Aust gst (lightly) bites NZ investors
New Zealand investors with money in Australian domiciled managed funds will feel the sting of gst when it is introduced across the Tasman this weekend.
Friday, June 30th 2000, 12:00AM
Unlike in New Zealand the Australian Government has decided to add gst to financial services (they are generally exempt here).
However, as with much of the Australian gst system there are twists. The good news is the impact of gst on managed funds is likely to be small.
"While the price of most goods and services in Australia will rise by up to 10 per cent, the impact of the Australian GST on the funds will be minimal," BT Funds Management says.
This is due to the fact that the funds will receive a credit from the Australian Taxation Office of 75 per cent of the gst paid on most of the expenses.
The effect of these payments and credits will be reflected in the unit price of the funds and, as such in the management expense ratio (MER).
BT estimates that the overall impact of the Australian gst on funds will be, on average, less than 0.05 per cent.
So an annual return of 8.0 per cent will be reduced to 7.95 per cent, or a return of 12.5 per cent will be 12.45 per cent, after the Australian gst has been taken into account.
IPAC Securities general manager David van Schaardenburg says "it's not a material issue, but it's one people should be aware of."
His advice is people should find out how the gst affects the funds they are invested in and they should compare expenses, such as the MER ratio of their funds, with other similar funds.
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