Liz Koh: Investing overseas: get good guidance

It is not uncommon for New Zealanders to have overseas investments. Migration to New Zealand, working holidays overseas and inheritance can all lead to investment assets being held outside the country.

Examples might be shares in foreign companies, foreign unit trust investments, foreign superannuation schemes and foreign life insurance policies. There are some pitfalls in leaving these investments overseas.

If your overseas investments have a value greater than $50,000, they could well be liable for tax in New Zealand. This is called a Foreign Investment Fund (FIF) tax. There are a number of options you can choose from as to how this tax is calculated and you will need help from an accountant or financial adviser.

Certain overseas investments, particularly Australian investments, are exempt from FIF tax.

Under current New Zealand legislation, an overseas adviser who provides investment advice to a New Zealand resident must be an Authorised Financial Adviser (AFA) as determined in the Financial Advisers Act.

Australian advisers may in some circumstances be exempt from this requirement. Exemptions also apply to wholesale investors, for example those whose investment assets are $1 million or more.

If, for example, you have a share portfolio of around 200,000 in the UK on which personalised investment advice is provided by a broker, the broker will be in breach of the Financial Advisers Act if he or she is not registered as an AFA in New Zealand. Not only that, but you will not have the protection of the code of conduct, disclosure requirements and dispute resolution schemes that are mandatory for Authorised Financial Advisers.

Finally, having assets in currencies other than the New Zealand dollar will expose you to exchange rate risk.

Obtaining advice from a New Zealand accountant or financial adviser on the implications of leaving investment assets overseas is highly recommended.

Liz Koh is an authorised financial adviser. The advice given here is general and doesn't constitute specific advice to any person. A free disclosure statement can be obtained by calling 0800 273 847.