During any tax year, your peak investment cost determines whether you’re over the $50,000 threshold and, as a result, fall under the Foreign Investment Funds (FIF) tax rules.

When you buy and sell shares, exchange rate changes can influence your investment cost. This is because your investment cost includes your available balance, which is stored in a Money Market Fund. If you sell shares, the money you receive goes into the Money Market Fund, which is effectively a buy order. Vice versa when you buy shares, you’ll effectively sell part of your Money Market Fund investment to buy them.

Every time you buy or sell, the NZD value of the transaction is calculated using the exchange rate on the day.

Example:

You buy $700 USD worth of Company XYZ. At the time of purchase, your investment cost is $1000 NZD (at an exchange rate of 0.7).

Let's assume the USD value of company XYZ doesn’t change. If you sold your shares in Company XYZ for $700 USD, the money you receive will be added to your available balance, which is held in the Money Market Fund. Because the Money Market Fund is another form of investment, in order to move your money into it, a buy order of $700 USD is placed.

If, in the time between buying and selling your shares, the exchange rate has changed to 0.6, then $700 USD is now worth $1166 NZD (previously $1000 NZD). This means that your investment cost is now $1166.

You can see your estimated peak investment cost for the current tax year in the Tax Reports section in Hatch, and after the end of every tax year, you’ll get a final tax report.