SuperLife

Allocation of Investment Returns

SuperLife generally credits the investment returns to members’ accounts on a daily basis – we call this ‘valuation day’. Each valuation day, we calculate the amount of the investment earnings for each investment Fund since the previous valuation day. We then allocate that amount across the members’ balances for the members who had a holding in that Fund at the end of the day. The allocation is made proportional to the value at the beginning of the valuation period, less any payments subsequently made. There are no reserves or smoothing mechanisms applied. The total return earned on the investments of the Fund, whether positive or negative, is what is credited each valuation day.

The total return includes both taxable investment earnings and non-taxable earnings. As a PIE vehicle (“portfolio investment entity”), not all returns are taxable.

Total return = taxable income + non-taxable return

Tax is then deducted from the taxable amount of the returns allocated to a member, at the member’s last advised PIR rate (“prescribed investor rate”). A member’s PIR is currently either 10.5%, 17.5% or 28%. For information on PIRs, see the PIR tax rate guide on the SuperLife website. You should review your PIR each financial year (we suggest in March) prior to the start of the following year.

Tax payable = PIR rate x taxable income

The tax payable may also be reduced by allocation of tax credits received by the fund (for example, foreign tax credits attached to foreign dividends).

 

Tax can be payable even if the total return is negative

Sometimes, the total return is negative, but tax is still payable. If the non-taxable return is negative and more negative than the taxable income, the total return will be negative, but tax will still be payable on the taxable income.

Tax

In New Zealand, the tax laws are complex. There are three tax regimes that potentially apply to a member’s investment earnings. There are also three different tax rates (10.5%, 17.5% or 28%). Tax is only payable on the taxable income and not on the total investment return. The taxable income depends on the type of assets held. See a brief summary of the taxable income for each Fund below.

Website

The returns having been allocated to members’ accounts can be seen on the SuperLife website. There will at times be a few days delay, as the returns are subject to internal audit before they are posted.

Taxable income 

The following is a brief summary of the taxable income for each asset type. 

Cash &
NZ bonds


Tax is payable on the interest received, the interest accrued but not yet received and the change in the value of the assets (this mainly relates to bonds) due to interest rate changes. This is known as the “accruals tax regime”. Because taxable income relates to a change in value, the taxable income over a period can be positive and negative and the tax paid can be positive and negative. Where it is negative, it is a tax credit.

Overseas bonds
Tax is payable on a combination of the accruals tax regime and the Fair Dividend Rate ("FDR") regime. The accruals regime is as for NZ bonds detailed above. Where the FDR regime applies, tax is deducted throughout the year on income equal to 5% of the market value. Tax is also payable on the currency hedging gains/losses throughout the year.
 
NZ & Australian shares
Tax is generally payable only on the dividends received. There is no tax on gains from the disposal of New Zealand shares and most Australian shares. In the case of dividends earned from NZ shares, any imputation credits received offset the tax liability payable. No tax is payable on market movements. Therefore, if the market goes down the total return may be negative, but tax is still payable on the dividends received.
In some cases, tax may be payable from holding Australian shares under the Foreign Investment Fund (“FIF”) regime. The investor won't be required to separately disclose interests in a FIF or make FIF income calculations in their personal income tax return. Any income calculations under the FIF rules will be made by the MRP.
Please refer to the IRD website for more detail on the FIF regime
Overseas shares & emerging markets shares
Tax is payable throughout the year under the FIF regime. Income is attributed at 5% of the market value of the shares, under the FDR calculation method. In the case of overseas shares currency hedged, tax is also payable on the currency hedging gains/losses throughout the year as they arise. Because tax is paid on notional income of 5% of the market value, there will be years when the market value goes down and the return is negative, but tax is still payable. Where tax is payable under the FIF rules, the investor won't be required to separately disclose the overseas dividend income or make FIF income calculations in their personal tax return. Any income calculations under the FIF rules will be made by the MRP.

 

Where the investment option is a combination of the different types of assets, the investment income and tax is based on a combination of the treatment of the individual assets.

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