The FIF quick sale adjustment, step by step

The fair dividend rate taxes 5% of what you held on 1 April, so shares bought after 1 April and sold before 31 March would otherwise escape. The quick sale adjustment fills that gap. It is the lesser of two portfolio totals: the peak holding amounts and the quick sale gains, with a negative gain total treated as zero (ITA s EX 52(7)). It only applies when you acquired or increased a holding and then sold or reduced it in the same year (ITA s EX 52(6)). Here is how each piece works.

When you need it

You need a quick sale adjustment only if, within one income year, you bought into (or added to) a FIF holding and later sold (or reduced) that same holding (ITA s EX 52(6); IR461 p15). Some common cases:

• You bought an ETF in June and sold it in February: yes.
• You sold part of a holding you had on 1 April, and bought nothing in that holding that year: no.
• You sold some shares in July and then bought more of the same in November: there is no same-year purchase sitting there to be sold in July, so in our engine no quick sale arises from that sale. A later sale after the November purchase would be a different story.
• You bought one ETF and sold a different one: each holding is tested on its own figures, then the totals are combined.

If you are on comparative value for the year, the adjustment does not apply; CV captures the trades directly (see the CV guide).

The formula

Quick sale adjustment = the lesser of (a) the total of the peak holding method amounts and (b) the total of the quick sale gain amounts, where a negative total in (b) counts as zero. Both totals are across all your FDR holdings, not share by share (ITA s EX 52(7)).

IR461 calls (b) “the actual gain”; Inland Revenue’s 2011 remedial article calls it the quick sale gain amount. They are the same thing. If shares are split or reorganised, the adjusted figures under s EX 54 are used (s EX 52(10)(b) and (11)(b)).

Inland Revenue’s example, step by step

IR461 p15 uses Company A. At the start of the year the investor holds 10,000 shares worth $200,000. Then:

1. Peak holding differential. Peak minus start is 5,000; peak minus end is 2,000. The lesser is 2,000.
2. Average cost. $110,000 + $44,000 = $154,000 spent on 7,000 shares, so $22 a share.
3. Peak holding amount. 5% × 2,000 × $22 = $2,200.
4. Quick sale gain. The 4,000 shares sold on 1 December are matched LIFO against the 1 October purchase. Gain = $100,000 minus 4,000 × $22 = $12,000.
5. Adjustment. The lesser of $2,200 and $12,000 is $2,200.
6. FIF income. 5% × $200,000 = $10,000, plus $2,200 = $12,200.

Our engine gives the same $12,200. Try it in the FDR calculator, which loads this example by default.

When the gain is the smaller figure

The adjustment can never be more than you actually made on the quick trade. Our own example: you hold 1,000 shares worth $20,000 on 1 April 2025. On 1 July you buy 500 more for $11,000, and on 1 September you sell 500 for $11,300.

Inland Revenue’s older Jane example works the same way: her adjustment was the lesser of $720 and $800, so $720, giving FDR income of $4,000 + $720 = $4,720 (TT2007). A loss on a quick trade does not reduce FDR income below the 5% base; it just means no adjustment.

Why the totals are across the whole portfolio

The Act compares the total of all peak holding amounts with the total of all quick sale gains (s EX 52(7)). A gain on one quick trade can be cancelled by a loss on another. In Inland Revenue’s NZ Co example (TT2007), peak holding amounts totalled $1,800 and quick sale gains totalled minus $3,840. The negative total counts as zero, so the adjustment was $0 and FDR income stayed at $10,000.

Working it share by share would have given a positive adjustment from the profitable trade. That is a common error in spreadsheets, so check how your tool does it. Hatch says its FIF report compares peak holding and quick sale gains on a portfolio-wide total with LIFO matching (single platform source, not confirmed by IRD). Our engine does the same, following the Act.

Dividends on quick-sold shares, and LIFO

The “gain” on a quick-sold parcel includes everything you derived from holding it, so a dividend received on those shares between purchase and sale adds to the gain (s EX 52(12) and (13)). Our engine shares each dividend across the shares on record that day.

LIFO matters when you trade several times. A sale is matched against the most recent same-year purchase still held, then the one before it (s EX 52(14)). Shares you held on 1 April are only reached once all same-year purchases have been used up. That is why, in Company A, the 1 December sale matches the 1 October purchase, not the opening shares.

Under the cost method, a different and simpler rule applies: the adjustment is just the peak holding amount, with no comparison against the gain (IR461 p12 and p17). See other FIF methods.

Common quick sale mistakes

• Matching sales first in, first out. The Act requires last in, first out (s EX 52(14)). First in, first out would often match a sale against shares held on 1 April and wrongly produce no quick sale.
• Using the price of one parcel instead of average cost. Average cost is the total cost of all acquisitions in the year divided by the number of shares acquired (s EX 52(11)), even if you bought several times at different prices.
• Using the gain alone, or the peak holding amount alone. The adjustment is the lesser of the two totals (s EX 52(7)). The cost method is the only place where the peak holding amount is used on its own.
• Netting share by share. Both totals are portfolio-wide.
• Forgetting dividends received on quick-sold shares, which add to the gain (s EX 52(12) and (13)).
• Ignoring currency. Purchases and sales must be converted to NZ$ with the same exchange rate method as the rest of your FIF figures (IR461 p13).

Practical tips

• Keep every contract note with dates, share numbers and amounts including brokerage. You need them for the average cost and the matching (records guide).
• Convert each trade to NZ$ with your chosen exchange rate method; our default uses IRD’s mid-month rate for the month of the trade (IR461 p13 accepts it as an actual rate).
• If the quick sale adjustment makes FDR higher than CV, an individual can use CV instead for the year (FDR or CV).
• Regular investing plans that only buy never trigger an adjustment; it needs a sale after a same-year purchase.

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

Questions

Does the quick sale adjustment apply if I only buy?

No. It needs a purchase and a later sale or reduction of the same holding in the same income year (ITA s EX 52(6)).

Can the adjustment be negative?

No. A negative total of quick sale gains is treated as zero, so the adjustment is zero at worst (ITA s EX 52(7)).

Is the adjustment worked out share by share?

No. The peak holding amounts and the quick sale gains are each totalled across all your FDR holdings, and the lesser total is used.

Which shares does a sale come from?

Last in, first out: the most recent same-year purchase is matched first (ITA s EX 52(14)).