Your Progress 0%

🌏 FIF Comparative Value (CV) Method

The Comparative Value (CV) Method is one of five methods for calculating Foreign Investment Fund (FIF) income. It taxes the change in market value of your foreign investments plus any distributions received during the year.

Key Point: CV Method calculates FIF income as the increase in market value during the tax year PLUS any dividends or distributions received. This is the most straightforward method, tracking actual gains and losses each year. Available for most attributing interests in FIFs.

CV Method Formula

FIF Income = (Closing Value - Opening Value) + Distributions
Where:
Closing Value = Market value at 31 March (year end)
Opening Value = Market value at 1 April (year start)
Distributions = Dividends, distributions received during year

Simple CV Method Example

US shares held for full tax year:

Opening value (1 April 2024): NZD $120,000
Closing value (31 March 2025): NZD $145,000
Dividends received: NZD $4,500
Capital gain: $145,000 - $120,000 = $25,000
FIF income: $25,000 + $4,500
FIF Income = $29,500

Tax impact: Add $29,500 to taxable income. At 33% rate = $9,735 tax.

When to Use CV Method

You CAN Use CV if:

  • You hold attributing interests in FIFs (foreign shares, funds)
  • You can determine market value at year start and end
  • Your total FIF interests exceed $50,000
  • You prefer tracking actual value changes

You CANNOT Use CV if:

  • You hold Australian resident FIFs (must use FDR for most)
  • You cannot determine market value
  • FIF doesn't meet attributing interest criteria

CV Method vs Other FIF Methods

Method Calculation Basis Best For
CV Market value change + distributions Volatile investments, losses
FDR 5% of opening value Steady growth, simplicity
DRR Distributions only High dividend stocks
CV (Cost) Change from cost + distributions First year holdings

Advantages of CV Method

1. Reflects Actual Performance

Taxes real gains and losses, not deemed income like FDR.

2. Loss Recognition

Can generate FIF losses when investments decline:

Opening: $100,000, Closing: $85,000
Loss: $15,000
Can offset against other income

3. Lower Tax in Down Markets

FDR always taxes 5% regardless of performance. CV taxes actual results.

4. Flexibility

Can switch between CV and FDR annually based on which is more favorable.

Disadvantages of CV Method

1. Record Keeping

Must track market values at 1 April and 31 March each year, convert to NZD.

2. Currency Fluctuations

Currency movements affect FIF income even if foreign currency value unchanged.

3. Higher Tax in Bull Markets

Taxes unrealized gains immediately, unlike NZ shares which tax only on sale.

4. Volatility

FIF income varies year to year with market movements.

💡 CV vs FDR Strategic Choice

You can switch between CV and FDR annually. Use CV in down years (claim losses), use FDR in strong years (cap tax at 5%). This flexibility can save thousands in tax.

Market Value Determination

Listed Shares:

Use closing price on 31 March (or nearest trading day).

Managed Funds:

Use fund's unit price at 31 March.

Currency Conversion:

Use IRD's published exchange rates for 1 April and 31 March
Or use actual rates from reputable source (bank)
⚠️ Common CV Method Mistakes

Using cost instead of market value: Must use market value at year start/end
Forgetting distributions: Dividends must be added to capital gain
Wrong currency conversion: Convert at correct year start/end rates
Missing purchases/sales: Adjust for transactions during year

🔢 CV Method Calculations

Example 1: Basic Full-Year Holding

S&P 500 ETF held entire year:

Holdings:

1 April 2024: 500 units at USD $420 = USD $210,000
Exchange rate 1 April: 0.60 (NZD/USD)
Opening value NZD: $210,000 ÷ 0.60 = $350,000
31 March 2025: 500 units at USD $465 = USD $232,500
Exchange rate 31 March: 0.58 (NZD/USD)
Closing value NZD: $232,500 ÷ 0.58 = $400,862
Dividends received: USD $5,250
Average rate: 0.59
Dividends NZD: $5,250 ÷ 0.59 = $8,898

FIF Income:

Capital gain: $400,862 - $350,000 = $50,862
Plus dividends: $8,898
Total FIF Income: $59,760

Example 2: Mid-Year Purchase

Purchased shares during tax year:

Transaction:

No holdings at 1 April 2024 (opening value: $0)
Purchased 15 October 2024: USD $75,000
Exchange rate: 0.62
Cost NZD: $75,000 ÷ 0.62 = $120,968

Year End:

31 March 2025 value: USD $82,000
Exchange rate: 0.58
Closing value NZD: $82,000 ÷ 0.58 = $141,379

CV Method Options:

Option 1: Market Value CV (not available - no opening value)

Option 2: Cost Method (use for first year):

Closing value: $141,379
Cost: $120,968
FIF income: $141,379 - $120,968
FIF Income: $20,411

Next year: Can use regular CV method with opening value of $141,379.

Example 3: FIF Loss

Market decline during year:

Opening value 1 April: $200,000
Closing value 31 March: $165,000
Dividends: $3,000
Capital loss: $165,000 - $200,000 = -$35,000
Plus dividends: $3,000
FIF Income: -$32,000 (Loss)

Tax treatment: $32,000 loss can offset other income, reducing tax.

Example 4: Multiple Holdings

Portfolio of different foreign investments:

Investment Opening Closing Dividends FIF Income
US Tech ETF $80,000 $95,000 $1,200 $16,200
European Fund $60,000 $55,000 $2,400 -$2,600
Asia Pacific $45,000 $52,000 $900 $7,900
Total $185,000 $202,000 $4,500 $21,500

Calculate CV method separately for each FIF, then sum total FIF income.

