Under $50,000: how your foreign dividends are taxed

Being under the $50,000 FIF threshold does not mean your overseas shares are tax free. It means they are taxed the simple way: the dividends you actually receive are income, taxed at your marginal rate, and gains on sale are taxed only if you hold the shares on revenue account (IR461 p9). You report the dividends on an IR3 and claim a credit for any foreign tax withheld. This guide walks through the steps with worked figures.

First, check you are really under

The test is on cost, not market value, and on every day of the income year (ITA s CQ 5(1)(d); IR461 p9). Exactly $50,000 is still inside. Count:

• every foreign share, ETF and fund you hold, on every platform, at what you paid including fees;
• your share of anything held jointly (IR461 p9);
• reinvested dividends, which add to cost.

Leave out NZ PIE funds and KiwiSaver, which are not FIF interests, and qualifying ASX-listed Australian companies, which are exempt (IR461 p7). One more condition: if you chose to apply the FIF rules in one of your previous 4 returns while under $50,000, you may have to keep applying them (ITA s CQ 5(1)(d)(iii)). Our $50,000 test checks all of this.

A family trust is different: on our reading it has no $50,000 exemption at all. See family trusts.

How the dividends are taxed

Inland Revenue says you "need to pay income tax on the interest and dividends from these investments" (IRD, I am a New Zealand tax resident with overseas investments, 17 September 2026). Under the threshold:

1. Take the gross dividend, before any foreign tax was taken off.
2. Convert it to NZ dollars at an accepted rate: the actual rate on the day (Inland Revenue's mid-month rate counts) or the rolling 12-month average, used consistently (IR461 p13). Our exchange rates tool has them.
3. Add it to your other income. It is taxed at your marginal rate.
4. Subtract a foreign tax credit for tax withheld overseas, within the limits below.
5. Subtract any NZ RWT a platform deducted.

Capital gains on sale are not taxed unless you hold the shares on revenue account, for example if you buy them to sell at a profit (IR461 p9). Whether that applies is a question of your own facts.

The foreign tax credit, and its limits

You can claim a credit for foreign tax deducted from the dividend, but it is limited (IR461 p20; IR3G pp22 and 23):

• to the rate allowed by the double tax agreement with that country, where there is one;
• to the NZ tax on that income, so on a low tax rate some foreign tax goes unused;
• with no refund and no carry forward of unused credits.

Some countries need special mention. Tax paid on dividends from the United Kingdom is not eligible (IR461 p20). Australian franking credits cannot be claimed (IR461 p20). For US shares, the NZ and US tax treaty (Article 10(2), as amended by the 2008 protocol) caps US tax on dividends to an NZ resident at 15%, and the IRS instructions for Form W-8BEN say 30% may be withheld if you do not give the form. See the W-8BEN guide and foreign tax credits.

Worked examples

All four use 2025/26 tax rates and NZ dollar amounts. The figures come from the same engine as our dividends under $50,000 tool.

In (a), if a platform had also deducted $100 of NZ RWT, you would pay $125.00 at year end instead of $225.00. In (b), the NZ result is the same as (a), but you have paid $225 more in total, which you could only try to recover from the US. In (d), the low tax rate means $67.50 of US tax cannot be used at all.

Converting each dividend

Each dividend is converted on its own. Say you receive a US$300 dividend in March 2026, with US$45 (15%) withheld. Inland Revenue quotes rates as US dollars per NZ$1, so you divide (TIB 31/11 p2).

The differences are small on one dividend but add up over a year of quarterly payments. Pick one method and use it for everything; once you use the rolling average, Inland Revenue says you must keep using it (IRD currency page, 4 November 2026). Keep each dividend statement showing the date, gross amount and tax withheld, because the credit claim needs proof (IR3G p22).

NZ RWT deducted by a platform

Some NZ platforms deduct NZ resident withholding tax on foreign dividends. Sharesies, for example, describes an option to stop RWT on FIF dividends only once your FIF cost has gone over $50,000 (Sharesies help, 16 September 2026, single source), which suggests that below the threshold RWT is deducted as normal. RWT is not lost: it counts against your total tax for the year, and RWT on some Australian dividends is refundable even where it exceeds the tax (IR461 p20; IR3G p23). Check your platform's annual tax statement and include the RWT in your return. Our tool has a field for it.

On the IR3

See our IR3 guide for more detail.

Near the line: what changes if you go over

The threshold is a cliff. If your cost goes over $50,000 on even one day, every FIF interest is in the FIF rules for the whole year (IR461 p9). Dividends are then not taxed separately; instead you pay on 5% of the 1 April value (FDR), or on comparative value if that is lower (IR3G p21; IR461 p14).

Using the person in example (a): with a portfolio worth $45,000 at 1 April, FDR income would be $2,250 and the extra tax $675.00, against $450.00 on the $1,500 of dividends. In a poor year, CV could be lower than both. Which is higher depends on the dividend yield and the year's returns. You can also choose to apply the FIF rules while under, for example in a CV loss year, but the 4-year look-back may then keep you in. A bill that would have raised the threshold to $100,000 lapsed and is NOT LAW (status).

This guide is general information, not tax advice; check with your accountant if you trade often or hold shares in more than one name. Rules checked 12 November 2026.

Questions

Do I pay tax on foreign dividends if I am under $50,000?

Yes. Below the FIF threshold, the gross dividends are ordinary income taxed at your marginal rate, with a credit for foreign tax withheld up to the treaty rate and the NZ tax on them.

Do I pay tax on capital gains on my foreign shares under $50,000?

Not unless you hold the shares on revenue account, for example if you bought them to sell at a profit (IR461 p9).

Can I claim UK or Australian tax as a credit?

Tax on UK dividends is not eligible, and Australian franking credits cannot be claimed (IR461 p20). NZ imputation credits and RWT on some Australian dividends are handled separately.

Does a sale during the year reduce my cost for the test?

From the day of the sale, yes, but a higher cost earlier in the year still counts because the test is on any day. Inland Revenue has not said how a part sale reduces cost; our tools use average cost.

Do I need to file an IR3 if I am under the threshold?

You report foreign dividends as overseas income in box 17B with an IR1261, and claim any credit in box 17A. Being under $50,000 removes the FIF calculation, not the reporting.