To calculate your FIF income we need to simplify some of the more complicated transaction types that can occur from time to time (these are usually the result of corporate actions like mergers, stock splits and spin-offs, etc.) by classifying them in terms of buys, sells, dividends or share price increases/decreases.
Below you’ll find some information on how we’ll typically treat most types of transactions. You can see how we’ve classified each of your transactions by looking at the FIF Formatted Data page in the Excel file included with your report purchase.
The Basics
Buys & Sells (Completed orders):
These appear as you’d expect in your FIF transactions as buys and sells. Note that where an order has been filled over several partial fills, this is treated as a single buy/sell for FIF calculation purposes (unless a portion of that fill was completed in a different tax year).
Dividends:
Dividends in both the FDR and CV calculations are presented as Gross values - i.e. without any withholding tax subtracted. When calculating quick sales, we use ex-dates rather than payment dates to ensure dividend payments are still correctly attributed to an investment for the case where an investor receives a dividend after selling their shares.
Note that some corporate actions may also result in transactions which are classified as dividends (see section below).
Share Transfers (in or out):
We don’t calculate FIF income for any investments which include a transfer in or out, your (non-FIF) tax reports will still contain details of transactions related to transferred investments so you can make your own calculations.
Corporate Actions
Bankruptcy/Extinction: When shares are written-off/dissolved this is treated as a sell for tax purposes, in some cases at $0.
Mergers/Acquisitions: These are generally treated as a final sale of the old shares and new purchase of different shares for tax purposes.
Return of capital: When calculating FIF income, returns of capital received from FIF investments have been treated as a dividend.
Rights/Warrants: Rights or warrants issues are not seen as taxable events and themselves are not considered to be FIFs so these are excluded from the FIF calculations and reports.
Spinoffs: Typically, shares received as a result of a spin-off will be treated as a dividend from the parent investment followed by a corresponding buy of the new shares..
Stock splits: Stock splits and reverse stock splits (consolidations) change the number of shares owned but not the value of an investment - so this isn’t a taxable event. In order to correctly calculate FIF income we convert all pre-split share amounts to post-split amounts. This means when you look at your opening positions in the FDR or CV tables, any share volumes affected by a split will have been adjusted based on the stock split ratio.
Symbol Change or Name Change: In these cases, the underlying investment isn’t changing so it isn’t treated as a taxable event. Note that you will only see the latest symbol/name of an investment in your reports and FIF transaction data.
Corporate actions can be made up of several different transactions (e.g. a spin-off and a symbol change). We recommend you review all transactions carefully to understand your calculation.
The list above describes how Hatch has interpreted corporate actions for the purposes of our FIF reports. There may be certain transactions/corporate actions where a different interpretation or treatment is possible that is also valid under NZ tax rules. If you think this may be the case then you can choose what interpretation you use when filing your New Zealand tax return. If you’re unsure or want any individualised tax advice, we recommend talking to a tax professional.
Note: Your tax obligations are unique to you - if you're unsure, we recommend you seek professional tax advice. Your situation may change over time; it’s your responsibility to keep up to date with changes.