Tax advantage in bringing investments onshore

Some of the underlying funds the scheme invests in are domiciled overseas. The largest of these funds is the one that invests in international equities. The advantage is that these overseas-domiciled funds offer access to a wider range of investments, increasing the opportunity to enhance returns without significantly adding risk. The disadvantage is that they are not structured optimally for tax purposes for a New Zealand investor. This is because dividends are generally subject to withholding tax charged in the domicile of the company whose shares the fund holds. Currently, we can only claim a very small amount of the tax withheld against the tax we pay locally. However, Russell Investments will soon be launching New Zealand domiciled versions of the international equities and infrastructure funds we use, and we will transfer investments into these funds. In future, we will effectively be holding the investments of these funds directly and therefore be able to claim a much higher proportion of the tax that is withheld.