Other FIF methods: cost method, deemed rate of return and attributable FIF income

IR461 lists six FIF methods (p10). For listed shares and funds, almost everyone uses fair dividend rate or comparative value. The other four exist for situations those two cannot handle: shares with no market price, shares that behave like debt, large stakes in a foreign company, and some new migrants. This guide explains when each applies, with IRD's own examples.

The six methods at a glance

Sources: IR461 pp10 to 12 and 17 to 18. Under the first four methods, "dividends and other gains are not usually taxed separately" (IR461 p10). A person generally keeps the same method from year to year unless a change is allowed (IR461 p11); individuals and family trusts can move freely between FDR and CV between years (IR461 p16).

The cost method

When. For a share in a foreign company, the cost method "can only be used if the FDR method is allowed but the market value of the attributing interest at the start of the income year cannot be determined (except by independent valuation)" (IR461 p17; ITA s EX 46(9)). Think of shares in an overseas private company or start-up, or a family company abroad.

Formula. 5% of the opening value, plus a quick sale adjustment. Unlike FDR, the adjustment is "simply the result of applying the peak holding method amount formula", with no comparison against the actual gain (IR461 p17).

Opening value (IR461 glossary p25). It is zero for shares acquired in the year. Otherwise you can use an audited public net asset value or an independent valuation if you choose; if not, it is 1.05 x last year's opening value, adjusted if your holding changed:

• holding increased: 1.05 x last year's opening value, plus the increase x average cost;
• holding decreased: (opening shareholding / previous year's shareholding) x 1.05 x last year's opening value.

IRD example (Peter). Peter owns 8% of a UK family company that cost $20,000. Our engine gives:

IRD's article rounds the third year to $1,102.

IRD example (Bart). In IRD's March 2025 fact sheet, Bart holds US start-up shares worth $2,000,000 on 1 April 2026. His 2027 income is 5%, $100,000; tax at 39% is $39,000; the next year's income is 5% more, $105,000. That example is why the revenue account method exists: tax on value that cannot be sold.

Combining. Under current law the cost method and CV cannot be used together (IRD bill commentary p67, explaining ss EX 46(8) and (9)). The lapsed bill would let unlisted shares use the cost method while listed shares use FDR or CV; that is NOT LAW (see the proposal guide). IRD's paper schedule for the cost method is IR449, and IRD's myIR FIF calculator includes the cost method.

The deemed rate of return (DRR)

When. DRR can only be used where the Act requires it (ITA s EX 46(5) and s EX 47): in practice, "in the case of a non-ordinary share if the CV method is not practical" (IR461 p11). Non-ordinary shares are things like fixed-rate shares, non-participating redeemable shares, and entities holding 80% or more in NZ dollar fixed-rate assets (IR461 p16). Most retail investors will never use it. DRR and AFI cannot be used for FIF superannuation interests or foreign life policies (IR461 p12).

Formula. Opening book value (the book value at the end of the previous year) x the deemed rate for the year, with another formula if the interest changes during the year, and possible "top-up" FIF income (IR461 p11). An adjustment for unrealised gains previously taxed can sometimes be claimed (IR461 p19).

Rates (IRD deemed rates page, last updated 30 April 2026), set as the average 5-year government stock rate at each quarter end plus 4%:

The 2026/27 rate was not yet published when we checked. Example: a $200,000 opening book value in 2025/26 gives DRR income of 7.84% x $200,000 = $15,680. IRD's paper schedule for DRR is IR443.

Attributable FIF income (AFI)

When. Generally only for "a person with an income interest of 10% or more in a FIF which is a foreign company if sufficient information can be provided to the Commissioner to check the relevant calculations" (IR461 p18). The calculations follow the controlled foreign company (CFC) rules with modifications.

Formula. Net attributable FIF income or loss x your income interest, plus some additional items (IR461 pp11 and 18).

Points to know:

• If the company is a non-attributing active FIF (in general, passive income under 5% of gross income), no FIF income arises, though dividends and revenue account gains may still be taxable (IR461 p18).
• Losses can usually be claimed but are limited to CFC or FIF income from the same country (IR461 p19).
• The rolling average exchange rate cannot be used for AFI (IR461 p13).
• Someone eligible for AFI can use another method instead if permitted (IR461 p18).

AFI is adviser territory, and our calculators do not compute it. A holding of 10% or more in a foreign company also raises CFC questions outside this site's scope.

Where RAM fits

The revenue account method is the sixth method and the newest, in force from 1 April 2025. It suits a narrow group: people who became resident from 1 April 2024 after 5 years away, holding unlisted foreign shares bought before arriving, or US citizens and others taxed on citizenship under extended RAM (IR461 p17). It has its own guide: the revenue account method.

Which method applies to you?

1. Listed shares, ETFs and funds, ordinary shares: FDR, or CV if you are an individual or family trust and it gives less. See FDR or CV and our CV calculator.
2. Unlisted foreign shares with no 1 April market value: cost method, unless you qualify for RAM.
3. Non-ordinary shares such as preference shares that behave like debt: CV, or DRR if CV is not practical. CV losses on these can be claimed (IR461 p19).
4. 10% or more of a foreign company: AFI may be available; get advice.

Whatever the method, the FIF rules only apply once you are over the $50,000 cost threshold (for individuals), or if you opt in. Our methodology page lists the IRD test cases our engine passes, including Peter's cost method example. This is general information, not tax advice; check with your accountant. Rules checked 12 November 2026.

Questions

Can I use the cost method for my Sharesies or Hatch shares?

No. Listed shares have a 1 April market value, and the cost method is only for shares whose market value cannot be found without an independent valuation (IR461 p17).

Why does the cost method grow by 5% a year?

Without a valuation, the opening value is 1.05 x last year's opening value (IR461 p25), so the deemed income rises each year even if the company does not.

Is the 2026/27 deemed rate published?

Not when we checked on 12 November 2026. IRD's deemed rates page (updated 30 April 2026) runs to 2025/26 at 7.84%.

Do I choose a method once, or every year?

A person generally uses the same method each year unless a change is permitted (IR461 p11). Individuals and family trusts are the main exception: they can switch between FDR and CV from one year to the next, but not within a year, and must use the same one for all the interests where they have the choice (IR461 pp14 and 16).

Can I claim a loss under the cost method?

No. IR461 p19 says the formula means no losses can arise, and losses on disposal cannot be claimed.