2019 FNZ TAX USER GUIDE - Rede Advisers

 
2019
FNZ TAX USER
GUIDE

               1
1. CONTENTS
                         2. INTRODUCTION                                                                          5
                         3. GENERAL INFORMATION REGARDING YOUR INVESTMENTS                                       6
                               3.1    Taxation of financial arrangements                                          6
                         		           3.1.1    Resident Withholding Tax on interest income                        6
                         		           3.1.2    Tax reports prepared on a cash basis                               6
                               3.2    Portfolio Investment Entities (PIEs)                                        6
                         		           3.2.1    Prescribed Investor Rate – Unlisted PIEs6
                         		           3.2.2    Unlisted PIE distributions                                         7
                         		           3.2.3    Fully imputed listed PIE distributions                             7
                               3.3    Taxation of dividend income                                                 7
                         		           3.3.1    New Zealand dividend income                                        8
                         		           3.3.2    Overseas dividend income                                           8
                               3.4    Foreign Investment Fund rules                                               8
                         		           3.4.1    De minimis exemption from the FIF rules                            8
                               3.5    Foreign tax credits                                                         9
                               3.6    Tax residency                                                               9
                               3.7    Rebates, Fees, and Charges                                                  9
                         4. COMPLETING YOUR TAX RETURN10
                               4.1    How to complete your tax return                                             11
                         		           4.1.1    IR3 – Individual Tax Return                                        11
                         		           4.1.2    IR4 – Company Tax Return                                           13
                         		           4.1.3    IR6 – Trust Tax Return                                             15
                         5. RESIDENT WITHHOLDING TAX DEDUCTED BY FNZ17
                               5.1    Interest Income                                                             17
                               5.2    Dividend income                                                             17
                         		           5.2.1    New Zealand dividend income                                        17
                         		           5.2.2    Overseas dividend income                                           17
                         6. FIXED INTEREST INVESTMENTS AND THE FINANCIAL ARRANGEMENTS RULES19
                               6.1    Cash Basis Person and method                                                19
                         		           6.1.1    Beneficiary or trustee of a trust                                  19
                         		           6.1.1.1 Trustee of an estate                                                19
                         		           6.1.1.2 Beneficiary of a bare trust                                         20
                         		           6.1.1.3 Trustee of a trust (other than a bare trust or estate)              20
                         		           6.1.1.4 Beneficiary of a trust (other than a bare trust)                    21
                         		6.1.2               Deferral threshold                                                 21
                         		           6.1.3    Base Price Adjustment                                              21
                         		           6.1.4    Ceasing to be or becoming a cash basis person                      22
                               6.2    Accrual methods                                                             22
                         		6.2.1               IFRS taxpayers                                                     22
                         		           6.2.2    Foreign denominated financial arrangements                         23
                         		           6.2.3    Certain bonds sold before first coupon date                        23
                         		           6.2.4    Base Price Adjustment                                              23
                         		           6.2.5    Election to apply an accrual method                                23
                               6.3    Worked examples                                                             23
                         		           6.3.1    Simple accrued interest at balance date - accrual method           23
                         		           6.3.2    Accrued interest on purchase, premium paid or discount received -
                         			accrual method                                                                        24
                         		           6.3.3    Accrued interest on purchase, premium paid or discount received-
                         			cash basis person                                                                     25
                         		           6.3.4    Differences between accrual basis and cash basis                   28

2 | 2019 FNZ TAX USER GUIDE
6.4     Overseas Fixed Interest Investments                                28
7. PORTFOLIO INVESTMENTS ENTITIES29
    7.1     Unlisted PIEs                                                      29
		          7.1.1       PIE tax crystallisation events                         29
		          7.1.2       Crystallisation ratio                                  29
		          7.1.3       PIE taxable income / (loss)                            30
		          7.1.4       Attributable taxable income / (loss)                   30
		          7.1.5       Gross PIE tax payable / (rebate)                       30
		          7.1.6       Net PIE tax payable / (rebated)                        31
		          7.1.7       PIE tax and incorrect PIRs                             31
    7.2     Listed PIEs                                                        31
		          7.2.1       Fully imputed PIE distributions                        31
		          7.2.2       Unimputed PIE distributions                            31
8. REALISED GAINS ON EQUITY INVESTMENTS32
    8.1     New Zealand and certain Australian listed equities                 32
    8.2     Overseas equities subject to the FIF rules                         32
9. FOREIGN EQUITY AND FOREIGN MANAGED FUNDS INVESTMENTS33
    9.1     Foreign Investment Funds defined                                   33
    9.2     Exemptions from the FIF Regime                                     33
    9.3     Australian listed share exemption                                  33
    9.4     Determining if the FIF rules apply to you                          34
		          9.4.1       De minimis exemption                                   34
    9.5     Portfolio FIFs                                                     34
10. FOREIGN INVESTMENTS FUND (FIF) INCOME35
    10.1    Calculation methods for FIF income (used by FNZ)                   35
    10.2    Fair Dividend Rate - the default method                            35
		          10.2.1      Exclusions from applying the FDR method                36
		          10.2.2      Fair Dividend Rate (FDR) method calculation            36
    10.3    Comparative Value (CV) method calculation                          38
    10.4    Comparative Value - The Compulsory Method                          38
    10.5    Comparative Value - The Optional Method                            38
    10.6    Other Calculation Methods (not used by FNZ)                        39
    10.7    Currency conversion rules for FIF taxation methods                 39
    10.8    Foreign tax credits                                                39
    10.9    Share re-organisations                                             39
    10.10   Impact of unsettled FIF trades as of 31 March on the tax report    40
    10.11   General                                                            40
11. R
     EBATES, FEES AND CHARGES41
    11.1    Fund Rebate Income                                                 41
		          11.1.1      Fund Rebate Income taxed through PIE crystallisation   41
		          11.1.2      Untaxed Fund Rebate Income                             41
    11.2    Ongoing Fees                                                       41
    11.3    Collection Charges                                                 41
12. RECONCILIATION OF FNZ TAX REPORT TO OTHER FNZ REPORTS42
13. QUESTIONS AND ANSWERS43
14. APPENDIX/TECHNICAL DEFINITIONS44
    14.1    General definitions                                                44
    14.2    Tax credit definitions                                             45
    14.3    Classification of transaction types                                46

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4 | 2019 FNZ TAX USER GUIDE
2. INTRODUCTION
Welcome to the 2019 FNZ Tax User Guide. This                               investments in your tax return. They may also affect the
User Guide is produced by FNZ Custodians Limited                           treatment of the FNZ held investments.
(FNZ) in its capacity as an integrated financial services
provider in relation to your investments. It has been                      Should you or your tax adviser have any questions
prepared for New Zealand tax residents and FNZ                             regarding your FNZ Tax Report or the User Guide,
trusts that you find the contents of this User Guide                       please contact your financial adviser in the first
informative and helpful in understanding your New                          instance. Please note that while FNZ can provide
Zealand tax obligations and, should you be required                        information on your investments held in its custody, and
to, completing your New Zealand tax return.                                how FNZ has chosen to process any transaction, FNZ
                                                                           does not provide tax advice.
The User Guide contains general information on the
various aspects of New Zealand tax legislation that                        Please also note the income figures expressed in this
may be relevant to your personal circumstances.                            report are not your portfolio performance. To obtain
The majority of the information that you should need                       your portfolio performance please contact your financial
to complete your tax return is in the next two sections.                   adviser. There may also be differences between how
                                                                           certain transactions are displayed in your tax report
Your FNZ Tax Report collates information on the                            compared to other reports, due to how tax legislation
interest, dividend, and distributions received and                         applies to your investments and certain transactions.
processed by FNZ for you during the year ended                             Please see section 12 of the long form FNZ Tax User
31 March 2019 (“the 2019 income year”). An                                 Guide for more details.
amalgamated tax statement such as your FNZ Tax
Report makes filing your income tax return much                            As FNZ and your adviser may not have complete
simpler. We recommend that you provide your FNZ                            knowledge of your specific circumstances, we strongly
Tax Report and this User Guide to your tax adviser.                        recommend that you seek independent tax advice from
                                                                           a professional tax adviser to ensure you meet your New
Should you have other investments that are not held                        Zealand tax obligations.
in custody with FNZ or investments that have not
been held in FNZ’s custody for the entire income year,                     Yours sincerely
you may also need to include the income from those

