New Zealand Group Investment Funds (GIFs)

In the main, most of these funds pay tax on much the same basis as unit trusts. ie. the fund pays tax and issues imputation credits with distributions BUT there are some exceptions. These exceptions are found in GIF’s which are income funds (mortgage and bond funds) and some property funds.

These funds do not fall under the imputation regime but distribute income after deduction of withholding tax. (Sometimes called interest PAYE). For NZ residents who make an annual tax return, the difference has little effect other than the possibility of timing differences for tax payable or refundable. There can also be some advantages for non-tax paying charitable trusts that have withholding tax deduction exemptions.

For overseas residents investing in these funds the difference can be significant. (Refer section for overseas investors.)