FIF Regime - Proposed Changes (Budget 2026)

Change 1 - RAM Method instead of FDR

Current Position

Many foreign investments are taxed under the Fair Dividend Rate (FDR) method.

Under FDR, investors are generally taxed each year on a deemed return of 5% of the opening value of the investment, regardless of whether they actually received cash income. This can create cash-flow problems, especially for investors holding growth companies or unlisted shares that pay no dividends.

New Position

More taxpayers will be able to use RAM (revenue account method ), which taxes:

• Actual dividends received, plus

• 70% of realised gains when shares are sold

rather than taxing an assumed annual return.

Change 2 - Threshold (cost of shares) is increased from $50,000 to $100,000 NZD

Before

Michael owns foreign shares costing NZ$75,000.

Because the current threshold is only $50,000, he must calculate FIF income annually.

After

The threshold increases to $100,000.

Michael falls below the threshold and no longer needs to apply FIF calculations unless he chooses to.

Result: reduced compliance costs and less tax reporting complexity.