FIF rules put advisers offside

Many financial planners and accountants have been flummoxed by the complex new foreign investment fund (FIF) regime as its first tax reporting season gets underway.

Friday, July 11th 2008, 6:57AM

by David Chaplin

Good Returns has been flooded with emails from advisers venting their frustration with the FIF rules with several saying even the Inland Revenue Department (IRD) has been unable to clarify their questions.

According to one chartered accountant who contacted Good Returns, the IRD call centres have been "beseiged with phone calls they cannot answer".

"IRD branch Technical Officers do not know anything about the regime," the accountant said. "IRD staff are attending a CE course this week to learn about it. I feel sorry for sole practitioners. A lot of accountants are going to get it wrong."

He said clients' fees had shot up as a result of the FIF regime with one accounting firm reporting an increase from $1,000 to $5,000.

Another financial planner also told Good Returns that fund managers are supplying inconsistent information, which further confused the issue.

"Regarding the tax information supplied by three fund managers in relation to the FIF regime, each has provided different information and different instructions on how to include it on the IRD return," the financial adviser said.

"Which is correct? Needless to say I have used the most favourable interpretation for my returns. But what a bugger's muddle it all is!"

However, at least two technology providers have recently launched software programs to help financial advisers, investors and accountants comply with the new FIF rules.

Tony Ryburn, head of Sharesight, told ASSET magazine this month his firm has just released a FIF calculator to help New Zealanders who invest in ASX-listed shares work out their tax liabilities.

Ryburn said the Sharesight calculator compared tax payable using both the comparative value (CV) and fair divided rate methods with the results both more accurate and cheaper than doing it manually.

"A lot of accountants are not that keen to get involved [with FIF calculations]," he told ASSET. "The risk is that the accountant's bill is bigger than the tax investors might have to pay."

Christchurch-based firm Omnimax is also about to release the final version of its FIF calculator, which the firm's founder Michael Taylor said includes data for most managed funds available in New Zealand as well as ASX shares.

Taylor told ASSET the Omnimax system could save clients thousands of dollars in fees and provide a new source of income for financial advisers.

"If you have no options you will lose potentially valuable business. But if you can show your clients that a tax report could save them $5,000 - in this climate especially - that's good news for everyone," he said.

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