The FIF Threshold Just Doubled. Here's What you Need to Know

Budget 2026 has raised the Foreign Investment Fund (FIF) de minimis threshold from $50,000 to $100,000. Once the legislation passes, the change will apply retroactively from 1 April 2026, meaning this tax year. For everyday Kiwis who want to invest directly in international shares, this is an opportunity to think about how you structure your portfolio.

When you invest in overseas shares or ETFs, think Apple, an S&P 500 ETF, or anything listed on a foreign exchange, New Zealand tax rules generally require you to apply the FIF (Foreign Investment Fund) regime.

The FIF rules calculate tax differently from simple dividend income. Depending on the method you use, you may end up paying tax even in years where markets went sideways or down.

The de minimis threshold is the exemption that protects smaller investors from that complexity. Under the old rules, that threshold was $50,000. Budget 2026 proposes lifting it to $100,000, meaning if the total cost of your direct overseas investments stays below the $100,000 threshold, you are exempt from the FIF rules. You simply pay tax on any dividends you actually receive, just like a NZ bank deposit. No complex calculations, no surprises at tax time.

The change is subject to legislation passing, but the direction is clear.

The $50,000 threshold was set over two decades ago and had never been adjusted for inflation. In today's dollars, it was well overdue for an update.

It’s important to note the threshold is based on cost price, not market value. The $100,000 figure refers to the original purchase price of your directly held overseas investments, not what they are worth today. A portfolio bought for $99,000 that grows significantly stays below the threshold, because your cost base never changes as markets move.

That is an important distinction. It means that if you invest $99,000 in a global equity ETF today and leave it alone, you wouldn’t need to apply FIF rules to it, no matter how much it grows. You are taxed only on dividends received.

Read more about the FIF de minimis threshold here.

You can buy over 3,000 US-listed shares and ETFs directly through the Kernel platform.

These direct investments do count toward the FIF de minimis threshold, but thanks to the new $100,000 threshold, you have much more opportunity to invest directly in the US market while keeping your tax treatment simple.

These direct assets are different from Kernel's managed funds, like the Kernel High Growth Fund or the Kernel S&P 500 Fund, which are structured as New Zealand PIEs. Kernel PIE funds do not count toward the FIF threshold, which is one of the reasons they work well as a core holding for larger portfolios.

In practice, you could hold $99,000 in direct US Shares or ETFs, and anything extra in Kernel's PIE funds, and only the Shares and ETFs portion counts toward the FIF threshold. These two approaches complement each other well.

The $100,000 threshold applies per individual, not per household.

That means a couple investing together could each maintain up to $100,000 in direct overseas shares (up to $200,000 between them) without either person triggering the FIF rules, provided each person's investments are held in their own name.

If you are setting up investments for your children in their own names, each child has their own $100,000 threshold too.

This is a legitimate way for families to expand access to this tax treatment across multiple people. If you are currently pooling overseas investments in one person's name, it is worth thinking about whether a different structure is more FIF-friendly.

Because the threshold is based on cost base rather than current value, the things that move you over the line are not market movements. They are the decisions you make, and sometimes forget you made, about how your money is invested.

If you are on a platform that automatically reinvests dividends back into overseas shares, each reinvestment increases your cost base. What starts as an $85,000 portfolio could quietly creep over $100,000 as dividends are reinvested, without you actively choosing to invest more. Check whether dividend reinvestment is switched on and track your total cost base regularly.

The FIF threshold applies to your total cost base across all platforms combined, not per account. If you have $65,000 on one platform and $45,000 on another, you are over the threshold, even if neither platform has flagged it. Keep a simple record of what you have invested across everywhere.

Most direct shares listed on the ASX are exempt from the FIF rules, so they do not count toward your de minimis threshold. If you own CBA, BHP, or ANZ shares directly, they sit outside the FIF regime under a specific exemption for Australian-listed companies.

However, ASX-listed ETFs are not exempt. An ETF traded on the ASX but invests globally, for example a US equity ETF listed in Australia, does count toward your FIF threshold, even though it is technically an ASX-listed product. It is a subtle but important distinction.

The IRD has a handy tool to help you figure out what holdings are included here.

If you have been cautiously keeping your overseas holdings under $50,000, you now have more room to work with. Here is a practical starting point:

• Add up your cost base across all platforms. Not market value, but what you originally paid. That is the number that matters.
• Check whether dividend reinvestments are switched on and decide whether you want them quietly adding to your cost base.
• Think about the per-person opportunity. If you and a partner are investing, are you both making full use of your individual thresholds?
• Consider your overall structure. Direct shares can sit alongside a core PIE fund holding, giving you access to specific markets or companies while keeping the broader portfolio tax efficient.
• If you are thinking about the long-term compounding angle, take it seriously. A single investment under $100,000, left alone, has genuine potential to compound significantly over decades with minimal tax friction. The maths rewards patience.

If you’ve been considering adding more direct US investments to your portfolio, these upcoming changes mark an exciting opportunity. Wondering where to begin? Explore Kernel’s range of 3,000+ shares in some of the world’s favourite companies.

This article is general in nature and does not constitute personalised financial or tax advice. Tax rules are complex and everyone's situation is different. If you are unsure how the FIF rules apply to you, we recommend speaking with a tax adviser. Investing involves risk including the possible loss of principal and there is no assurance that the investment will provide positive performance over any period of time. Kernel Wealth Limited is the issuer of the Kernel Funds and the Kernel KiwiSaver Plan. A Product Disclosure Statement is available at https://kernelwealth.co.nz/resources.