Calculate FIF Income Tax with FME
With the emergence of online investment platforms such as Hatch or Sharesies, people in New Zealand can buy shares and bonds directly from overseas. If you have been investing in one of those platforms in the past few years, it is possible you might have to calculate the Foreign Investment funds (FIF) Income Tax at the end of the tax year.
According to the IRD website, you must apply FIF tax rules if you have invested more than $50K NZD in foreign shares (Apple Shares, Vanguard ETFs, etc) in the tax year. There are two methods to calculate your FIF income:
- Fair Dividend Rate (FDR): 5% of the opening market value at the beginning of the income year.
- Cumulative Value (CV): Closing value gains, minus opening value plus costs.
Unfortunately, Hatch or Sharesies does not calculate the FIF Income for you. You will have to pay for an external platform or an accountant. But they do provide you with Excel spreadsheets of all your investment activities with the tax year. With FME, you can easily set up workbenches to calculate your FIF Income and run it each year. It doesn’t cost you a cent. This is how I calculated my FIF Income in Hatch in 2021.
In May of each year, Hatch will publish your investment activities in the Report section. You need to download these CSVs:
- tax-year-ending-2021-opening-positions.csv
- tax-year-ending-2021-closing-positions.csv
- tax-year-ending-2021-dividends.csv
- tax-year-ending-2021-trades.csv
- The FDR method is fairly straight forward to calculate:
Use Aggregator to calculate the Opening Market Value, and AttributeManager to calculate 5% of that value.
I am a long term buy and hold investor, not a trader. The quick sale adjustment does not apply to me.
2. The CV method needs a bit of work:
Calculate the Closing Market Value of the investment:
Calculate Gains: Sales + Dividends
Total Sales: Money received from selling investments
Dividends received:
Calculate Cost: money spent on brokerage to buy new shares
Now you can calculate the CV Income using AttributeCreator or AttributeManager:
Here you go. Now you have the FDR and CV Income side by side. You can choose which method to file on the IRD website.
