that NZ does have capital gains tax. Many property owners have been stung by recent waves of tax audits. The rule is simply this:

If you buy ANY land, house, commercial property, or even shares WITH THE SOLE INTENTION TO MAKE A PROFIT, then you'll have to pay capital gains tax. If you're business is into buy and selling houses, you'll be taxed. If you buy NZ or Australian shares today and sell it for a profit 2 months later.. you'll have to pay tax on the capital gain.

The key factor again is the INTENTION to profit or not? If the intention is for retirement purposes, then Captial gains tax does not apply with the exception of the new FIF rules which state overseas (INCLUDING THE UK) portfolios (investors holding shares from companies), will be taxed on the paper gains over a certain %.

BQ

[Trigirl]

UK is NOT exempt!i didn't say it was - i said at the moment (ie before the new rules come in) you can get round paying tax by investing in shares where its more normal to pay out less - or nothing - in dividends.

the lesson on investing - i'm not quite sure if it was given in response to my post - but if so it was really very unnecessary. but if it was just a general wish to educate then i'm sure someone will be very pleased.

i'll reiterate the point you seem to have either missed or ignored. in new zealand (or to use your style IN NEW ZEALAND) the corporate tax system is designed so that companies are more likely to pay out dividends than certain overseas companies are. private investors are taxed on dividends and not on capital gains. these new rules are intended to offset the possible advantages that therefore arise if you invest in an overseas company with it likely lower % dividend payouts.

now - that doesn't mean the best investment strategy is now to invest only in NZ - even given the tax you'll pay it could well still be better to have a balanced portfolio that includes a number of overseas companies - but thats part of the investment strategy questions we all have to continue asking ourselves.

[Super_BQ]

Trigirl. please forgive my capital letters. For some, big letters help to show which point of interest is being discussed - can be quite confusing when several issues that cover 2 different countries are discussed.

My discussion about investing in this thread may be out of line - my appologies. However, I do believe that for many new migrants coming to NZ from coutries like the US, they will have considerable investments in shares ; for which in NZ's perspective, considered 'offshore' (with the exception of Australia). After all, every country has their right to do things differently. Big problems will come to those residing in a new country by being ignorant of any tax laws.

the corporate tax system is designed so that companies are more likely to pay out dividends than certain overseas companies are.

Can you explain why is it beneficial for companies in NZ to pay dividends? From my understanding, the taxing on corporate companies in NZ is no different than how companies are taxed in UK,US, or Canada. They all use a lower corp. tax rate (33% in NZ, 30% in Aus, 22% in Canada) and any dividend paid, the shareholder gets a "dividend tax credit/rebate" to avoid double taxing of the same profits.

these new rules are intended to offset the possible advantages that therefore arise if you invest in an overseas company with it likely lower % dividend payouts.

If there are considerable advantages, then all New Zealanders should be entitled to these advantages. The new rules are outright discriminatory between those that invest globally vs. those that invest locally (with execption of Australia because somehow they are not considered foreign).

Previous to the new FIF tax laws. NZ residents saw no tax liability if they invested in say Contact Energy shares (NZX listed) or if they invested in Coca-Cola (NYSE listed). Both companies pay a healthy dividend. In fact it only seems fair because we see both local and imported products sold in NZ. Products like KFC, Coca-Cola, Tyco, Sony, Xbox, etc are all foreign and it seems appropriate for local residents to invest into these products.

But the new FIF laws say, "Hey, don't buy shares in these foreign companies because IRD will tax you. Instead, you should invest in NZ & Australian companies because they will be tax free". But what Dr. Culleen isn't telling you is for the past decade, the NZX has underperformed compared to the US indices. The dismally low returns from the NZX is probably related to the listed companies' preference of paying dividends instead of maintaining capital gain.

Again, i'm sorry if I over explained everything - NONE to be aimed as an attack to you (or anyone). If I were to really be irate, I would go on about the problems with Kiwi Bank & Kiwi Saver...

BQ

[SteveO]

I am very interested in Mr Brillo's question about an offshore account and or any high interest account recommendations you good people may have?