                                                                           Charlie Trotter
                                                                           Managing Director - NZ
                                                                           FNZ Limited

Disclaimer

The information contained in the FNZ Tax User Guide is of a general nature only. The User Guide is based on tax legislation and the
interpretation of that legislation at the time the guide is prepared. Both tax legislation and its interpretation are subject to change over
time. Tax legislation and its application to your specific circumstances can be complex. As such, you are strongly encouraged to seek
professional tax advice where required. Whilst every effort has been made to ensure the accuracy of this User Guide and your tax reports,
to the maximum extent permitted by law no liability is accepted by FNZ for any errors or omissions.

                                                                                                                                               5
3. GENERAL INFORMATION REGARDING
                                  YOUR INVESTMENTS
                        This section contains general information regarding                                                                  such as accrued interest, premiums and discounts
                        your investments which may be relevant to you when                                                                   on purchase and disposal of certain fixed interest
                        preparing your 2019 tax return. We recommend you                                                                     investments will be required to be factored into any
                        read this section in its entirety before completing your                                                             ‘spreading method’ calculation. Your tax report does
                        tax return.                                                                                                          not contain any accrual calculations.

                                                                                                                                             Section 6 of the long form Tax User Guide contains
                        3.1 Taxation of financial arrangements                                                                               the tests to determine if you qualify to be a cash basis
                        3.1.1 Resident Withholding Tax on interest income                                                                    person. It also includes detailed worked examples
                                                                                                                                             which may be helpful to you in calculating your accrual
                        Your Resident Withholding Tax (“RWT”) rate as at
                                                                                                                                             interest income should you be required to apply accrual
                        31 March 2019 which was supplied by you or your
                                                                                                                                             reporting.
                        adviser is shown at the top of the first page of your
                        tax report.
                                                                                                                                             3.2 Portfolio Investment Entities (PIEs)
                        If the RWT rate supplied was incorrect during the                                                                    3.2.1 Prescribed Investor Rate – Unlisted PIEs
                        2019 income year, you may have underpaid or
                        overpaid RWT on your interest income. Practically,                                                                   Your Prescribed Investor Rate (“PIR”) at 31 March 2019
                        any under or overpayment is calculated by filing a                                                                   which was supplied by you or your adviser is shown at
                        tax return. As RWT is a refundable tax credit, any                                                                   the top of the first page of your tax report.
                        overpayment is generally refundable.
                                                                                                                                             Individual and joint investors should not be required to
                        We recommend that you seek advice from your                                                                          include unlisted PIE income in their tax return if they
                        tax adviser to quantify any tax liability or refund.                                                                 elected the correct PIR or a PIR that was too high
                                                                                                                                             throughout the 2019 income year. This is on the basis
                        3.1.2 Tax reports prepared on a cash basis                                                                           that PIE tax is generally a final tax.

                        Your tax report has been prepared on a cash basis                                                                    Please note that PIE tax is not a final tax for:
                        for tax purposes. As the cash basis method may not
                        be appropriate for you, we recommend you discuss                                                                     •	individuals and joint investors who had unlisted
                        your circumstances with your tax adviser to ensure                                                                      PIE income crystallised at an incorrect PIR that was
                        you meet your New Zealand tax obligations.                                                                              too low;

                                                                                                                                             •	trusts, unless the highest available PIR was elected
                        As an example, if you hold the investments as part
                                                                                                                                                at all times during the income year; and
                        of a business activity or through a trust or company
                        and are preparing financial statements, or you do not                                                                •	any entity that had unlisted PIE income crystallised
                        meet the criteria to be a cash basis person, you may                                                                    at a 0% PIR during the income year.
                        be required to account for interest income using an
                                                                                                                                             Electing the correct PIR is beneficial in that the
                        accrual method.
                                                                                                                                             maximum PIR is typically lower than the corresponding
                        Accrual tax reporting is a complex area of tax law.                                                                  marginal tax rate. That is, in some situations, you will
                        If you qualify for accrual tax reporting, you will be                                                                pay more income tax if you are required to include your
                        required to use a ‘spreading method’ to determine                                                                    PIE income in your tax return and be taxed at your
                        the income to include in your tax return. Factors                                                                    marginal rate, as opposed to the applicable PIE tax that

The information contained in the FNZ Tax User Guide is of a general nature only. The User Guide is based on tax legislation and the interpretation of that legislation at the time the guide is prepared. Both tax legislation and its interpretation are
subject to change over time. Tax legislation and its application to your specific circumstances can be complex. As such, you are strongly encouraged to seek professional tax advice where required. Whilst every effort has been made to ensure
the accuracy of this User Guide and your tax reports, to the maximum extent permitted by law, no liability is accepted by FNZ for any errors or omissions. Property of FNZ, not for onward distribution.

6 | 2019 FNZ TAX USER GUIDE
would have been paid if you elected the correct PIR.                                                                If you wish to take advantage of the imputation or FDP
If the PIR that applied to your unlisted PIE income                                                                 credits received from your listed PIE investments, you
was less than you were entitled to use, you may need                                                                should include the gross fully imputed PIE distribution
to include some of your unlisted PIE income in your                                                                 and any tax credits in your tax return.
tax return. The amount of income you are required to
                                                                                                                    For completeness, investors other than individuals
return is generally the amount that was taxed at the
                                                                                                                    and trusts are generally required to treat the imputed
lower PIR. You should be allowed to claim a credit
                                                                                                                    portion of distributions from listed PIEs as taxable.
for any PIE tax paid on your behalf that relates to the
PIE income included in your tax return.                                                                             Amounts showing in your tax report as “Excluded
                                                                                                                    Listed PIE distributions” do not have to be included in
If your PIE investments incurred a loss during the
                                                                                                                    your tax return.
2019 income year, you should not be required to
include this loss in your tax return unless you had
a 0% PIR or you elected a PIR that was too low.                                                                     3.3 Taxation of dividend income
                                                                                                                    A ‘dividend’ is a broad concept under New Zealand
Please note that there are specific rules on how
                                                                                                                    tax legislation and generally includes all situations
new residents of New Zealand set their PIR. Please
                                                                                                                    where a company provides a ‘transfer of value’ to a
contact your tax adviser or visit www.ird.govt.nz
                                                                                                                    shareholder. This ‘transfer of value’ can occasionally
for more details.
                                                                                                                    include non‑cash items such as the distribution of
We recommend that you seek advice from your tax                                                                     shares or other non-cash assets by the company to its
adviser to determine if you are required to include                                                                 shareholders. FNZ interprets the dividend rules as part
any unlisted PIE allocated amounts in your tax return.                                                              of discharging its role as custodian and encourages
We also recommend advice is sought around whether                                                                   clients to seek their own tax advice on the application
certain PIE income is required to be included for any                                                               of the dividend rules where necessary.
other purposes (for example the Working for Families
package) as the rules around these areas have
recently changed.

3.2.2 Unlisted PIE distributions

Such amounts are considered as excluded income
in terms of the Income Tax Act and therefore, clients
are never required to include them in their tax returns.
FNZ however reports these distributions for information
purposes and so that the total distributions reported
in the tax report is consistent with other reports issued
by FNZ.

