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

New Zealanders are increasingly turning to investments to grow their wealth and secure financial freedom. Whether you’re investing in shares, property, managed funds, cryptocurrencies, or term deposits, it’s essential to understand how these assets are accounted for, taxed, and reported. In this article, we explore how investment portfolios are managed from an accounting perspective, outline tax rules investors must follow, and clarify what expenses you can claim to reduce your tax bill.

Understanding Investment Portfolios

An investment portfolio is a collection of assets that might include:

• Shares (domestic and international)

• Bonds

• Term deposits

• Managed funds

• Cryptocurrency

• Investment property

Each asset type comes with its own level of risk, return, and tax implications. Most New Zealanders hold their investments either individually, through trusts, or via companies. Each structure can affect how income is taxed and how deductions are claimed.

Accounting for Investments

Proper accounting of your investment portfolio is vital not only for tax compliance but also for tracking performance and making informed decisions.

Key Accounting Concepts:

1. Cost Base Tracking
   You must keep track of the cost base (what you paid for the investment) for tax purposes, especially when you sell. This includes:

   • Purchase price

   • Brokerage fees

   • Legal fees (for property)

   • Acquisition costs

2. Income Recognition
   Investment income must be declared in the financial year it is earned. This includes:

   • Dividends

   • Interest income

   • Rental income

   • Managed fund distributions

   • Capital gains (in some circumstances)

3. Capital vs Revenue Account
   Investors must understand whether they are on capital account or revenue account. This determines whether gains are taxable.

   • Capital account: Generally used for long-term investments. Gains are usually not taxed.

   • Revenue account: If you are trading frequently or buying to sell for a profit, gains may be taxed as income.

Tax Rules for New Zealand Investors

The Inland Revenue Department (IRD) applies various tax rules to different types of investments. Understanding these rules ensures you avoid penalties and pay only what is legally required.

1. Shares

NZ Shares:

• Dividends are taxable and include imputation credits (ICs). You can use ICs to offset tax payable.

Foreign Shares:

• If your total cost of overseas shares exceeds NZD $50,000, you may be subject to the Foreign Investment Fund (FIF) rules.

• Under FIF, you generally use the Fair Dividend Rate (FDR) method to calculate income (5% of opening market value).

• If under $50,000, you’re typically taxed on dividends received only.

2. Managed Funds (PIEs)

• Portfolio Investment Entities (PIEs) include KiwiSaver and many managed funds.

• They are taxed at your Prescribed Investor Rate (PIR), which is based on your total income.

• PIEs handle the tax internally, meaning you don’t usually need to include this income in your individual return.

3. Term Deposits and Interest

• Interest from bank accounts or term deposits is taxable.

• Resident Withholding Tax (RWT) is usually deducted at source, but you still need to report it correctly.

4. Cryptocurrency

• Inland Revenue treats cryptocurrencies like property, not currency.

• If you’re buying crypto with the intention to sell for a profit (even once), any gain is usually taxable.

• Mining and staking rewards are also considered income.

5. Rental Property

• Net rental income is taxable.

• From 1 October 2021, interest deductibility for residential property is being phased out (unless it’s a new build or a qualifying build-to-rent).

• Bright-line rule: If you sell a residential property within a certain period (10 years for most), the gain may be taxed.

Claimable Investment Expenses

One of the most common questions investors ask is, “What expenses can I claim?”

The IRD allows you to claim expenses directly related to earning your investment income. However, personal or private expenses are not deductible.

Here’s a breakdown by asset class:

A. Shares & Securities

Claimable:

• Brokerage fees (when buying and selling)

• Portfolio management fees

• Financial adviser fees (if related to managing current investments)

• Interest on loans used to purchase shares (only if the investment generates taxable income)

• Subscriptions to investment reports or tools (if used to manage taxable investments)

Not Claimable:

• Capital improvement costs

• Fees related to buying shares held for long-term capital growth (on capital account)

B. Managed Funds & PIEs

• Fees directly related to PIE funds are usually not deductible, as the PIE pays the tax.

• However, investment advisory or accounting fees may be deductible in some cases (for non-PIE funds).

C. Cryptocurrency

Claimable:

• Transaction fees

• Software subscriptions used for trading

• Internet or power (if mining from home – apportion appropriately)

• Accounting and legal advice related to your crypto portfolio

• Losses (if crypto sold at a loss and was held on revenue account)

Not Claimable:

• Personal crypto use

• Capital losses on coins held for non-taxable purposes

D. Rental Property (Residential)

Claimable:

• Accounting fees

• Rates and insurance

• Repairs and maintenance

• Property management fees

• Travel (if incurred before 2018 and meets specific rules)

• Depreciation on chattels (not the building)

• Legal fees for tenancy-related matters

• Body corporate fees

Restrictions:

• Interest deductibility is limited or disallowed under the new tax laws unless the property qualifies for an exemption.

• Depreciation on buildings is not claimable (from 2011 onwards).

• If you use the property personally for any time during the year, expenses must be apportioned.

Record Keeping Requirements

To stay compliant with IRD rules, investors must keep adequate records for at least 7 years.

Your records should include:

• Purchase and sale documents

• Invoices and receipts for expenses

• Broker and investment statements

• Details of dividends and interest received

• Proof of intention at time of purchase (especially for property or crypto)

• Portfolio reports and valuation summaries

Investors with complex portfolios often benefit from using accounting software (like Xero, Sharesight, or a specialist investment accountant) to automate reporting.

Trusts and Companies as Investment Vehicles

Some investors hold their portfolios through a trust or company. These structures offer benefits such as asset protection, succession planning, and tax flexibility.

Trusts:

• Income distributed to beneficiaries is taxed at the beneficiary’s marginal tax rate.

• If retained, it’s taxed at 33%.

• Trustees must file annual tax returns and may face different compliance requirements under tax pooling or PIE rules.

Companies:

• Profits are taxed at 28%.

• Dividends can be distributed with imputation credits.

• Record-keeping and compliance obligations are stricter.

Note: These structures also require specialist accounting advice to manage correctly.

Common Mistakes to Avoid

1. Assuming gains are always tax-free
   Many investors mistakenly believe capital gains aren’t taxed. If your intention was to sell for a profit, or you’re trading frequently, gains can be taxable.

2. Neglecting to declare overseas income
   If you hold shares or funds overseas, you may need to apply the FIF rules and file accordingly.

3. Not tracking expenses correctly
   Without proper records, you may lose out on legitimate deductions.

4. Incorrectly treating crypto income
   The IRD is actively pursuing crypto traders who fail to declare income. Always keep thorough records of your crypto transactions.

5. Relying on general advice
   Investment tax law is highly specific. It’s important to get personalised advice based on your individual situation.

Final Thoughts: Get Expert Help

Investing is one of the most powerful tools for building wealth. But with it comes the responsibility of proper accounting, tax compliance, and strategic planning. Whether you’re a DIY investor with a simple share portfolio or a landlord with multiple properties and trusts, understanding the tax and accounting framework in New Zealand is crucial.

Working with a knowledgeable accountant—especially one experienced in investments—can help you:

• Maximise deductions

• Avoid tax traps

• Structure your affairs tax-effectively

• Meet your reporting obligations

Need Help?

If you’re unsure whether your investment income is being handled correctly, it’s a smart move to consult a qualified accountant. From managing your portfolio’s tax obligations to setting up the right investment structure, they can provide tailored advice that keeps you compliant—and optimised—for New Zealand’s tax environment.