FIF and children's shares: their own threshold and their own rate

Parents and grandparents often buy overseas shares or ETFs for children. For FIF purposes the key question is whose name the shares are in. A child who holds shares in their own right is a separate taxpayer, with their own $50,000 FIF threshold and their own, usually low, tax rate. Shares a parent holds in the parent's own name, even if they are "for" the child, need more care, and so does income a family trust pays to a child.

A child has their own $50,000

The $50,000 exemption is given to every natural person (ITA s CQ 5(1)(d); IR461 p9). A child is a natural person, so a child who holds foreign shares in their own name has their own threshold, tested on cost on any day of the year, like an adult. We have seen this stated directly only by one platform (Kernel's blog, 3 June 2026), so we mark the specific point UNVERIFIED; it follows from the natural person test, and we know of no rule that adds a child's holdings to a parent's.

So a child with $8,000 of US shares is well under, and is taxed only on dividends. A child given $60,000 of overseas shares is over, and their holdings are taxed under the FIF rules for the whole year, at the child's rate.

Worked example: a child under $50,000

Mia, aged 9, holds US shares in her own name that cost $8,000. In 2025/26 she receives $160 of dividends (in NZ dollars) and has no other income. A W-8BEN was lodged, so 15% US tax ($24.00) was withheld. Below the threshold, her dividends are ordinary income (IR461 p9).

The credit cannot be more than the NZ tax on that income, and unused credits are not refunded or carried forward (IR461 p20; IR3G p23). At a low tax rate, some US withholding is simply lost. Without a W-8BEN, 30% ($48.00) would be withheld; the NZ credit is still $16.80, and the $24.00 above the 15% treaty rate could only be recovered, if at all, from the US. You can run your own figures in our dividends under $50,000 tool.

Worked example: a child over $50,000

Say a grandparent gives a child overseas shares that cost $60,000 and are worth $62,000 at 1 April. The child is over $50,000, so the FIF rules apply. FDR is 5% x $62,000 = $3,100. With no other income, the tax on that is $325.50, starting at 10.5%. If the same shares were held by a parent earning $100,000, the tax on the same $3,100 would be $1,023.00 at 33%. The child could also use CV in a poor year, as any individual can (IR461 p16).

The gap between those two figures is why the question of whose shares they really are matters, and why the answer needs to be clear and documented. A gift to a child should be a real gift. For trusts, the law already has a specific rule, below.

Shares in a parent's name

Some platforms and brokers only open accounts for adults, so parents buy shares in their own name and earmark them for a child. The FIF test looks at interests that "the person holds" (ITA s CQ 5(1)(d)(i)). On our reading, shares registered in the parent's own name start as the parent's, counting towards the parent's $50,000 and taxed at the parent's rate. Whether they belong to the child in law, for example under a formal bare trust, is a legal question we cannot answer for you. If you treat shares in your name as your child's, get your accountant's view first and keep the paperwork.

The Sharesies help page we read does not cover kids accounts (single source, 16 September 2026). If your platform offers accounts in a child's name, check its terms for who the legal holder is.

Trusts and the minor beneficiary rule

Where a family trust holds the shares and pays income to a child, Inland Revenue's rule for minor beneficiaries applies. A beneficiary under 16 is a minor beneficiary, and income distributed to them "is usually taxed as trustee income at the rate of 39%, not as beneficiary income" (IRD, Tax on beneficiary income, 20 April 2026). The exceptions listed include distributions of $1,000 or less in a tax year, a beneficiary getting a disability allowance or child disability allowance, a trust that exists to handle a deceased person's estate, income from a Māori authority, and a disabled beneficiary trust.

So $1,200 of FIF income distributed to a 12 year old, with no exception applying, would be taxed at 39%: $468.00. Remember too that on our reading an ordinary family trust has no $50,000 threshold, so its foreign shares are in the FIF rules from the first dollar. See FIF for family trusts.

Filing for a child

Inland Revenue says you "need to pay income tax on the interest and dividends from these investments" when you hold overseas investments (IRD, 17 September 2026), and that applies to a child's own investments too. Overseas income, including dividends and any FIF income, is reported in box 17B of the IR3 with an IR1261 overseas income summary, and foreign tax credits in box 17A (IR3G pp19 and 22). A parent or guardian usually deals with this for a young child. If US tax was withheld and the child's NZ tax is small, the return may show nothing to pay, as in Mia's example, but the income is still reported.

Keep the same records as for an adult: purchase records showing cost, values at 1 April and 31 March, dividend statements with tax withheld, and evidence of how the child came to own the shares, such as a gift.

Other points

• NZ PIE funds and KiwiSaver are not FIF interests, for children or adults.
• A large gift partway through the year counts from the day it lands, but because the test is on any day, crossing $50,000 in, say, February puts the child in the FIF rules for the whole year (IR461 p9).
• Reinvested dividends add to cost, so a child's holding can drift over $50,000 without any new gift.
• For US shares, a W-8BEN affects how much US tax is withheld; see our W-8BEN guide.
• Qualifying ASX-listed Australian companies are exempt and do not count towards the threshold (IR461 p7).
• The $100,000 threshold in the lapsed bill is NOT LAW (status).

This guide is general information, not tax advice; check with your accountant, especially for shares held in your name for a child or through a trust. Rules checked 12 November 2026.

Questions

Does my child have their own $50,000 FIF threshold?

If the shares are in the child's own name, yes on our reading: the exemption is for every natural person. One platform states this directly; we mark it UNVERIFIED pending an Inland Revenue statement.

Do my child's shares count towards my $50,000?

Not if the child holds them in their own name. Shares in your own name count towards yours, even if you mean them for the child, unless your accountant agrees they belong to the child.

Does a child pay tax on foreign dividends?

Yes, at their own rate, with a credit for foreign tax withheld up to the NZ tax on that income. At 10.5%, part of a 15% US withholding is not usable.

What about a family trust paying income to my child?

Under the minor beneficiary rule, distributions to under 16s over $1,000 a year are usually taxed at 39% as trustee income, with some exceptions.

Can a child use comparative value in a bad year?

Yes, if the child is over $50,000 and in the FIF rules. A child is an individual, so the same annual choice between FDR and CV applies, with no loss claim below zero.