3.2.3 Fully imputed listed PIE distributions

Distributions received from listed PIEs are generally
not taxable when received by individuals and trusts.
However, individuals on a marginal tax rate of less than
28%, and trusts that have beneficiaries on a marginal tax
rate of less than 28%, may benefit from electing to treat
the imputed portion of distributions from listed PIEs as
taxable. This is on the basis that the excess imputation
and/or FDP credits can be offset against other taxable
income (potentially resulting in a tax refund).

The information contained in the FNZ Tax User Guide is of a general nature only. The User Guide is based on tax legislation and the interpretation of that legislation at the time the guide is prepared. Both tax legislation and its interpretation are
subject to change over time. Tax legislation and its application to your specific circumstances can be complex. As such, you are strongly encouraged to seek professional tax advice where required. Whilst every effort has been made to ensure
the accuracy of this User Guide and your tax reports, to the maximum extent permitted by law, no liability is accepted by FNZ for any errors or omissions. Property of FNZ, not for onward distribution.

                                                                                                                                                                                                                                                            7
3.3.1 New Zealand dividend income                                                                                    3.4.1 De minimis exemption from the FIF rules

                        Prima facie, all New Zealand sourced dividend income                                                                 Individuals and certain trusts can choose not to apply
                        is subject to RWT at 33%. However, no RWT is                                                                         the FIF rules if the total cost of their FIF investments
                        required to be deducted by FNZ if you had a valid RWT                                                                did not exceed $50,000 at any time during the income
                        certificate of exemption and this was provided to FNZ.                                                               year. This is known as the ‘de minimis’ exemption.
                                                                                                                                             Companies, and other trusts, must apply the FIF rules
                        If the company paying the dividend has attached                                                                      regardless of the cost of their FIF investments.
                        imputation credits to the dividend, FNZ will allocate
                        you your share of these imputation credits. Where                                                                    Additionally, where you do not exceed the $50,000
                        applicable, FNZ has offset eligible tax credits against                                                              threshold you can elect to calculate your income
                        your tax liability to reduce the RWT withheld.                                                                       using the FIF rules. If you do elect to do this you are
                                                                                                                                             required to calculate your income using the FIF rules
                        You should consider whether dividend or associated                                                                   for four years.
                        credits should be included in your tax return.
                                                                                                                                             Your de minimis election as at 31 March 2019 which
                        3.3.2 Overseas dividend income                                                                                       was supplied by you or your adviser is shown at the
                        Prima facie, FNZ is required to deduct RWT at 33%                                                                    top of the first page of your tax report.
                        on dividend income paid to investors from an overseas
                                                                                                                                             If you have elected to be subject to the FIF rules, we
                        resident entity. However, no RWT is required to be
                                                                                                                                             have included FIF calculations in your tax report for
                        deducted if:
                                                                                                                                             your investments held in custody with FNZ. If you
                        •	the overseas entity is a FIF and the investor has,                                                                have elected not to be subject to the FIF rules, no FIF
                           at the time the distribution is paid, elected to be                                                               calculations have been included in your tax report.
                           subject to the FIF rules (outlined in further detail
                           below); or                                                                                                        If you have other FIF investments not held in custody
                                                                                                                                             with FNZ or that your adviser is not aware of, we
                        •       if you had a valid RWT certificate of exemption                                                              recommend that you consider the impact of these
                                and this was provided to FNZ.                                                                                on your FNZ de minimis election. If your de minimis
                        If you have not elected to be subject to the FIF rules,                                                              election is incorrect, we recommend you contact
                        RWT is generally deducted from all overseas dividend                                                                 your adviser immediately to have your de minimis
                        income. Please note that the amount of RWT withheld                                                                  election amended.
                        from dividends you receive is based on the information                                                               As the FIF rules are complex, we recommend that
                        available at the time (being your FIF election and if the                                                            you seek advice from your tax adviser to determine if
                        overseas entity is a FIF or is exempt from FIF).                                                                     you are subject to the FIF rules, and if so, which FIF
                                                                                                                                             calculation method is most beneficial for you.
                        3.4 Foreign Investment Fund rules
                                                                                                                                             Note where FIF instruments have been transferred out
                        The Foreign Investment Fund (“FIF”) regime contains
                                                                                                                                             of custody, the FIF schedules may need to be modified
                        rules specifically designed to tax certain overseas
                                                                                                                                             for transactions that occurred outside of FNZ custody
                        investments. A FIF is broadly defined to include a right
                                                                                                                                             as well as your actual closing FIF holdings when
                        (i.e. a share) in a foreign company (i.e. a company
                                                                                                                                             preparing your tax return. We suggest you refer to the
                        that is not resident in New Zealand). However, there
                                                                                                                                             appendix for more information regarding our treatment
                        are some exemptions for certain Australian ASX listed
                                                                                                                                             of transfers.
                        companies and Australian unit trusts. A FIF interest
                        also includes rights in certain foreign superannuation
                        schemes and life insurance policies. While you do not
                        hold such investments through FNZ, holding such an
                        interest may impact on your ability to apply the de
                        minimis exemption (see across).

The information contained in the FNZ Tax User Guide is of a general nature only. The User Guide is based on tax legislation and the interpretation of that legislation at the time the guide is prepared. Both tax legislation and its interpretation are
subject to change over time. Tax legislation and its application to your specific circumstances can be complex. As such, you are strongly encouraged to seek professional tax advice where required. Whilst every effort has been made to ensure
the accuracy of this User Guide and your tax reports, to the maximum extent permitted by law, no liability is accepted by FNZ for any errors or omissions. Property of FNZ, not for onward distribution.

8 | 2019 FNZ TAX USER GUIDE
3.5 Foreign tax credits                                                                                             their New Zealand tax obligations.

Foreign tax may be withheld from overseas interest                                                                  FNZ prepares different tax reports for residents of
or dividend income derived by you. The rate of                                                                      New Zealand and non-residents. If you were non-
withholding tax will depend on the law of the foreign                                                               resident in New Zealand at any stage during the 2019
jurisdiction. In many circumstances, you may be able                                                                tax year, you will receive the non-resident report in
to claim a credit against your New Zealand tax liability                                                            respect of the entire year. We note that the manner in
for the foreign tax that has been withheld.                                                                         which information is reported to you and the amount
                                                                                                                    of withholding tax deducted from your interest and
However, there are complicated rules around the
                                                                                                                    dividend income is based on your tax residency.
amount of the foreign tax credit which is allowed as
a credit in your tax return. In general, it is limited to                                                           The tax rules that apply if your residency changes
your New Zealand tax liability on the investments that                                                              during the year are complex and the information in
gave rise to the foreign tax credit. For example, if your                                                           your tax report should be carefully considered when
taxable income on your USA FIF investments is nil,                                                                  completing your tax return. We would particularly
you will be unable to claim any credits for USA tax                                                                 recommend that you seek tax advice on how to use
paid for these investments. In addition, if you have                                                                the information in your tax report and what adjustments
New Zealand losses available, these must be offset                                                                  may be required to the information shown (for example
against taxable income before foreign tax credits                                                                   part year calculations).
can be claimed. If these losses exceed your taxable
income, foreign tax credits may be forfeited.                                                                       Please notify your adviser if your recorded residency
                                                                                                                    status is not currently correct or if it was not correct
Further, certain Double Tax Agreements (“DTA”)                                                                      during the previous year.
between New Zealand and foreign jurisdictions
may limit the amount of the foreign tax credit. Some                                                                3.7 Rebates, Fees, and Charges
countries require certain steps be taken before a
lower tax rate under the DTA can be applied. However,                                                               On the Summary of Investment Income page, FNZ
New Zealand tax rules generally limit foreign tax credits                                                           separately displays a subtotal for rebates that have
to the rate under the DTA. For example, if the DTA                                                                  been taxed through a PIE crystallisation and a subtotal
rate is 15% and the amount withheld in the foreign                                                                  for untaxed rebates. Unlisted PIE rebates are generally
jurisdiction is based on a 30% rate, you may be limited                                                             taxed in your unlisted PIE proxy tax calculations (as
to a tax credit at the 15% rate even though the actual                                                              shown in the relevant section of your tax report). A
tax withheld is at 30%.                                                                                             separate schedule of untaxed rebates from PIE funds
                                                                                                                    and other issuers is provided in the tax report and
Inland Revenue released a publication in November                                                                   these are generally taxable. For the purposes of the
2018 titled “A guide to foreign investment funds                                                                    following section ‘How to complete your tax return’,
and the fair dividend rate (IR461)” which provides                                                                  FNZ has assumed that these rebates are taxable.
information on the eligibility to claim the benefit of
foreign tax credits.                                                                                                Fees and charges may be deductible for tax purposes.
                                                                                                                    For the purposes of the section How to complete your
As the rules around foreign tax credits are complex,                                                                tax return, FNZ assumes that fees and charges are
we recommend that you seek advice from your tax                                                                     deductible, including any GST paid. If investors have
adviser to determine if you are eligible to claim a                                                                 claimed GST input credits for any GST paid in respect
foreign tax credit.                                                                                                 of any fees and charges in their GST returns, the
                                                                                                                    deductible amount needs to be reduced by the GST
3.6 Tax residency                                                                                                   already claimed.