So, if you have a savings account, (i.e sold a house or just have a large sum saved) ............to use an instant access offshore sterling account, such as this one from Bradford and Bingley International.

http://www.bbi.co.im/offshore-savin...ss-account.aspx

Any comments would be gratefully received, before I commit to it!

Thanks!

[eternalkiwi]

Part of the intention behind the new FIF regulations is to build NZ's homegrown financial markets and provide additional encouragement for NZers to invest in NZ for the greater benefit of NZ.
Whether this is the best way to benefit NZ is arguable, but this is what our current Government have decided on.

At least for new migrants there is a 4 year window, and by that time we may have different government with a more global hands-off perspective.

At least the government has not introduced a Capital Gains tax to NZ, though with the new business tax review starting soon, who knows what changes that will create.

[Super_BQ]

Part of the intention behind the new FIF regulations is to build NZ's homegrown financial markets and provide additional encouragement for NZers to invest in NZ for the greater benefit of NZ.

What I don't understand is it's perfectly fine for the NZ gov't to invest tax payer's money into foreign stock exchanges for the NZ SuperAnnuation Fund. But the individual folks living in NZ can't partake in the same activities?

http://www.stuff.co.nz/3956743a10.html

It's quite clear the gov't tell the people to do one thing while it does the other. The term "policisian" sound pretty universal world wide.

At least the government has not introduced a Capital Gains tax to NZ, though with the new business tax review starting soon, who knows what changes that will create.

I would like to kindly reiterate that NZ does indeed have capital gains tax (as mentioned from another thread). However, it's not just openly spoken about. What the fuss about capital gains tax in Wellington is making this issue compulsary. That is regardless of the venture, capital gains will apply to everything.

The key note, "If the venture is for the sole purpose of making a profit (whether from real estate, share market, or like any business) then there is indeed capital gains tax". It would be hard to convince the IRD tax auditor that you sold 3 houses within a 2 or 3 year of owning them and said the purpose of buying these titles was for long term retirement.

BQ

[MarkS]

What I don't understand is it's perfectly fine for the NZ gov't to invest tax payer's money into foreign stock exchanges for the NZ SuperAnnuation Fund. But the individual folks living in NZ can't partake in the same activities?

I don't entirely disagree with the general point, but (yet again) I want to point out that the new FIF rules do not stop New Zealanders from investing overseas, they merely tax overseas portfolios differently to domestic portfolios. Yes, generally those overseas portfolios are taxed more highly, but not necessarily so - a foreign share yielding say 7% will be taxed more lightly than a domestic share yielding 7%!

BQ's point about capital gains tax is spot on though - it does exist, although it does seem to be the tax that dare not speak it's name. What really annoys me is that it mainly seems to come down to intention - the key criterion for whether a capital gain is taxable is whether, when you bought it, you intended to sell it for a profit. Absolutely barking...

[eternalkiwi]

The reason why intent is important is that intent helps to show whether the item was an asset (capital) or say inventory or expenses (revenue). Revenue is taxable capital is not.

If you regularly buy and sell goods, IRD would tax the net profits you received from trading. IRD do not make any distinction on the type of goods traded, whether they be foodstuffs, buildings or illegal goods. If you regularly trade you are deemed to be in business and need to pay tax.

Therefore if you can show that the reason you purchased an item was for the purpose of generating revenue, the sale of that item would not normally be taxable, if you purchased an item to sell at a profit, the sale of that item would normally be taxable. For example, selling a van that was used as a delivery vehicle would not be taxable income, though selling a van from a car sales yard would be taxable.

[Mr Brillo]

Hi there

Just to go back to the original point I was making......

BBI.CO.IM now offer 5.85 (5.45 after 31/03/07) interest calculated daily and paid monthly. Are there better returns for INSTANT access that anyone knows of??

Thanks

[MarkS]

I had a look around when you first posted the link, and it was the best rate I could find then. We were going to open an account, but have ended up moving all our money over instead.

There's some comparison tables for offshore accounts at sites like www.moneysupermarket.com I think, could be worth trying. But the BBI deal sounds like a good one to me!

[MarkS]

Just checked out www.moneysupermarket.com/savings, and the top deal they mention is 5.75% at Britannia International. That includes 0.50% bonus "paid if only one withdrawal is made per calendar year and monthly deposits are maintained." BBI deal is probably better.

