New Zealand Tax Opera Trust, a complying trust was settled by Zack Goodvoice mor
ID: 2814129 • Letter: N
Question
New Zealand Tax
Opera Trust, a complying trust was settled by Zack Goodvoice more than ten years ago. Opera Trust has the following share investments in several listed companies overseas (all interests are < 10%). As at 1 April 2017, the cost of all his shares acquired by Opera Trust amounted to $40,000 (excluding the Australian ASX shares).
Shares in
Market value 1 April 2017 $
Dividends $
Market value 31 March 2018 $
Purchased during 2017-18 $
A US company.
11,000
350
7,500
nil
A UK company.
5,000
nil
6,000
8,000
A Singaporean company.
5,000
500
7,100
nil
An Australian ASX listed company.
2,000
100
3,500
1,000
On 1 April 2017, the opening market value of the UK company shares was $5 per share. The $8,000 UK company shares were bought in May 2017 ($4.00 per share) and 1,000 of these shares were sold in January 2018 for $6,000. The $1,000 Australian shares were bought in June 2017 ($1 per share).
No other shares were sold by Opera Trust in 2017-18.
REQUIRED:
Based on the above scenario, you are required to explain to Opera Trust:
a) whether it qualifies for the $50,000 de minimis exemption in 2017- 18;
b) what is Opera Trust’s Foreign Investment Fund (FIF) income in 2017-18.
You are required to show all workings for the methods that Opera Trust can use based on the information provided. You need to provide sections of the Income Tax Act 2007 to support your answers. A reference list is not required.
Shares in
Market value 1 April 2017 $
Dividends $
Market value 31 March 2018 $
Purchased during 2017-18 $
A US company.
11,000
350
7,500
nil
A UK company.
5,000
nil
6,000
8,000
A Singaporean company.
5,000
500
7,100
nil
An Australian ASX listed company.
2,000
100
3,500
1,000
Explanation / Answer
Answer a) Under the $50,000 de minimis exemption rule of Foreign investment Funds , any unit trust are exempted in FIF clause with invesment value less than $50,000 in foreign market except some shares in Australian market.
In Year 2017-18 :
Market Value as on 1 April 2017 (excludes Australian shares) = $21000
Market Value as on 31 March 2018 (excludes Australian shares) = $20,600.
So, qualified for the $50,000 de minimis exemption in the year.
Answer b)
Income in the year 2017-18.
Sold shares = 1000 @ $6
Income under FIF = 6 * 1000 = $6000.
Dividend recieved = 350 +500 =$850
Total income = $6000 + $ 850 = $6580.