KEY POINTS:
New tax rules relating to foreign investments introduced on April 1 last year are so complex few investors will be able to do their own returns, says financial adviser John Commins.
"Many small accounting firms are also struggling to cope with the process. Accounting firms and tax agents are not experienced in identifying which is a foreign investment fund and which is not."
Exemptions applying to about 80 percent of companies listed on the Australian Stock Exchange do not help much and that exemption list will change year to year, he said.
"The rules and recent IRD determinations categorise a number of offshore investments as those for which some investors can claim losses while others cannot."
Inland Revenue published new forms for foreign investment fund disclosure in June. Tax payers who do not use a tax agent must have their returns in by July 7 or must apply for an extension so timing is very tight.
"There is the prospect that investors audited by IRD some years hence will be penalised for not getting their sums right, despite the best intentions."
The complexity would increase the cost of tax return preparation and prove uneconomical for many investors.
"The Government is discouraging investors from properly diversifying their portfolios. This is irresponsible, especially given the concentrated exposure many investors have to failed New Zealand finance companies."
He said the minimum exemption should be lifted to $250,000 from $50,000 as an interim measure.
- NZPA