As noted, this User Guide has been prepared to                                                                      We recommend that you seek advice from your tax
assist tax residents of New Zealand to understand                                                                   adviser to determine if the rebates you received are
                                                                                                                    taxable and if the fees and charges you incurred are
                                                                                                                    deductible for tax purposes.
The information contained in the FNZ Tax User Guide is of a general nature only. The User Guide is based on tax legislation and the interpretation of that legislation at the time the guide is prepared. Both tax legislation and its interpretation are
subject to change over time. Tax legislation and its application to your specific circumstances can be complex. As such, you are strongly encouraged to seek professional tax advice where required. Whilst every effort has been made to ensure
the accuracy of this User Guide and your tax reports, to the maximum extent permitted by law, no liability is accepted by FNZ for any errors or omissions. Property of FNZ, not for onward distribution.

                                                                                                                                                                                                                                                            9
4. COMPLETING YOUR TAX RETURN
                        The section below is a guideline on how to use the                                                                   The information used to generate your tax report
                        information contained in your tax report to populate                                                                 comes from a number of sources, including user
                        your tax return. On the summary pages of the tax                                                                     input, domestic, and international sources. Accordingly
                        report a numbered ‘Item’ has been inserted which                                                                     FNZ cannot guarantee the accuracy of this information.
                        relates to an ‘Item’ in the ‘How to complete your tax                                                                We note that FNZ attempts to process all transactions
                        return’ section.                                                                                                     in line with the relevant New Zealand tax requirements.
                                                                                                                                             However there may be rare cases where certain
                        Your tax report should be retained for tax purposes.
                                                                                                                                             complicated foreign corporate transactions (for
                        Together with information from other sources, the
                                                                                                                                             example some restructures, demergers, spinouts
                        summaries at the front of the report will assist in the
                                                                                                                                             or takeovers) result in amounts displayed in the tax
                        production of your tax return. However, the summaries
                                                                                                                                             report that may require further analysis on a case-
                        are not designed to be the sole source of information,
                                                                                                                                             by-case basis. Accordingly clients should review the
                        particularly if you have other investments that are not
                                                                                                                                             tax treatment of all transactions and seek advice as
                        held in custody with FNZ.
                                                                                                                                             required. -FNZ does not provide tax advice.
                        Only income and distributions received while your
                                                                                                                                             The tax report details the various amounts of tax
                        investments are held in FNZ custody are included
                                                                                                                                             deducted from the income of investments held in
                        within your tax report. Where investments are transferred
                                                                                                                                             custody with FNZ. We note that the rules around
                        into custody part way through an income year, FNZ
                                                                                                                                             claiming any tax credits are complicated and vary
                        will only report income and distributions from the date
                                                                                                                                             depending on your specific circumstances and the
                        that the investments are transferred into FNZ custody.
                                                                                                                                             nature of the investments you have held. The ability
                        All amounts in the tax report summary pages are                                                                      to claim tax credits that are included in your tax report
                        reported in New Zealand dollars. The exchange rates                                                                  may also be impacted by the investments you hold, or
                        used are at the close of business on the day the                                                                     gains and/or losses derived from investments not held
                        distribution is paid. In some cases, this rate could                                                                 in custody with FNZ. As such, we recommend you
                        differ from the actual rate used in the cash                                                                         seek professional advice if you intend to claim any tax
                        management conversion.                                                                                               credits displayed in your FNZ tax report as part of your
                                                                                                                                             tax return.
                        The following section should be used as a guide only.
                        The income that is required to be included in your tax
                        return will depend on your personal circumstances. As
                        such, we strongly recommend you seek professional
                        advice before filing your New Zealand tax return.

The information contained in the FNZ Tax User Guide is of a general nature only. The User Guide is based on tax legislation and the interpretation of that legislation at the time the guide is prepared. Both tax legislation and its interpretation are
subject to change over time. Tax legislation and its application to your specific circumstances can be complex. As such, you are strongly encouraged to seek professional tax advice where required. Whilst every effort has been made to ensure
the accuracy of this User Guide and your tax reports, to the maximum extent permitted by law, no liability is accepted by FNZ for any errors or omissions. Property of FNZ, not for onward distribution.

10 | 2019 FNZ TAX USER GUIDE
4.1 How to complete your tax return
4.1.1 IR3 – Individual Tax Return

Please ensure that you have read the entire contents of section 3 (General information regarding your investments)
before continuing.

  IR3 Box 13A  -  Total Interest RWT
  FNZ Tax Report                                                                                                          Item           NZ Tax Return
New Zealand Interest Income - NZ Resident Withholding Tax                                                                 2
Overseas Interest Income - NZ Resident Withholding Tax                                                                    9

                                                                                                                                         Total RWT

                                                                                                                                         13A            $                       ,                    ,                     .

  IR3 Box 13B  -  Total Gross Interest
  FNZ Tax Report                                                                                                          Item           NZ Tax Return
New Zealand Interest Income - Gross Income                                                                                1

                                                                                                                                         Total gross interest

                                                                                                                                         13B            $                       ,                    ,                     .

  IR3 Box 14  -  Total Dividend Imputation Credits
  FNZ Tax Report                                                                                                          Item           NZ Tax Return
New Zealand Dividend Income - NZ Imputation Credits                                                                       4
Overseas Dividend Income (Exempt from FIF Rules) - NZ Imputation Credits 11
Overseas Dividend Income (Subject to FIF Rules) - NZ Imputation Credits                                                   15
Do you elect to treat fully imputed portion of listed PIE distributions as taxable?
Listed PIE Distributions - NZ Imputation Credits                                                                          If yes, 29
Have you had PIE income taxed at 0% during the year?
Unlisted PIE Income (PIR 0% for Period) - Allocated Imputation Credits                                                    If yes, 27

                                                                                                                                         Total dividend imputation credits

                                                                                                                                           14           $                       ,                    ,                     .

   Please ensure you were eligible for each PIR used during the year as this may affect your calculation for this section.

