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Inland Revenue

Tax Policy

Announcements
PUBLISHED 16 May 2006

New rules benefit funds, savers

Managed funds and their investors will be better off under the proposed new rules on taxing income from share investment, the Minister of Revenue said today. In response to claims that the changes would disadvantage funds and savers through funds, Mr Dunne cited statements from the funds industry that supported the changes. The bill introducing the new rules is expected to be tabled in Parliament this week. For more information see the Minister's media statement.


Hon Peter Dunne
MP for Ohariu Belmont
Minister of Revenue
Associate Minister of Health

MEDIA STATEMENT

Funds and savers better off under new tax rules

The misinformation on the government's proposals for the taxation of overseas investment income continues, presumably promoted by the relatively small number of people who stand to lose their tax-favoured position, Revenue Minister Peter Dunne said today.

As the respected financial writer Mary Holm wrote in the New Zealand Herald on April 27, "Tax changes a boon for many……. The negative aspects of the changes have received more publicity than the positive, leaving people misinformed."

Mr Dunne said "It is not true that superannuation funds and the like will be worse off overall under the proposed changes.

"It is not true that people saving for their retirement will have to increase the money they put into their savings funds when the proposals become law, as has been suggested.

"It is not true that the proposals will tax all unrealised gains of individual investors.

"Super funds and the like are major beneficiaries of the proposals to bring more fairness into the investment tax rules. The government will forgo about $100 million of tax from capital gains, mainly from managed funds.

"Savers in these funds, especially people on lower tax rates, will see a direct benefit from higher returns. This is reflected in the comments of industry leaders:

  • ING, 16 May: "ING welcome the tax changes in respect of the taxation of domestic managed funds. The playing field has been levelled in terms of liability to 'capital gains tax' and lower income earners will not now suffer the tax penalty of managed funds being taxed at a corporate income tax rate of 33%."
  • Fisher Funds, 11 April: "Tax changes are great news for investors – better news for New Zealand's capital markets."
  • NZ Exchange Ltd, 11 April: "Tax changes positive for New Zealand capital markets – … CEO Mark Weldon heralded today's tax change announcement by the government as evidence that New Zealand equity investments would at long last be able to come into their own."
  • FundSource, 12 April: "The new tax rules on investment income … herald a new era for the savings and investment industry in New Zealand."

Mr Dunne said "Unless investors paid more than $50,000 for their overseas shares they will not have to pay more tax as a result of the changes. If they paid more than $50,000 for shares in countries outside New Zealand and Australia, they will pay tax of less than 2% of their shares' value in most years.

"On the other hand, people who invest in emerging economies like China and India will be better off, because the changes put the taxation of share investments in different countries on an equal footing – which does not happen under the current rules.

"The basis of the changes is that it is only fair that if you live in New Zealand you are expected to contribute to New Zealand by paying tax in New Zealand on your income, whether it comes from New Zealand or overseas," Mr Dunne said.

Contact for technical details: Ainslie Fenwick, Tax advisor to Hon Peter Dunne
Tel: 4-4719728