The information below is general and is not intended as specific taxation advice. All investors should seek independent tax advice in relation to their own individual circumstances.
What is the difference between a repurchase and a redemption?
You have two choices when withdrawing your funds. You can sell your units back to Liontamer (called the repurchase method) or redeem them, which means the units are cancelled (called the redemption method). It is important you understand which option is best for you due to the different tax and fee consequences of each method.
Due to New Zealand securities laws, Liontamer is unable to provide advice on the appropriate method of withdrawal specific to your personal circumstances. We strongly recommend that you consult your accountant or tax adviser to confirm the appropriateness of using either the repurchase or redemption method to withdraw your maturing units.
Repurchase (default) option
Please note you will be charged a non-refundable 2% fee for Liontamer to repurchase your units at, or before, maturity i.e. applies to all repurchases.
If you are investing in your own capacity (i.e. not a trust or a trustee, company or other entity) and the original cost of your offshore portfolio is NZ$50,000 or less (excluding the cost of certain Australian listed investments and certain other investments) any gains you receive may not be subject to tax if you ask Liontamer to repurchase your units (depending on your individual circumstances). You should check with your tax adviser about whether this applies to you. In all other circumstances, how you are taxed on the amount you receive on repurchase will depend on how you elect to be taxed on your offshore portfolio under the Foreign Investment Fund (FIF) tax rules. Payment will be made within 10 business days of the date your repurchase request was processed. For more information see, 'How is my Liontamer fund taxed?'
Please note there is no fee if you choose to redeem your units at maturity; however there is a 2% early exit fee if you choose to redeem prior to maturity.
If you decide to redeem your units your tax position will depend on whether the FIF tax rules apply to you or not. You should check with your tax adviser about what rules apply to you. In general, if you are a natural person (not acting as a trustee) and the original cost of your offshore portfolio is NZ$50,000 or less (excluding the cost of certain Australian listed investments and certain other investments) you will be taxed on any amount you receive in excess of the subscription price of your units. The full excess (if any) will be treated as a taxable dividend. In all other circumstances, how you are taxed on the amount you receive on redemption will depend on how you elect to be taxed on your offshore portfolio under the FIF tax rules. Payment will be made within 10 business days of the date your redemption request was processed. For more information see, 'How is my Liontamer fund taxed?'
Is this a tax-paid investment?
No, all Liontamer funds are Australian unit trusts and tax is not deducted at source. You need to account for any tax outcomes from your Liontamer funds in your annual tax return.
How is my Liontamer fund taxed?
Each Liontamer fund is an Australian unit trust which should be treated as a “foreign company” for New Zealand tax purposes This means that the Foreign Investment Fund (FIF) tax rules may apply to your Liontamer investment(s)
The FIF rules will not apply to you if you are classified as a de minimus investor, i.e. the total cost of all your foreign investments on a portfolio basis is $50,000 or less (excluding the cost of certain Australian listed investments and certain other investments), and you are investing in your own capacity (i.e. not as a trustee or through a trust or company).
If the FIF rules do not apply to you then, in general, the proceeds from any maturing fund should be treated as a capital (non-taxable) gain (unless you are a revenue account holder or you selected to have your units redeemed at maturity). Revenue account holders are those who acquired their units with the purpose of resale, are in the business of dealing in units or shares, or acquired their units as part of a profit making undertaking or scheme. Any distribution of annual returns should be treated as taxable income.
If the FIF rules do apply to your foreign investments you need to use an authorised calculation method to determine the taxable income from your units, such as the Fair Dividend Rate method, Comparative Value (CV) method (for individuals or trustees) or the Cost Method.
Examples of how these methods work:
- Under the FDR method you would have taxable income each year of a total of 5% of the total market value of your foreign investments that are subject to the FIF rules at 1 April each year; or
- Under the CV method, taxable income is the net gain in the market value of your investments over the year plus distributions received and net sale proceeds.
Individuals or trustees that choose to apply the CV method must do so on a portfolio basis for all investments subject to the FIF rules.
The Inland Revenue Department (IRD) has issued a determination on 28 May 2010 which allows investors in units of Liontamer trusts which meet certain criteria contained in the determination to adopt the FDR method. We believe that all existing Liontamer trusts satisfy these criteria.