  IR3 Box 14A  -  Total dividend resident withholding tax and payments for foreign dividends
  FNZ Tax Report                                                                                                          Item           NZ Tax Return
New Zealand Dividend Income - Foreign Withholding Payment Credits                                                         5
New Zealand Dividend Income - NZ Resident Withholding Tax                                                                 6
Overseas Dividend Income (Exempt from FIF Rules) - 12
Foreign Withholding Payment Credits
Overseas Dividend Income (Exempt from FIF Rules) -                                                                        14
NZ Resident Witholding Tax
Overseas Dividend Income (Subject to FIF Rules) -                                                                         16
Foreign Withholding Payment Credits
Overseas Dividend Income (Subject to FIF Rules) - 18
NZ Resident Withholding Tax
Do you elect to treat fully imputed portion of listed PIE distributions as taxable?
Listed PIE Distributions - Foreign Withholding Payment Credits                                                            If yes, 30
Have you had PIE income taxed at 0% during the year?
Unlisted PIE Income (PIR 0% for Period) - Allocated DWP Credits                                                           If yes, 25
Unlisted PIE Income (PIR 0% for Period) - Allocated RWT Credits                                                           If yes, 26

                                                                                                                                         Total dividend RWT and payments for foreign dividends

                                                                                                                                         14A            $                       ,                    ,                     .
   Please ensure you were eligible for each PIR used during the year as this may affect your calculation for this section.

The information contained in the FNZ Tax User Guide is of a general nature only. The User Guide is based on tax legislation and the interpretation of that legislation at the time the guide is prepared. Both tax legislation and its interpretation are
subject to change over time. Tax legislation and its application to your specific circumstances can be complex. As such, you are strongly encouraged to seek professional tax advice where required. Whilst every effort has been made to ensure
the accuracy of this User Guide and your tax reports, to the maximum extent permitted by law, no liability is accepted by FNZ for any errors or omissions. Property of FNZ, not for onward distribution.

                                                                                                                                                                                                                                                       11
IR3 Box 14B  -  Total Gross Dividends
                     FNZ Tax Report                                                                                                           Item          NZ Tax Return
                   New Zealand Dividend Income - Gross Income                                                                                 3
                   Do you elect to treat the fully imputed portion of listed PIE distributions as taxable?
                   Listed PIE Distributions - Gross Income                                                                                    If yes, 28

                                                                                                                                                             Total gross dividends

                                                                                                                                                             14B            $                       ,                    ,                     .

                     IR3 Box 17A  -  Total Overseas Tax Paid
                     FNZ Tax Report                                                                                                           Item          NZ Tax Return
                   Overseas Interest Income - Foreign Withholding Tax                                                                         8
                   Overseas Dividend Income (Exempt from FIF Rules) - Foreign Withholding Tax 13
                   Overseas Dividend Income (Subject to FIF Rules) - Foreign Withholding Tax                                                  17
                   Have you had PIE income taxed at 0% during the year?
                   Unlisted PIE Income (PIR 0% for Period) - Allocated Foreign Tax Credits                                                    If yes, 24

                                                                                                                                                             Total overseas tax paid

                                                                                                                                                             17A            $                       ,                    ,                     .
                      Please ensure you were eligible for each PIR used during the year as this may affect your calculation for this section.

                     IR3 Box 17B  -  Total Overseas Income
                     FNZ Tax Report                                                                                                           Item          NZ Tax Return
                   Overseas Interest Income - Gross Income                                                                                    7
                   Overseas Dividend Income (Exempt from FIF Rules) - Gross Income                                                            10
                   Comparative Value (The Compulsory Method) - Total Comparative Value                                                        33
                   Foreign Investment Fund (FIF) Income
                   Choose the lower of the Total Fair Dividend Rate                                                                           31 or 32
                   and the Total Comparative Value (the Optional Method)
                   Have you had PIE income taxed at 0% during the year?
                   Unlisted PIE Income (PIR 0% for Period) - PIE Taxable Investment Income                                                    If yes, 23

                                                                                                                                                             Total overseas income

                                                                                                                                                             17B            $                       ,                    ,                     .
                      Please ensure you were eligible for each PIR used during the year as this may affect your calculation for this section.

                     IR3 Box 24 - Total Other Income
                     FNZ Tax Report                                                                                                           Item          NZ Tax Return
                   Determine which of your management fee rebates are taxable:
                   Fund Rebate Income - Untaxed Fund Rebate Income                                                                            19

                                                                                                                                                             Total other income

                                                                                                                                                               24           $                       ,                    ,                     .

                     IR3 Box 26 - Total Expenses Claimed
                     FNZ Tax Report                                                                                                           Item          NZ Tax Return
                   Determine which of your fees and charges are deductible including the GST portion:
                   Fees and Charges - Total Fees and Charges                                                                                  20

                                                                                                                                                             Total other expenses

                                                                                                                                                               26           $                       ,                    ,                     .

The information contained in the FNZ Tax User Guide is of a general nature only. The User Guide is based on tax legislation and the interpretation of that legislation at the time the guide is prepared. Both tax legislation and its interpretation are
subject to change over time. Tax legislation and its application to your specific circumstances can be complex. As such, you are strongly encouraged to seek professional tax advice where required. Whilst every effort has been made to ensure
the accuracy of this User Guide and your tax reports, to the maximum extent permitted by law, no liability is accepted by FNZ for any errors or omissions. Property of FNZ, not for onward distribution.

12 | 2019 FNZ TAX USER GUIDE
4.1.2 IR4 – Company Tax Return

Please ensure that you have read the entire contents of section 3 (General information regarding your investments)
before continuing.

  IR4 Box 13A  -  Total Interest RWT and/or NRWT
  FNZ Tax Report                                                                                                          Item           NZ Tax Return
New Zealand Interest Income - NZ Resident Withholding Tax                                                                 2
Overseas Interest Income - NZ Resident Withholding Tax                                                                    9

                                                                                                                                          Total RWT and/or NRWT

                                                                                                                                          13A           $                        ,                    ,                     .

  IR4 Box 13B  -  Total Gross Interest
  FNZ Tax Report                                                                                                          Item           NZ Tax Return
New Zealand Interest Income - Gross Income                                                                                1

                                                                                                                                         Total gross interest—if a loss put a minus sign in the last box

                                                                                                                                          13B           $                        ,                    ,                     .

  IR4 Box 14  -  Total Dividend Imputation Credits
  FNZ Tax Report                                                                                                          Item           NZ Tax Return
New Zealand Dividend Income - NZ Imputation Credits                                                                       4
Overseas Dividend Income (Exempt from FIF Rules) - NZ Imputation Credits 11
Overseas Dividend Income (Subject to FIF Rules) - NZ Imputation Credits                                                   15
Listed PIE Distributions - NZ Imputation Credits                                                                          29
Unlisted PIE Income (PIR 0% for Period) - Allocated Imputation Credits                                                    27

                                                                                                                                         Total dividend imputation credits

                                                                                                                                           14           $                        ,                    ,                     .
   Dividends and associated credits do not need to be included in your IR4 Income Tax return if you were liable to pay Foreign
   Dividend Withholding Payment tax during the year on the dividends.

  IR4 Box 14A  -  Total dividend RWT and FDP credits
  FNZ Tax Report                                                                                                          Item           NZ Tax Return
New Zealand Dividend Income - Foreign Withholding Payment Credits                                                         5
New Zealand Dividend Income - NZ Resident Withholding Tax                                                                 6
Overseas Dividend Income (Exempt from FIF Rules) - 12
Foreign Withholding Payment Credits
Overseas Dividend Income (Exempt from FIF Rules) - 14
NZ Resident Witholding Tax
Overseas Dividend Income (Subject to FIF Rules) - 16
Foreign Withholding Payment Credits
Overseas Dividend Income (Subject to FIF Rules) - 18
NZ Resident Withholding Tax
Listed PIE Distributions - Foreign Withholding Payment Credits                                                            30
Unlisted PIE Income (PIR 0% for Period) - Allocated DWP Credits                                                           25
Unlisted PIE Income (PIR 0% for Period) - Allocated RWT Credits                                                           26

                                                                                                                                         Total dividend RWT and FDP credits

                                                                                                                                          14A           $                        ,                    ,                     .
   Dividends and associated credits do not need to be included in your IR4 Income Tax return if you were liable to pay Foreign
   Dividend Withholding Payment tax during the year on the dividends.

