A new breed of investment funds has recently been designed to provide better tax effectiveness than traditional products. The “new breed” funds are being offered by Australian managers to take advantage of aspects of NZ’s Income Tax Act 1994 and some features of Aussie unit trusts. Clients of Capital Financial Planning Limited are able to gain access to the new funds on a wholesale basis. For existing clients, we are also switching all holdings in the old products to the new. You may have received a Transaction Authorisation Form (TAF) about this recently.
Essentially, traditional Aussie unit trusts distribute realised capital gain and income earned from investments held outside Australia without the deduction of any significant tax at source. These distributions are taxable as income in New Zealand. For the new breed of specially designed unit trusts, investors will be allocated non-taxable bonus units in the fund. Re-investment is compulsory if the benefits are to be gained but investors are free to draw down on their funds if they wish. Releasing cash from the “new breed” funds is best done by Manager Repurchase rather than by Redemption.
Some managers have Binding Rulings from the IRD for their funds which effectively protect the favoured tax status for the period of the ruling, whilst others have asked for expert tax opinions which appear in their Investment Statements. Managers offering “new breed” funds to date are Bankers Trust, MacQuarie, Tower and Platinum. AXA is currently applying for a Binding Rule and will very likely launch their new series once this is to hand.
If you have over NZ$350,000 to invest and want truly impartial advice, contact us to find out how we can put your money to work to fund your important goals.
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