Jenee Tibshraeny: NZ Herald Wellington business editor on the Government looking to change the Foreign Investment Fund regime

Revenue Minister Simon Watts this month unveiled plans to change the Foreign Investment Fund (FIF) regime to give some foreigners with illiquid investments offshore an additional, possibly more advantageous, way of paying tax.

He said the Government would also consider exempting more Kiwis from the FIF rules, which incentivise domestic investment, but can be an administrative nightmare.

NZ Herald Wellington business editor Jenee Tibshraeny unpacked the current concerns - and explained why people are calling on the Government to go further.

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Episode Transcript

Speaker 1 (00:00):
Bryan Bridge.

Speaker 2 (00:01):
There are calls for the government to go further at
seventeen minutes after six and amending complex tax rules so
that they benefit every day key we investors as well
as wealthy foreigners. The government's trying to attract here. We
spoke about this a couple of weeks back. Jane chip
Trainee is The Herald's Wellington Business Edit Wellington Business Editor,
and she's with me tonight. Hi, Janae. Hi, right, good

(00:23):
to have you back. So give us an idea of
what we're talking about here. Remind us it's the fifth
Rules of Foreign Investment Fund rules. Who do they apply
to currently? What's the deal?

Speaker 1 (00:33):
Right? So currently they these tax rules are basically aimed
at incentivizing investment in New Zealand assets in the share market.
So on. It's a good sort of principle. A quirk
of the rules though, is that for is that they
treat investments that New Zealanders have offshore slightly differently to

(00:55):
the way they treat investments that you have locally. Now,
that's only for investments worth more than fifty thousand dollars.
So if you have more than fifty thousand dollars in shares,
invested in the US or you know, other sorts of
investments you fall under this tax regime, which is different
to the regime that you'd fall under if you had

(01:17):
shares invested in the New Zealand Stock Exchange, or if
you had shares invested through your key We Saber fund.
That's that's probably that's a pie fund, So that's a
certain structure. So shares E's, which is an investment platform,
has raised the point that actually this gets awfully complicated
for people regular kiwis who it's quite you know, you

(01:40):
don't have to be super wealthy to have more than
fifty thousand dollars invested offshore. It gets super complicated at
tax time because you have to navigate potentially two different
tax systems. You have to figure out, firstly, do you
have more than fifty thousand dollars invested offshore in the
sorts of assets that fall under this regime, and then
if yes, you have to go through a few more

(02:01):
hoops and hurdles to satisfy the ID. So this has
been a long standing problem. The thing is is that
that fifty thousand dollar threshold hasn't been changed in more
than twenty five years, so Back in the day when
it was introduced, fifty thousand dollars was a lot of money.
It's still a lot, but perhaps not quite as much

(02:24):
as it used to be.

Speaker 2 (02:25):
Interesting, So, do you think the government's actually gonna pick
this up and change it because presumably it will cost
them something.

Speaker 1 (02:33):
Well, yeah, that's the thing. So I took to Revenue
Minister Simon Watts yesterday and he said he was open
to changing that fifty thousand dollar threshold. Basically, it would
just ease the administrative burden on New Zealand investors. It
would mean that, you know, you don't have to go

(02:54):
through your investments and figure out well what falls under
this regime and what falls under that regime, and you know,
you could set it at a higher level and still
incentivize domestic investment or investment through pythons. So that's a
certain type of structure. You can still invest in offshore assets,
but if you do it through the certain python structure
then that's fine. Now, the reason this has all come

(03:18):
up in the news is because Simon Watts earlier this
month said that he planned to make changes to these rules,
but only in a way that benefited foreigners and not
in a way that benefits you and I or regular
New Zealanders. So I guess the fact that he is
looking at these rules in the context of attracting wealthy

(03:39):
New Zealanders to New Zealand means that it is putting
the issue on the agenda and it is putting it
on the table. I think it also sort of fits
into the broader thing that the government's trying to do
in terms of encouraging people to save and invest for
their retirements. A lot of young people might get to
retirement without owning a home, so you know, the investments

(04:03):
that they have in shares are probably increasingly important for
their well beings.

Speaker 2 (04:09):
Yeah. You fascinating stuff. Hopefully they the foreigners and the
exemption there will have opened the door for the rest
of us. Jane tip Traaney, the Herald Wellington Business editor,
with this. For more from Heather Duplessy Allen Drive, listen
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