[SteveO]

Mr Brillo,
Thanks for raising this, I have looked and agree the BBI account looks very appealing, I have very little financial experience of NZ v UK offshore savings accounts but this looks a good deal to me.

I wonder what other members are doing as potentialy 4 years without tax on what could be a resaonable chunk of money for many, would seem to be something that is worth getting right.

BR Steve

[Mr Brillo]

Hi Steve

You are quite correct, it would be really helpful to share experiences. Whilst cash is certainly NOT king and much of the reason for moving to NZ was a change of lifestyle / getting away from the rat race etc, it still remains vitally important to get the best out of what you have and not to get ripped off by any financial institution / person.

The proportion of posts on the whole of this forum that are related to financial security seems to be very small. It doesn't matter how much you have, it's what you do with it that matters - and with all the people that look at this, there must be so many good and bad experiences that will help.

There does seem to be a lack of regulation and protection for the consumer in NZ, so the better informed we are, the better protected against "conmen" we are!

I use moneysavingexpert and thisismoney for the most impartial UK advice, moneysupermarket and similar are not independant and do not give info on ALL the offers out there. So far as I know, there is no-one like Martin Lewis and moneysavingexpert in NZ. If there is, I would love to hear.

Brillo

[alan999]

Hi there

Just to go back to the original point I was making......

BBI.CO.IM now offer 5.85 (5.45 after 31/03/07) interest calculated daily and paid monthly. Are there better returns for INSTANT access that anyone knows of??

Thanks

Am I being lazy or missing something. i could go offshore and get this rate, down to 5.45 as you say for 49 months then remember (not like me) to get it out before its taxed and also run the risk of some new rules that would tax it anyway.

Or just put it in ab asb account paying 7% which I think would pay 5.04% after 39% tax (don't think acc is paid on investment income but it's only an assumption).

So unless I've missed something it isn't worth the hassle/ risk, and if I could find an account paying just a bit extra in nz than the asb one be no better.

If I'm wrong please tell me before I make a big mistake.

Alan

[Nathan]

With the continued decline of the US$....in particular, compared to the NZ$, it's really hard to think of what I hve as valuable investments! Sheeesh, I hope it turns around before we have to transfer any signifiv=cant amount of money!!

Sorry, didn't mean to hijack the thread....

I'm beginning to think the NZ approach of putting the money in Kiwi real estate makes sense. But I'll change my mind!

[Mr Brillo]

Alan

Our cash is in £'s in the UK and at current exchange rates, we don't want to move it over! Therefore BBI is the best home for our cash which gives us instant access, should exchange rates improve and we want to (or need to) move.

PS - You can get better than 7% over here in NZ - 7.35% at Raboplus or 7.8% for 3 month term deposit.

If you're happy with the current exchange rate and NZ interest rate - you could move the cash across and invest here, it might be a bit less hassle, but it's not really much effort to keep an eye on UK interest rates and NZ$ / GBP rates.

By my reckoning though, if you are already in 39% tax bracket, then 7% after tax (x0.61) = 4.27%. (Doesn't it??) If you are not earning though, it's a different matter.

[alan999]

I don't know how I can make so many stupid mistakes.

Obvious reason for keeping it in stirling and I can't even work out %s now.

So if I was to use BBI and get interest tax free, what is involved when I transfer it to NZ with regard to declarations etc. Or does a lump sum just appear in my NZ account no questions asked, inside the 49 month rule of course.

Thanks for straightening me out on this.

Alan

[UK Neil]

Im in the same boat here...trying to work out how to get the best return on the cash from the house sale in a savings account while we find our feet out there.

If we were to leave it in an account in the UK, is it right that we would not have to pay uk income tax on it as we are not resident in the uk and we would also not pay tax on it in NZ due to the 48month tax break?

Offshore accounts dont seem to pay an awful lot more than i can get in UK accounts either? Am i just looking in the wrong place?

I know the rates are better in NZ but im assuming that the 48month tax break rule doesnt count if its in an account in NZ earning interest which means that your better to leave the money in the UK and pay no tax at all, is my thinking joined up or am i confusing everyone else as well as myself !?