FDR or CV: which FIF method to choose, and who can choose

For most individual investors the choice is simple: work out both, and use the one that gives the lower FIF income. Inland Revenue says that if CV is less than FDR, individuals and family trustees “generally have the option of using” CV (IR461 p14), and they can switch freely from year to year but not within a year (IR461 p16). Two limits matter: you cannot mix methods across your ordinary holdings in one year, and a CV loss is reduced to zero. This guide shows who may choose and how the choice plays out.

Who may choose

The choice depends on who holds the shares (ITA s EX 46(6); IR461 pp11, 16 and 24):

Type B is the ordinary family trust: the settlor is a natural or deceased person, the trust is a complying trust, and it exists mainly for people the settlor has natural love and affection for, or for a charity (IR461 p24). A family trust can choose CV even though, on our reading, it has no $50,000 exemption; see FIF for family trusts.

The rules of the choice

• Lower income. CV is available when it gives lower FIF income than FDR (IR461 p14).
• Year by year. Individuals and type B trustees can switch between FDR and CV in different income years, but not within an income year (IR461 p16).
• No cherry picking. All the holdings where you have the choice must use the same method that year. If you choose CV for one ordinary share, you cannot use FDR for another (ITA s EX 46(8)(b); IR461 p14).
• No CV losses. If CV gives a total loss on holdings that could have used FDR, it is reduced to zero. The loss cannot be set against other income (ITA s EX 51(7) and (8); IR461 p14 and p19).
• Non-ordinary shares are outside the choice: they use CV, and their losses can be claimed (IR461 p16 and p19).

So the choice is made for the whole portfolio, once a year, after the year has ended and you know the 31 March values.

Three years, worked through

Take an individual whose FIF holdings were worth $100,000 on 1 April, who made no trades, and whose other taxable income is $95,000 (so the extra income falls in the 33% band under 2025/26 rates). FDR is the same in every year: 5% × $100,000 = $5,000.

In the flat year the saving is modest, $165. In the bad year it is the whole FDR tax. In the good year FDR saves $4,950 compared with CV. That pattern is why individuals tend to sit on FDR in rising markets and switch to CV when markets fall.

A company holding the same portfolio would pay tax on $5,000 of FDR income in all three years, because it has no choice. A family (type B) trust would get the same choice as the individual.

A rule of thumb, and where it breaks

With no trades in the year, CV is opening value subtracted from closing value plus dividends. So CV is lower than FDR whenever your total return for the year (price change plus dividends) is less than 5% of your 1 April value, measured in New Zealand dollars. In the flat year above, the return was $3,000 + $1,500 = $4,500, or 4.5%, so CV won.

The shortcut breaks down when you trade:

• purchases and sales enter CV directly, and the timing of new money changes the result;
• FDR may carry a quick sale adjustment if you bought and sold within the year (quick sale guide);
• exchange rates move the NZ$ figures even when share prices do not.

When you have trades, work out both in full. Our home calculator does this for a whole portfolio, and the CV calculator and FDR calculator show each method on its own.

How our calculator chooses

We pick the method that gives the lower FIF income, as IR461 p14 puts it. We do not pick the method that leaves less tax to pay after foreign tax credits. In rare cases with large foreign tax credits, the other method could leave slightly less to pay, because the credit for each holding is capped at the New Zealand tax on that holding’s FIF income (IR461 p20). If that might be you, ask your accountant. See foreign tax credits.

Two smaller rules: where FDR and CV are exactly equal we show FDR, since the tax is the same; and tax is worked out on whole dollars, because the IR3 drops cents from taxable income. The full list of assumptions is on our methodology page.

Inland Revenue’s example

IR461 p14 gives the Bill Murphy example. He holds three companies, each worth $100,000 at the start of the year, closing at $102,000, $110,000 and $80,000, with no dividends or trades. FDR is $15,000. CV is $2,000 + $10,000 minus $20,000 = minus $8,000, which is reduced to zero. He can return $15,000 under FDR or $0 under CV, and “the CV loss cannot be offset against any other income”.

Note that he cannot use CV for company C (the loss) and FDR for the other two. It is all CV or all FDR.

Making the choice, step by step

1. After 31 March, gather the 1 April and 31 March market values of every FIF holding, on every platform, in NZ$ using one exchange rate method.
2. Work out FDR: 5% of the total 1 April value, plus any quick sale adjustment.
3. Work out CV for each holding, then total them. If the total is negative, it becomes zero.
4. If you are an individual or type B trustee, use the lower total for all your ordinary holdings. Anyone else uses FDR.
5. Add CV income from any non-ordinary shares, which are outside the choice.
6. Work out foreign tax credits on the method you chose, holding by holding.

The choice is not affected by the $100,000 threshold bill, which is NOT LAW: it lapsed when Parliament dissolved, and its threshold change would alter who is in the rules, not how FDR and CV compare. See our dated status page.

Practical points

• Keep CV records even if you expect FDR. You only know which is lower after 31 March, and CV needs every trade and dividend (records guide).
• Platform reports. Sharesies and Hatch each say their FIF reports show both FDR and CV figures (single platform sources, not confirmed by IRD). Each covers one platform only; the choice is made across everything you hold, so add the platforms together before comparing.
• Couples. Each person works out FIF income on their own share of the holdings, so on our reading each makes their own choice, and one partner could be on CV while the other is on FDR (couples guide).
• Opting in under $50,000 just to use a CV result is possible, but it can keep you in the rules for the next four years (ITA s CQ 5(1)(d)(iii); threshold guide).

Rules checked 12 November 2026. General information, not tax advice; check with your accountant.

Questions

Do I have to tell IRD which method I used?

We have not seen a separate election form in IRD’s guidance. Where a FIF disclosure is required, IRD’s paper schedules are split by method (IR447 for FDR, IR448 for CV), so the method shows there. Keep your workings for both methods.

Can I use CV this year and FDR next year?

Yes, if you are an individual or family (type B) trustee. You can switch freely between years, but not within a year (IR461 p16).

Can a company choose CV in a bad year?

No, not for ordinary shares. Companies generally stay on FDR (IR461 p16).

If CV is negative, can I carry the loss forward?

No. A CV loss on holdings that could have used FDR is reduced to zero and cannot be used against other income (IR461 p14).