• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to secondary sidebar
  • Skip to footer
  • Subscribe
  • Twitter
  • RSS Feed

Investment News NZ

Investment News provides financial advisers news stories from the financial industry in New Zealand. Subscribe to our free weekly newsletter.

  • Home
  • News
  • Kiwisaver
  • Subscribe
  • About
  • Advertise
  • Contact
You are here: Home / Investment News / … as ETF study calculates local-domicile tax advantage

… as ETF study calculates local-domicile tax advantage

October 5, 2020

Hugh Stevens: Smartshares chief

Home-based exchange-traded funds (ETFs) provide NZ investors with a sizeable tax uplift across both equity and fixed income asset classes, a new study by the Hong Kong arm of EY shows.

According to the EY analysis, investors in NZX-listed ETFs tracking global share indices could garner after-tax returns of up to 15 per cent above similar products domiciled in offshore jurisdictions.

For example, investors in NZ-based ETFs following a broad European index would lose 30 per cent of the fund returns to various taxes compared to 40 per cent for almost identical vehicles housed in other countries.

The July 2020 EY ‘Taxation report for NZ investors’, produced on behalf of the Hong Kong stock exchange (HKEX), local-listed fixed income ETFs would also provide higher after-tax returns than overseas variants, albeit at smaller margins than for equity funds.

EY also developed a handy-dandy calculator allowing investors to compare estimated after-tax returns for ETFs tracking the same index but listed on different exchanges.

For instance, in a single year, $10,000 invested in an NZ-listed ETF following the MSCI World would generate an annual after-tax distribution of $167 on a gross estimated yield of 2.33 per cent – $10 more than a US-housed version of the same index-tracker.

Similarly, an NZX-listed global fixed interest ETF would generate a slightly higher after-tax income than all other offshore-based products covering the same index, the EY calculator shows.

EY notes that while return on investment (ROI) is a key priority, costs play an important role in maximizing ROI”.

“One significant yet lesser understood cost with investing in ETFs is taxation,” EY says. “This is especially true for any cross-border investment which are normally subject to multiple instances of taxation.”

The EY calculator and NZ report come with some caveats – including a limited palate of comparator indices – but the investor tools do provide “evidence that significant differences can arise in after-tax returns for ETFs domiciled in different jurisdictions”, the study says.

Elliott Shadforth, EY Hong Kong wealth and asset management leader, produced the report with a panel of other authors.

The NZX-owned Smartshares is the only issuer of locally domiciled ETFs with a product suite of almost 40 funds, collectively holding more than $4 billion at the last count.

Hugh Stevens, Smartshares chief, said the new tax tools were a welcome addition for NZ investors.

“[The EY report] clearly illustrates why investors should look past the headline management fee when choosing an ETF. NZ ETFs, listed on the NZX, are usually better value when investors look at the total cost of ownership,” Stevens said. “The EY and HKEX work shows that New Zealanders investing in offshore ETFs may be taxed significantly more than they would be if investing through a Smartshares ETF. I also remind investors that tax is not the only difference in total cost. For example, New Zealanders buying US ETFs are usually paying foreign exchange spreads and other charges that vastly outweigh the difference between NZ and offshore ETF management fees.”

 

 

Print Friendly, PDF & Email
Twitter0
LinkedIn0
Google+0
Facebook0

Read More » Investment News

Recent articles

  • Salt diversifies with another AMP Capital hire April 14, 2021
  • FMA draws hard line under fund fees, softens on KiwiSaver advice costs April 14, 2021
  • Passive move activates AMP NZ investment role; double exit at AMP Capital… April 11, 2021
  • … as Ms Fixit comes to the rescue at AMP HQ April 11, 2021
  • Lifetime deadline set for late April April 11, 2021
  • MyFiduciary books first Australian consulting client April 11, 2021
  • Wealth Technologies welcomes aboard two new platform clients April 11, 2021
  • Look inside: why ESG is for managers not just investments April 11, 2021
  • Same time last year: why 2020 was tough for TAA despite record volatility April 11, 2021
Finished reading? Why not subscribe? To receive a weekly email enter your email address here.

Primary Sidebar

WEEKLY NEWSLETTER

Sign up here to receive our weekly newsletter.
Learn More »

Investment News

  • Salt diversifies with another AMP Capital hire April 14, 2021
  • FMA draws hard line under fund fees, softens on KiwiSaver advice costs April 14, 2021
  • Passive move activates AMP NZ investment role; double exit at AMP Capital… April 11, 2021
  • … as Ms Fixit comes to the rescue at AMP HQ April 11, 2021
  • Lifetime deadline set for late April April 11, 2021
  • MyFiduciary books first Australian consulting client April 11, 2021
  • Wealth Technologies welcomes aboard two new platform clients April 11, 2021
  • Look inside: why ESG is for managers not just investments April 11, 2021
  • Same time last year: why 2020 was tough for TAA despite record volatility April 11, 2021
  • Veteran exit triggers NZ Super management rejig April 11, 2021

Search by Keyword

Most Recent Investment News

Salt diversifies with another AMP Capital hire

April 14, 2021

FMA draws hard line under fund fees, softens on KiwiSaver advice costs

April 14, 2021

Passive move activates AMP NZ investment role; double exit at AMP Capital…

April 11, 2021

… as Ms Fixit comes to the rescue at AMP HQ

April 11, 2021

Lifetime deadline set for late April

April 11, 2021

Investment News Archive

Most Popular Articles

  • NZ share-trading splurge could trigger tax alarms… posted on October 5, 2020
  • Westpac NZ flags retail advice sale to Forsyth Barr posted on October 19, 2020
  • Flint set to spark platform competition posted on August 17, 2020
  • The horror year in technicolour: free KiwiSaver 13 report released posted on September 30, 2020
  • Four to the core: Smartshares to expand, rearrange and reprice ETFs posted on June 22, 2020
  • NZ Funds directors back on board posted on April 24, 2016
  • Kitset KiwiSaver scheme set to unwrap in spring posted on April 27, 2020
  • Kiwi Wealth hits the bigger time posted on November 26, 2017

Sponosored Content

Responsible goes retail: why Mint has opened the SRI tin

David-Boyle

Jumping lessons: what all investors can learn from GameStop loss

What do ‘Kiwi’ experts see for 2021?

David-Boyle

On the industry play-list: four chart-topping regulations for 2021

Quick-links to Popular News

  • FAP Compliance
  • Coronavirus
  • New Appointments
  • Financial Markets Authority (FMA)
  • Kiwisaver
  • Climate Change
  • Crypto Currency
  • Blockchain
  • Insurance

Secondary Sidebar

Recent News

  • Salt diversifies with another AMP Capital hire April 14, 2021
  • FMA draws hard line under fund fees, softens on KiwiSaver advice costs April 14, 2021
  • Passive move activates AMP NZ investment role; double exit at AMP Capital… April 11, 2021
  • … as Ms Fixit comes to the rescue at AMP HQ April 11, 2021
  • Lifetime deadline set for late April April 11, 2021
  • MyFiduciary books first Australian consulting client April 11, 2021
  • Wealth Technologies welcomes aboard two new platform clients April 11, 2021
  • Look inside: why ESG is for managers not just investments April 11, 2021
  • Same time last year: why 2020 was tough for TAA despite record volatility April 11, 2021
  • Veteran exit triggers NZ Super management rejig April 11, 2021

Footer

Copyright ©2020 InvestmentNews.co.nz — All Rights Reserved ·— Terms & Conditions