The information contained in the FNZ Tax User Guide is of a general nature only. The User Guide is based on tax legislation and the interpretation of that legislation at the time the guide is prepared. Both tax legislation and its interpretation are
subject to change over time. Tax legislation and its application to your specific circumstances can be complex. As such, you are strongly encouraged to seek professional tax advice where required. Whilst every effort has been made to ensure
the accuracy of this User Guide and your tax reports, to the maximum extent permitted by law, no liability is accepted by FNZ for any errors or omissions. Property of FNZ, not for onward distribution.

                                                                                                                                                                                                                                                       13
IR4 Box 14B  -  Total Gross Dividends
                          FNZ Tax Report                                                                                                           Item           NZ Tax Return
                        New Zealand Dividend Income - Gross Income                                                                                 3
                        Listed PIE Distributions - Gross Income                                                                                    28

                                                                                                                                                                  Total gross dividends

                                                                                                                                                                   14B           $                       ,                     ,                     .

                          IR4 Box 18A  -  Total Overseas Tax Paid
                          FNZ Tax Report                                                                                                           Item           NZ Tax Return
                        Overseas Interest Income - Foreign Withholding Tax                                                                         8
                        Overseas Dividend Income (Exempt from FIF Rules) - Foreign Withholding Tax 13
                        Overseas Dividend Income (Subject to FIF Rules) - Foreign Withholding Tax                                                  17
                        Unlisted PIE Income (PIR 0% for Period) - Allocated Foreign Tax Credits                                                    24

                                                                                                                                                                  Total overseas tax paid

                                                                                                                                                                   18A           $                       ,                     ,                     .
                           Dividends and associated credits do not need to be included in your IR4 Income Tax return if you were liable to pay Foreign Dividend
                           Withholding Payment tax during the year on the dividends.

                          IR4 Box 18B  -  Total Overseas Income
                          FNZ Tax Report                                                                                                           Item           NZ Tax Return
                        Overseas Interest Income - Gross Income                                                                                    7
                        Overseas Dividend Income (Exempt from FIF Rules) - Gross Income                                                            10
                        Comparative Value (The Compulsory Method) - Total Comparative Value                                                        33
                        Total Fair Dividend Rate - FIF Income                                                                                      31
                        Unlisted PIE Income (PIR 0% for Period) - PIE Taxable Investment Income                                                    23

                                                                                                                                                                  Total overseas income—if a loss put a minus sign in the last box

                                                                                                                                                                   18B           $                       ,                     ,                     .

                          IR4 Box 21B - Total Other Income
                          FNZ Tax Report                                                                                                           Item           NZ Tax Return
                        Determine which of your management fee rebates are taxable:
                        Fund Rebate Income - Untaxed Fund Rebate Income                                                                            19
                        Determine which of your fees and charges are deductible (including the GST portion):
                        Fees and Charges - Total Fees and Charges                                                                                  20

                                                                                                                                                                  Total other income—if a loss put a minus sign in the last box

                                                                                                                                                                   21B           $                       ,                     ,                     .

The information contained in the FNZ Tax User Guide is of a general nature only. The User Guide is based on tax legislation and the interpretation of that legislation at the time the guide is prepared. Both tax legislation and its interpretation are
subject to change over time. Tax legislation and its application to your specific circumstances can be complex. As such, you are strongly encouraged to seek professional tax advice where required. Whilst every effort has been made to ensure
the accuracy of this User Guide and your tax reports, to the maximum extent permitted by law, no liability is accepted by FNZ for any errors or omissions. Property of FNZ, not for onward distribution.

14 | 2019 FNZ TAX USER GUIDE
4.1.3 IR6 – Trust Tax Return

Please ensure that you have read the entire contents of section 3 (General information regarding your investments)
before continuing.

  IR6 Box 9A  -  Total Interest RWT
  FNZ Tax Report                                                                                                                                  Item                     NZ Tax Return
New Zealand Interest Income - Allowable NZ Resident Withholding Tax                                                                               2
Overseas Interest Income - Allowable NZ Resident Withholding Tax                                                                                  9

                                                                                                                                              Total RWT

                                                                                                                             9A           $                       ,                    ,                     .

  IR6 Box 9B  -  Total Gross Interest
  FNZ Tax Report                                                                                                                                  Item                     NZ Tax Return
New Zealand Interest Income - Gross Income                                                                                                        1

                                                                                                                                              Total gross interest—if a loss put a minus sign in the last box

                                                                                                                             9B           $                       ,                    ,                     .

  IR6 Box 10  -  Total Dividend Imputation Credits
  FNZ Tax Report                                                                                                                                  Item                     NZ Tax Return
New Zealand Dividend Income - NZ Imputation Credits                                                                                               4
Overseas Dividend Income (Exempt from FIF Rules) - NZ Imputation Credits                                                                          11
Overseas Dividend Income (Subject to FIF Rules) - NZ Imputation Credits                                                                           15
Do you elect to treat fully imputed portion of listed PIE distributions as taxable?
Listed PIE Distributions - NZ Imputation Credits                                                                                                  If yes, 29
Have you had PIE income taxed at 0% during the year?
Unlisted PIE Income (PIR 0% for Period) - Allocated Imputation Credits                                                                            If yes, 27

                                                                                                                                              Total dividend imputation credits

                                                                                                                             10           $                       ,                    ,                     .
   Please ensure you were eligible for each PIR used during the year as this may affect your calculation for this section.

  IR6 Box 10A  -  Total Dividend RWT and Payment for Foreign Dividends
  FNZ Tax Report                                                                                                                                  Item                     NZ Tax Return
New Zealand Dividend Income - Foreign Withholding Payment Credits                                                                                 5
New Zealand Dividend Income - NZ Resident Withholding Tax                                                                                         6
Overseas Dividend Income (Exempt from FIF Rules) -                                                                                                12
Foreign Withholding Payment Credits
Overseas Dividend Income (Exempt from FIF Rules) -                                                                                                14
NZ Resident Witholding Tax
Overseas Dividend Income (Subject to FIF Rules) -                                                                                                 16
Foreign Withholding Payment Credits
Overseas Dividend Income (Subject to FIF Rules) - 18
NZ Resident Withholding Tax
Do you elect to treat fully imputed portion of listed PIE distributions as taxable?
Listed PIE Distributions - Foreign Withholding Payment Credits                                                                                    If yes, 30
Have you had PIE income taxed at 0% during the year?
Unlisted PIE Income (PIR 0% for Period) - Allocated DWP Credits                                                                                   If yes, 25
Unlisted PIE Income (PIR 0% for Period) - Allocated RWT Credits                                                                                   If yes, 26

                                                                                                                                              Total dividend RWT and payment for foreign dividends

                                                                                                                           10A            $                       ,                    ,                     .

   Please ensure you were eligible for each PIR used during the year as this may affect your calculation for this section.

The information contained in the FNZ Tax User Guide is of a general nature only. The User Guide is based on tax legislation and the interpretation of that legislation at the time the guide is prepared. Both tax legislation and its interpretation are
subject to change over time. Tax legislation and its application to your specific circumstances can be complex. As such, you are strongly encouraged to seek professional tax advice where required. Whilst every effort has been made to ensure
the accuracy of this User Guide and your tax reports, to the maximum extent permitted by law, no liability is accepted by FNZ for any errors or omissions. Property of FNZ, not for onward distribution.

                                                                                                                                                                                                                                                       15
IR6 Box 10B  -  Total Gross Dividends
                          FNZ Tax Report                                                                                                                                      Item                   NZ Tax Return
                        New Zealand Dividend Income - Gross Income                                                                                                            3
                        Do you elect to treat the fully imputed portion of listed PIE distributions as taxable?
                        Listed PIE Distributions - Gross Income                                                                                                               If yes, 28

                                                                                                                                                                       Total gross dividends

                                                                                                                                                    10B            $                       ,                    ,                     .

