PART A Foreign Investment Funds

Clyde is a New Zealand tax resident who deals in shares. He owns a number of shares in New Zealand publicly-listed companies. He also owns shares in foreign companies which, on 1 April 2021, have a market value of $132,000. You understand all the shares have been acquired since 1 January 2015 and that all the holdings are less than 10% of the relevant companies. As at 1 April 2021, the portfolio comprises:

shares in publicly listed companies in Argentina, Brazil, China, India and Indonesia (hereafter referred to as shares in the Emerging Markets) which cost $34,000 and have a market value (as at 1 April 2021) of $78,000;

shares in Australian resident companies listed on the Australian Stock Exchange (ASX) (hereafter referred to as the listed Australian companies) with a cost of $39,000 and a market value (as at 1 April 2021) of $54,000;

You are advised that Clyde has undertaken the following transactions:

Sale of shares in a Chinese company (March 2021). These shares, which were acquired in 2018, were sold for $15,000. The shares had originally cost $10,000.

Purchase of shares in an Australian resident company listed on the ASX (June 2021). The shares in this company cost $20,000.

Purchase of additional shares in an Indonesian company (July 2021). The additional shares in this company cost $21,000.

Sale of shares in an Argentinian company (November 2021). These shares, which were acquired in 2016, were sold for $26,000. The shares had originally cost $29,000.

Purchase of shares in a major Chinese company (February 2022). The shares in this company cost $25,000.

Sale of shares in an Australian resident company listed on the ASX (March 2022). The shares in this company, which were acquired in 2017, sold for $30,000.

Purchase of shares in a Brazilian company (April 2022). The shares in this company cost $7,000.

As at 31 March 2022 Clyde advises that the shares in the listed Australian companies have a market value of $75,000 (which includes the purchase and sale of relevant shares as noted above); and the shares in the Emerging Markets a market value of $90,000 (which includes the purchase and sale of relevant shares in companies in the Emerging Markets as noted above).

In this year Clyde received a $5,000 dividend from the shares in the listed Australian companies and a dividend of $6,000 from the shares in the companies in the Emerging Markets.

REQUIRED:

Clyde has asked what the tax implications (including any tax payable) of his overseas share investment portfolio will be in the 2021-2022 tax year. Assume Clyde is subject to tax at the highest individual marginal tax rate and that all amounts are in New Zealand dollars. Show all your workings. State any assumptions you make.

Note: the 2021-2022 tax year is from 1 April 2021 to 31 March 2022.

(12 Marks)

Burt acquired shares in a Singapore based company in 1998. He does not have any record of the cost of the shares. He is wishes to calculate whether his overseas share portfolio is below the minimum threshold for application of the Foreign Investment fund (FIF) rules for individuals. Burt seeks your advice.

(3 Marks)