Foreign Investment Fund taxpayers

by Tony Ryburn

A good tax system is a simple one - right? Well all I can say is that someone forgot to tell the Government which has created a nightmare of complexity for FIF taxpayers. The Government was no doubt aided and abetted by its advisors who should surely have known better.

For those FIF taxpayers who are not Sharesight customers (see below) the new regime is going to result in a huge amount of unproductive time and cost. When this is added to the cost of setting up and administering the new FIF regime, the costs are surely going to be outweighed by the tax revenue benefit many times over.

The range of information required by FIF investors to complete their tax return is mind-boggling. Amongst other things they need to:

  • Identify their FIF investments
  • Determine whether a threshold exemption applies by establishing what was paid for FIFs on day one (including brokerage) using a FIFO calculation to account for subsequent buys and sells
  • Identify any individual investments that may be exempt based on a complex and difficult-to-determine set of criteria
  • Establish market value of portfolio value at the beginning of the year
  • Determine the appropriate tax calculation method(s)
  • Identify acquisitions and disposals during the year
  • Make any required adjustments for quick sales, using at least one of two possible methods
  • Adjust for and capital reorganisations that may have occurred
  • Identify all gross dividends received
  • Identify the dates of all transactions
  • Identify appropriate exchange rates and do the conversions
  • Obtain the market value at the end of the year if the CV method is the most appropriate

So what’s the answer? We can but hope that if there is a change of Government, this piece of lunatic legislation will be repealed. But don’t hold your breath!

In the meantime there is great news for FIF investors with non-exempt Australian shares. At the end of next week we will be providing an FIF report to customers on the Expert plan which will provide the data they need to meet their tax obligations automatically. This will save a huge amount of time and angst not to mention accounting fees -assuming they can find an accountant prepared to do the work at any price.

Below is a sneak peak at what the new report will look like, we will be publishing a more detailed tour shortly.

FIF Income Summary

FIF FDR Method

FIF CV Method

This information is not a recommendation nor a statement of opinion. You should consult an independent financial adviser before making any decisions with respect to your shares in relation to the information that is presented in this article.