                          IR6 Box 13A  -  Total Overseas Tax Paid
                          FNZ Tax Report                                                                                                                                      Item                   NZ Tax Return
                        Overseas Interest Income - Allowable Foreign Withholding Tax                                                                                          8
                        Overseas Dividend Income (Exempt from FIF Rules) - Allowable Foreign Withholding Tax                                                                  13
                        Overseas Dividend Income (Subject to FIF Rules) - Allowable Foreign Withholding Tax                                                                   17
                        Have you had PIE income taxed at 0% during the year?
                        Unlisted PIE Income (PIR 0% for Period) - Allowable Allocated Foreign Tax Credits                                                                     If yes, 24

                                                                                                                                                                       Total overseas tax paid

                                                                                                                                                    13A            $                       ,                    ,                     .
                           Please ensure you were eligible for each PIR used during the year as this may affect your calculation for this section.

                          IR6 Box 13B  -  Total Overseas Income
                          FNZ Tax Report                                                                                                                                      Item                   NZ Tax Return
                        Overseas Interest Income - Gross Income                                                                                                               7
                        Overseas Dividend Income (Exempt from FIF Rules) - Gross Income                                                                                       10
                        Comparative Value (The Compulsory Method) - Total Comparative Value                                                                                   33
                        Foreign Investment Fund (FIF) Income
                        Choose the lower of the Total Fair Dividend Rate                                                                                                      31 or 32
                        and the Total Comparative Value (the Optional Method)
                        Have you had PIE income taxed at 0% during the year?
                        Unlisted PIE Income (PIR 0% for Period) - PIE Taxable Investment Income                                                                               If yes, 23

                                                                                                                                                                       Total overseas income—if a loss, put a minus sign in the last box

                                                                                                                                                    13B            $                       ,                    ,                     .
                           Please ensure you were eligible for each PIR used during the year as this may affect your calculation for this section.

                          IR6 Box 16B - Total Other Income
                          FNZ Tax Report                                                                                                                                      Item                   NZ Tax Return
                        Determine which of your management fee rebates are taxable:
                        Fund Rebate Income - Untaxed Fund Rebate Income                                                                                                       19

                                                                                                                                                                       Total other income—if a loss, put a minus sign in the last box

                                                                                                                                                    16B            $                       ,                    ,                     .

                          IR6 Box 19 - Total Expenses Claimed
                          FNZ Tax Report                                                                                                                                      Item                   NZ Tax Return
                        Determine which of your fees and charges are deductible including the GST portion:
                        Fees and Charges - Total Fees and Charges                                                                                                             20

                                                                                                                                                                       Total expenses claimed

                                                                                                                                                      19           $                       ,                    ,                     .

The information contained in the FNZ Tax User Guide is of a general nature only. The User Guide is based on tax legislation and the interpretation of that legislation at the time the guide is prepared. Both tax legislation and its interpretation are
subject to change over time. Tax legislation and its application to your specific circumstances can be complex. As such, you are strongly encouraged to seek professional tax advice where required. Whilst every effort has been made to ensure
the accuracy of this User Guide and your tax reports, to the maximum extent permitted by law, no liability is accepted by FNZ for any errors or omissions. Property of FNZ, not for onward distribution.

16 | 2019 FNZ TAX USER GUIDE
5. RESIDENT WITHHOLDING TAX DEDUCTED
         BY FNZ
Broadly speaking, as a nominee for tax purposes, FNZ                                                                5.2 Dividend income
is required to deduct RWT on dividend and interest
                                                                                                                    5.2.1 New Zealand dividend income
income paid to New Zealand resident investors on the
Wrap Platform (Wrap).                                                                                               Prima facie, all New Zealand sourced dividend income
                                                                                                                    is subject to RWT at 33% (less credit for any eligible tax
5.1 Interest income                                                                                                 credits which may be attached). However, no RWT is
                                                                                                                    required to be deducted by FNZ if you had a valid RWT
FNZ has deducted RWT on interest income derived                                                                     certificate of exemption and this was provided to FNZ.
by investors based on their elected RWT rate in Wrap
at the time of the distribution. If you did not provide                                                             Where applicable, FNZ has offset eligible tax credits
FNZ or your adviser with a valid IRD number, FNZ                                                                    against your tax liability to reduce the RWT withheld.
has withheld RWT on interest income at the highest
                                                                                                                    5.2.2 Overseas dividend income
RWT rate.
                                                                                                                    Prima facie, FNZ is required to deduct RWT at 33%
If you provided a valid IRD number and did not provide                                                              on dividend income paid to investors from an overseas
FNZ or your adviser with a RWT rate election, RWT has                                                               resident entity. However, no RWT is required to be
been withheld on interest at the applicable default tax                                                             deducted if the overseas entity is a FIF and the investor
rate depending on your entity type.                                                                                 has, at the time the distribution is paid, elected to be
Where applicable, FNZ has offset eligible tax credits                                                               subject to the FIF rules. Please note that the FIF rules
against any tax liability to reduce the RWT required to                                                             are discussed in further detail in section 9 and 10
be withheld by FNZ. No RWT is deducted on interest                                                                  of this guide.
income if you elected a 0% RWT rate and provided                                                                    If you have not elected to be subject to the FIF rules,
a valid RWT certificate of exemption to FNZ.                                                                        RWT is generally deducted from all overseas dividend
The amount of RWT deducted by FNZ is determined                                                                     income derived by you unless you provided FNZ with
based on the information available at the time of the                                                               a valid RWT certificate of exemption.
distribution. If an incorrect amount of RWT has been                                                                Where the investor changes their election to become
withheld, you should contact your adviser immediately.                                                              subject to the FIF rules during the tax year, all
As RWT is a refundable tax credit, any overpayment                                                                  distributions received from FIF investments from that
can generally be refunded by filing a tax return, or by                                                             point forward will no longer have RWT deducted at
filing an IR 454 (for those entities that are not required                                                          33%. Investors may wish to claim a credit in their
to file a tax return). Please note that a company’s                                                                 tax return for any RWT that has been deducted on
income tax refund is generally limited to the balance                                                               distributions from FIF investments at times when the
in its imputation credit account (“ICA”) at the end of                                                              investor was not subject to the FIF rules.
the income year.

If you are unsure how this affects you, we recommend
that you seek advice from your tax adviser.

The information contained in the FNZ Tax User Guide is of a general nature only. The User Guide is based on tax legislation and the interpretation of that legislation at the time the guide is prepared. Both tax legislation and its interpretation are
subject to change over time. Tax legislation and its application to your specific circumstances can be complex. As such, you are strongly encouraged to seek professional tax advice where required. Whilst every effort has been made to ensure
the accuracy of this User Guide and your tax reports, to the maximum extent permitted by law, no liability is accepted by FNZ for any errors or omissions. Property of FNZ, not for onward distribution.

                                                                                                                                                                                                                                                       17
Where the investor changes their election in Wrap to                                                                 The amount of RWT deducted by FNZ is determined
                        no longer be subject to the FIF rules during the income                                                              based on the information available at the time of the
                        year, all distributions received from FIF investments                                                                distribution. If you believe an incorrect amount of RWT
                        from that point forward will be subject to RWT at 33%.                                                               has been withheld, you should contact your adviser
                        Please note that these investors may be required to file                                                             immediately. As RWT is generally a refundable tax
                        a tax return to ensure tax is paid on distributions from                                                             credit, any overpayment can be refunded by filing a
                        FIF investments (that were not subject to RWT) while                                                                 tax return or by filing an IR 454 (for those entities that
                        the investor was subject to the FIF rules.                                                                           are not required to file a tax return). Please note that a
                                                                                                                                             company’s income tax refund is generally limited to the
                        Where applicable, FNZ has offset foreign tax paid to                                                                 balance in its ICA at the end of the income year.
                        reduce the RWT withheld. No RWT shall be deducted
                        on dividend income if the investor has elected a 0%                                                                  If you are unsure how this affects you, we recommend
                        RWT rate and a valid RWT certificate of exemption has                                                                that you seek advice from your tax adviser.
                        been provided to FNZ.

