We discussed in last week’s tax blog Finance Minister Nicola Willis’s 2026 budget. From a tax point of view, a number of changes were announced. Of these changes was an update to the Foreign Investment Fund (FIF) rules.
The changes to the FIF rules were implemented to ensure New Zealand remains an inviting country for highly skilled people, including retaining talent and incentivising new migrants. The changes seek to reduce tax barriers these people might face. We have outlined a few of these changes.
Introduced last year was the revenue account method. This was a new FIF calculation method designed to allow new migrants to be taxed on a realisation basis for their foreign unlisted investments. The 2026 budget extends this method to all New Zealand tax residents.
Other FIF calculation methods, such as the cost method, which taxes investors on 5% of the cost of the investment each year, caused potential liquidity issues for investors who had not realised their investments. The change addresses this issue by allowing all New Zealand residents to be taxed on 70% of realised gains plus any dividends derived during the year. It is important to note that this to unlisted shares only.
A change was also made to the $50,000 de minimus threshold. This threshold applied to exclude investors from the FIF rules where their foreign investments totalled less than $50,000. The de minimus was introduced back in 2000 and since then inflation has eroded the real value of this threshold. This meant the FIF rules have applied to more investors than originally intended.
The 2026 budget has increased the de minimus threshold from $50,000 to $100,000. This increase accounts for inflation since 2000 and reduces the number of people the FIF rules apply to.
If you would like to know more about these changes, please get in touch with us.