2025 Tax Guidance: What Advisers Need to Know

Inland Revenue is consulting on updates to the FIF regime, aiming to make it simpler for investors in global funds and more attractive for new migrants. Proposed changes include allowing some new migrants to pay tax only on dividends and realised gains (not unrealised gains) for a transitional period and reviewing calculation methods to reduce compliance headaches for everyday investors.

A new interpretation statement, IS 24/10: Income tax – Share investments, provides the most comprehensive guidance to date for individuals investing in shares. Here’s what’s clarified and why it matters:

• When Are Share Sale Profits Taxable?
  The statement sets out clear criteria for when profits from selling shares are taxable.

  • If shares are bought with the main purpose of resale, as part of a share dealing business, or as part of a profit-making scheme, profits are taxable.

  • If shares are bought for long-term investment or to earn dividends, profits on sale are generally not taxable—unless the above criteria are met.

• Dividends Are Always Taxable
  All dividends, whether from NZ or foreign companies, are taxable income.

  • NZ companies usually withhold tax at source, but clients should check their tax statements for accuracy.

  • Foreign dividends must be self-reported, and clients may be able to claim foreign tax credits

• Foreign Investment Fund (FIF) Rules
  The statement provides practical guidance on when the FIF rules apply:

  • If a client’s total cost of foreign shares (excluding certain Australian shares) exceeds N$50,000, the FIF rules apply.

  • If under the threshold, ordinary tax rules apply (tax on dividends, not on unrealised gains).

It might be a good idea to monitor client holdings to ensure correct application of the FIF regime, especially for those using global index funds.

• Record-Keeping and Evidence
  The IRD expects investors to keep records that support their stated investment purpose, such as:

  • Notes or emails about why shares were purchased

  • Research or advice relied on at the time of purchase

  • Investment plans or lending records

This is especially important for clients who may sell shares within a short period or have a pattern of frequent trading.

• Claiming Expenses and Losses

  • Expenses (like advisory fees or interest on borrowed funds) are deductible only if shares are bought for resale or as part of a share trading business.

  • Losses on share sales are only deductible if the sale is taxable under the above rules.

• Practical Examples and Fact Sheets
  IS 24/10 includes real-world examples and two fact sheets:

  • When the FIF rules apply

  • Dividends and taxable share sales

Inland Revenue has also signalled increased compliance activity around FIF, PIE eligibility, and share investment reporting. Now is a great time to review client portfolios, confirm PIR (Prescribed Investor Rate) settings, and ensure all tax information is up to date.

For a detailed breakdown of these changes and the latest Inland Revenue guidance, see the EY Tax Monthly News Update – Edition 1, 2025.