Example 5: CV vs FDR Comparison

Same investment, different methods:

Facts:

Opening value: $150,000
Closing value: $168,000
Dividends: $2,500

CV Method:

FIF income = ($168,000 - $150,000) + $2,500
= $20,500
Tax at 33%: $6,765

FDR Method:

FIF income = $150,000 × 5%
= $7,500
Tax at 33%: $2,475

Decision: FDR better (saves $4,290 tax). In strong markets, FDR caps tax at 5% of opening value.

Handling Transactions During Year

Purchases:

Opening: $100,000
Bought more (Oct): $30,000
Closing: $145,000
Gain: $145,000 - ($100,000 + $30,000) = $15,000

Sales:

Opening: $100,000
Sold portion (Dec): $25,000 (proceeds)
Closing: $80,000 (remaining)
Total value: $80,000 + $25,000 = $105,000
Gain: $105,000 - $100,000 = $5,000

🌍 Real-World CV Method Examples

1
Tech Investor 2024 Bull Market

Investor in US tech stocks during strong year:

Portfolio:

Opening 1 April 2024: NZD $280,000
Closing 31 March 2025: NZD $385,000
Dividends: NZD $8,400

CV Method:

Capital gain: $385,000 - $280,000 = $105,000
Plus dividends: $8,400
FIF income: $113,400
Tax at 39%: $44,226

FDR Alternative:

FIF income: $280,000 × 5% = $14,000
Tax at 39%: $5,460
FDR saves $38,766 in tax!

Lesson: In bull markets with large gains, FDR usually better. CV taxes all unrealized gains.

2
2023 Bear Market Losses

Same investor during market downturn:

Portfolio:

Opening 1 April 2023: NZD $320,000
Closing 31 March 2024: NZD $280,000
Dividends: NZD $6,800

CV Method:

Capital loss: $280,000 - $320,000 = -$40,000
Plus dividends: $6,800
FIF income: -$33,200 (Loss)
Tax saving at 39%: $12,948

FDR Alternative:

FIF income: $320,000 × 5% = $16,000
Tax at 39%: $6,240
CV saves $19,188 vs FDR!

Lesson: In bear markets, CV better. Can claim losses and reduce tax. FDR still taxes 5% even when portfolio falls.

3
Currency Impact

Investment unchanged in USD, but NZD strengthens:

US Investment:

Holdings: USD $150,000 (unchanged all year)
1 April rate: 0.65 NZD/USD
Opening NZD: $150,000 ÷ 0.65 = $230,769
31 March rate: 0.60 NZD/USD (NZD stronger)
Closing NZD: $150,000 ÷ 0.60 = $250,000

FIF Income:

Capital gain: $250,000 - $230,769 = $19,231
Dividends: $0
FIF Income: $19,231

Result: Tax on $19,231 even though USD value unchanged. Currency gain creates FIF income. Conversely, NZD weakening can create losses.

4
Strategic Method Switching

5-year history showing optimal method choice:

Year Opening Closing CV Income FDR Income Best Method
2021 $200K $245K $45K $10K FDR
2022 $245K $210K -$35K $12.25K CV
2023 $210K $225K $15K $10.5K FDR
2024 $225K $280K $55K $11.25K FDR
2025 $280K $260K -$20K $14K CV

Tax Savings:

Always using FDR: Total income $58K
Always using CV: Total income $60K
Strategic switching: Total income $21.75K
Saves $36.25K income (or $11,963 tax at 33%)

Strategy: Use CV in down years (claim losses), FDR in up years (cap at 5%). Review annually.

🎯 Test Your Knowledge

Complete this quiz on FIF CV Method

1. The CV Method calculates FIF income as:
5% of opening value
Market value change plus distributions
Distributions only
Cost minus market value
2. Opening $150K, Closing $175K, Dividends $3K. CV Method FIF income is:
$25,000
$28,000
$22,000
$3,000
3. A major advantage of CV Method is:
Simplest calculation
Can claim losses in down markets
Never higher than FDR
No record keeping needed
4. When is FDR typically better than CV?
In bear markets
In strong bull markets with large gains
When portfolio value falls
FDR is always better
5. Market values for CV Method must be determined on:
31 December
1 April and 31 March (NZ tax year)
31 March only
Any date you choose
6. CV Method includes dividends because:
They're separate from FIF income
Total return includes both capital gains and distributions
IRD requires it for complexity
Dividends are taxed twice
7. Opening $200K, Closing $170K, Dividends $4K. FIF income is:
-$30,000
-$26,000
$4,000
-$34,000
8. Currency movements affect CV Method FIF income:
Never
Only when you sell
Yes, changes in NZD exchange rates create gains/losses
Only for Australian investments
9. You can switch between CV and FDR methods:
Never, once chosen
Only once ever
Annually, choosing the better method each year
Only with IRD approval
10. CV Method is best when:
You want simplicity
Portfolio has fallen or modest gains
Portfolio has large gains (>5%)
Never, always use FDR

🧮 Try CV Calculator

If you've found a bug, or would like to contact us please click here.

Calculate.co.nz is partnered with Interest.co.nz for New Zealand's highest quality calculators and financial analysis.

© 2019–2025 Calculate.co.nz. All rights reserved.
All content on this website, including calculators, tools, source code, and design, is protected under the Copyright Act 1994 (New Zealand). No part of this site may be reproduced, copied, distributed, stored, or used in any form without prior written permission from the owner.
All calculators and tools are provided for educational and indicative purposes only and do not constitute financial advice.
Calculate.co.nz is part of the realtor.co.nz, GST Calculator, GST.co.nz, and PAYE Calculator group.
Calculate.co.nz is also partnered with Health Based Building and Premium Homes to promote informed choices that lead to better long-term outcomes for Kiwi households.