The information contained in the FNZ Tax User Guide is of a general nature only. The User Guide is based on tax legislation and the interpretation of that legislation at the time the guide is prepared. Both tax legislation and its interpretation are
subject to change over time. Tax legislation and its application to your specific circumstances can be complex. As such, you are strongly encouraged to seek professional tax advice where required. Whilst every effort has been made to ensure
the accuracy of this User Guide and your tax reports, to the maximum extent permitted by law, no liability is accepted by FNZ for any errors or omissions. Property of FNZ, not for onward distribution.

18 | 2019 FNZ TAX USER GUIDE
6. FIXED INTEREST INVESTMENTS
         AND THE FINANCIAL ARRANGEMENTS RULES
Generally, you must calculate income and expenditure                                                                6.1 Cash Basis Person and method
from your financial arrangements using the “financial
                                                                                                                    The cash basis rules exist to provide compliance
arrangement rules” (commonly known as the accrual
                                                                                                                    concessions to persons who hold financial arrangements
rules). Broadly, a financial arrangement is a debt or                                                               of a less than substantive value. The cash basis rules
debt like instrument (for example, bonds, and fixed                                                                 also allow non individuals such as companies and
interest investments). If you are a “cash basis person”,                                                            trusts to apply the cash basis rules where certain
income is calculated on an interest paid/received basis.                                                            criteria are met. Investors are required to determine
If you are not a cash basis person, income must be                                                                  their eligibility to use the cash basis method every
calculated each year using an accrual rather than cash                                                              income year.
method. Please note that all interest income is reported
                                                                                                                    The following flowchart summarises an investor’s ability
in the tax report on a cash basis (that is, reported when
                                                                                                                    to be a cash basis person. The section following the
the payment is received by FNZ). Depending on your
                                                                                                                    flowchart outlines some specific rules to use when
individual circumstances, the cash basis method may                                                                 applying the flowchart.
not be appropriate for tax purposes.
                                                                                                                    6.1.1 Beneficiary or trustee of a trust
In addition to reporting your interest receipts in your
                                                                                                                    If you are a beneficiary or trustee of a trust, you may
tax return, you may be required to make adjustments
                                                                                                                    be required to either include or exclude the value of
for any accrued interest and/or discounts or premiums
                                                                                                                    the financial arrangements held by the trust when
included in the purchase price of any fixed interest
                                                                                                                    determining if you, in your personal capacity, are
securities that you have acquired. Similarly, adjustments                                                           a cash basis person. Similarly, this treatment may
may be required for any accrued interest and premiums                                                               be required for financial arrangement income and
or discounts that are included in the sale proceeds                                                                 expenditure derived by the trust. These requirements
where securities are sold before maturity date.                                                                     are considered in further detail below.
Information contained in the Direct Bond Trade Report
                                                                                                                    6.1.1.1 Trustee of an estate
within your tax report will assist you in determining
these adjustments.                                                                                                  If you are the trustee of an estate, you may be a cash
                                                                                                                    basis person if at the time of the deceased’s death
You should note that depending on your circumstances,                                                               the deceased person was a cash basis person and
any losses or credit impairments resulting from deposits                                                            the cash basis thresholds (outlined in the flowchart
made with finance companies may be a capital loss                                                                   above) are met. If these criteria are met, you may be
and, as such, may not be deductible for tax purposes.                                                               treated as a cash basis person for the income year of
However, an investor’s business that includes holding                                                               the deceased’s death and the four subsequent income
or dealing in financial arrangements of the type giving                                                             years provided the cash basis test is met each income
rise to the loss may be able to claim a tax deduction                                                               year.
for the loss provided certain requirements are met. You                                                             If you fail to meet the cash basis test, you must apply
are encouraged to seek professional tax advice before                                                               an accrual method, and are not permitted to use the
claiming a tax deduction for such losses.                                                                           cash basis method in any subsequent income years.
                                                                                                                    This is irrespective of whether or not the deceased’s
Accrual tax reporting is a complex area of law. We
                                                                                                                    estate meets the cash basis test in future income years.
have included this information to help assist you to
determine how the accrual rules apply to you.

The information contained in the FNZ Tax User Guide is of a general nature only. The User Guide is based on tax legislation and the interpretation of that legislation at the time the guide is prepared. Both tax legislation and its interpretation are
subject to change over time. Tax legislation and its application to your specific circumstances can be complex. As such, you are strongly encouraged to seek professional tax advice where required. Whilst every effort has been made to ensure
the accuracy of this User Guide and your tax reports, to the maximum extent permitted by law, no liability is accepted by FNZ for any errors or omissions. Property of FNZ, not for onward distribution.

                                                                                                                                                                                                                                                       19
Is your financial arrangement income and expenditure
                             $100,000 or less?*                                                                                            NO

                                                                                   YES
                                                                                                                                                 Is the value of all your financial arrangements
                                                                                                                                 YES             $1,000,000 or less?*

                                                                                                                                                                                                      NO
                             Is your accrual financial arrangement income greater
                             than your cash basis financial arrangement income
                             by greater than $40,000?* (See Deferral threshold                                                             YES
                             section below).

                                                                                   NO

                             Has the Commissioner of Inland Revenue excluded                                                                                               The investor must use an
                             you from applying the cash basis method?                                                                                                      accrual method.
                                                                                                                                            YES

                                                                                   NO

                             The investor may apply the cash basis method to their
                             financial arrangements. Please note that a cash basis
                             person may elect to apply an accrual method.

                        *If you are a beneficiary or a trustee of a trust, please read the Beneficiary or trustee sections below.

                        6.1.1.2 Beneficiary of a bare trust                                                                                  •	the value of the arrangement, if it produces trustee
                                                                                                                                                income or beneficiary income under the trust rules;
                        If you are a beneficiary of a bare trust, you must
                        calculate your share of the trust’s financial arrangements                                                           •       the income under the arrangement that is trustee
                        and the income and expenditure from the trust’s                                                                              income or beneficiary income under the trust rules;
                        financial arrangements. In effect, you (as beneficiary)
                                                                                                                                             •       the value of the financial arrangement, if
                        are treated as being a party to the arrangement.
                                                                                                                                                     expenditure is incurred under it; and
                        The result of these calculations is included when                                                                    •       the expenditure incurred under the arrangement.
                        determining if you, in your personal capacity, meet
                        the cash basis test.                                                                                                 These exclusions ensure that you (as an investor who
                                                                                                                                             is a trustee of a trust) do not count the trust’s financial
                        6.1.1.3 Trustee of a trust (other than a bare                                                                        arrangements when determining if you are, in your
                        trust or estate)                                                                                                     personal capacity, a cash basis person.
                        If you are a trustee of a trust (other than a bare trust
                        or estate), the following trust amounts are excluded
                        when applying the tests to your personal position:

The information contained in the FNZ Tax User Guide is of a general nature only. The User Guide is based on tax legislation and the interpretation of that legislation at the time the guide is prepared. Both tax legislation and its interpretation are
subject to change over time. Tax legislation and its application to your specific circumstances can be complex. As such, you are strongly encouraged to seek professional tax advice where required. Whilst every effort has been made to ensure
the accuracy of this User Guide and your tax reports, to the maximum extent permitted by law, no liability is accepted by FNZ for any errors or omissions. Property of FNZ, not for onward distribution.

20 | 2019 FNZ TAX USER GUIDE
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