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Commins: Investors Struggle With Complex And Unfair New Tax Rules

Fuseworks Media
Fuseworks Media
Commins: Investors Struggle With Complex And Unfair New Tax Rules

New tax rules introduced on 1st April last year are coming home to roost for taxpayers with offshore investments and their tax agents. The new rules are so complicated that few investors will be able to do their own returns predicts John Commins, a consultant for financial intermediaries.

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% of companies listed in the Australian Stock Exchange All Ordinaries Index do not help much and that exemption list will change year to year.

Further, the rules and recent IRD determinations categorise a number of offshore investments as those for which some investors can claim losses while others cannot. This is hardly fair.

Commins says that the IRD published new forms for FIF disclosure only in the middle of June. Tax payers who do not use a tax agent must have their returns in by 7th July or must apply for an extension so timing is getting very tight.

Furthermore, 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, he said.

Mr Commins said that the complexity will increase the cost of tax return preparation considerably for many investors and may be uneconomic relative to the size of their portfolio.

In effect, 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 says that the de minimis exemption should be lifted to at least $250,000 as an interim measure and then further consultation between Government, the public and financial industry participants to work out a way to simplify the rules.

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