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Investments and Portfolios

Investments, Portfolios, and Accounting in New Zealand: A Guide for Savvy Investors

Investing can feel a bit like a maze, especially with all the tax and accounting rules you need to follow here in New Zealand. Whether you’re getting into shares, property, or even crypto, it’s super important to know how to handle your money properly.

This guide will walk you through the basics of managing your investments, understanding the tax rules, and figuring out what you can and can’t claim as an expense.

 

The Lowdown on Your Investment Portfolio

 

Think of your investment portfolio as a collection of all your financial assets. This could be anything from:

  • Shares (local and international)
  • Term deposits
  • Managed funds (like your KiwiSaver)
  • Cryptocurrency
  • Rental properties

Every one of these has its own level of risk and its own tax rules. Most Kiwis hold their investments on their own, but some use trusts or companies, which can change how you’re taxed and what you can claim.

 

Keeping Your Books in Order

 

Good accounting isn’t just about keeping the IRD happy—it helps you see how well your investments are doing.

 

Key things to track:

 

  • Cost Base: This is what you originally paid for an investment, including all those little costs like brokerage fees. You need to know this so you can figure out your profit when you sell.
  • Income: You must declare any money you make from your investments in the year you get it. This includes things like dividends, interest, or rental income.
  • Capital vs. Revenue: This is a huge one.
    • Capital account is for long-term investments where you’re not planning to sell for a quick profit. The money you make is usually not taxed.
    • Revenue account is for when you’re actively buying and selling (like a trader). In this case, your gains are taxed as regular income.

 

New Zealand’s Investment Tax Rules

 

Here’s a simple breakdown of how the IRD taxes different investments.

  • Shares:
    • NZ Shares: Dividends are taxed, but you can use imputation credits to get a tax break.
    • Foreign Shares: If your overseas shares are worth more than $50,000, you might have to follow the Foreign Investment Fund (FIF) rules, which can get complicated. If they’re under that amount, you’re generally only taxed on the dividends you get.
  • Managed Funds (PIEs):
    • Portfolio Investment Entities (PIEs), like KiwiSaver, handle the tax for you. You’re taxed at your Prescribed Investor Rate (PIR), so you usually don’t have to worry about adding this income to your personal tax return.
  • Term Deposits & Interest:
    • Any interest you earn is taxable. Your bank usually takes out the tax for you (called Resident Withholding Tax), but you still need to report it.
  • Cryptocurrency:
    • The IRD sees crypto as property, not cash. If you buy it to sell for a profit, any gain is typically taxable. This goes for any rewards you get from mining or staking, too.
  • Rental Property:
    • Net rental income is taxable. Just remember, the rules around claiming interest on your mortgage are changing and are being phased out for most residential properties. And don’t forget the Bright-line rule—if you sell a property within 10 years, you’ll probably have to pay tax on the profit.

 

What Can You Claim as an Expense?

 

You can claim expenses that are directly related to earning your investment income. But remember, you can’t claim anything for personal use.

  • Shares & Securities: You can claim things like brokerage fees, portfolio management fees, and the cost of subscriptions you use for research.
  • Cryptocurrency: Transaction fees, trading software, and even accounting advice are all fair game. You can also claim a loss if you sell crypto that you held on a revenue account.
  • Rental Property: You can claim things like accounting fees, rates, insurance, and property management fees. Just be aware that you can no longer claim depreciation on the building itself, and the rules around mortgage interest are much stricter now.

 

Mistakes to Steer Clear Of

 

  • Thinking all gains are tax-free: If you’re buying something with the plan to sell it for a profit, the IRD might see that gain as taxable income.
  • Ignoring overseas income: Don’t forget to declare any income from foreign investments.
  • Bad record keeping: If you don’t have proper records, you could miss out on legitimate tax deductions.
  • Getting crypto tax wrong: The IRD is getting serious about this. Make sure you’re keeping great records of all your crypto transactions.

 

The Final Word: Don’t Go It Alone

 

Investing is a powerful way to build your wealth, but it comes with the responsibility of getting your accounting and tax right. A good accountant who knows the ins and outs of investments can be a lifesaver. They can help you save money, avoid common mistakes, and make sure everything is handled correctly so you can focus on what matters: growing your portfolio.