FDR vs CV — Which FIF Method Saves You Tax?
Each year, individuals and eligible trusts elect either Fair Dividend Rate (FDR) or Comparative Value (CV) across all their FIF holdings. The choice can swing your FIF income by thousands of dollars. Below: the decision tree, four worked portfolio scenarios computed live, and a calculator that picks for you.
Decision tree
- 1. Total FIF cost basis ≤ $50,000? → De minimis exempt (individuals/trusts only). Tax only actual dividends. Skip FDR/CV entirely.
- 2. Holding shares via a company? → FDR is mandatory. No CV election, no de minimis.
- 3. Did the portfolio fall in market value during the year? → CV is usually lower (often $0). Elect CV.
- 4. Did the portfolio rise more than 5% of opening + dividends? → FDR is usually lower. Elect FDR.
- 5. Anywhere in between? → Compute both with the calculator below and elect the lower.
Four worked scenarios
Each scenario assumes an individual with $80k other income, 2025-26 tax year. Numbers below are computed live at build time from the same util the calculator uses.
Scenario A — Strong bull year
$100k opening, $130k closing, $2k dividends, no trades during the year.
| Method | Deemed income | Estimated tax @ marginal |
|---|---|---|
| FDR Recommended | $5,000 | $1,650 |
| CV | $32,000 | — |
FDR taxes only 5% of opening — capital gains escape FIF. CV would capture the entire $30k gain. FDR wins by a wide margin.
Scenario B — Down year
$100k opening, $85k closing, $1,500 dividends, no trades.
| Method | Deemed income | Estimated tax @ marginal |
|---|---|---|
| FDR | $5,000 | — |
| CV Recommended | $0 | $0 |
CV is negative ($85k − $100k + $1.5k = −$13.5k) so floors at $0. FDR still applies the full 5% on opening. CV wins — zero FIF income for the year.
Scenario C — Mid-year top-up
$100k opening, bought another $30k, sold $10k, $128k closing, $2.2k dividends.
| Method | Deemed income | Estimated tax @ marginal |
|---|---|---|
| FDR Recommended | $5,500 | $1,815 |
| CV | $10,200 | — |
Purchases/sales widen the CV calculation. FDR adds a quick-sale adjustment if any of the $30k was sold same year. Compare both — usually FDR still wins on a rising portfolio, but the gap narrows.
Scenario D — Just over de minimis
Cost basis $55,000 (above the $50,000 threshold), $60k opening, $66k closing, $1.2k dividends.
| Method | Deemed income | Estimated tax @ marginal |
|---|---|---|
| FDR Recommended | $3,000 | $990 |
| CV | $7,200 | — |
Crossing the de minimis flips the holding from "taxed only on dividends received" to a full FIF interest. FDR ≈ 5% × $60k = $3k; CV ≈ $66k − $60k + $1.2k = $7.2k. FDR wins, but the absolute jump from "just dividends" to "$3k deemed income" is significant.
Run your own portfolio
Enter your holdings below to see FDR vs CV side-by-side, with the lower method auto-selected.
From your broker's FIF report — capped at 5% of cost basis.
When the choice matters most
The FDR vs CV election is most consequential in three scenarios:
- Bear markets. CV floors at zero, so a 20%+ drawdown can mean you owe nothing on FIF — but FDR would still tax 5% of opening. In 2022, many NZ investors with US ETFs saved thousands by electing CV.
- Sharp rebounds in a single year. If you're recovering from a prior bad year, CV captures the full upside and FDR's 5% cap protects you. FDR wins big in recovery years.
- High dividend payers. CV adds dividends to the calculation; FDR does not (dividends are subsumed inside the 5% deemed return). High-yield US ETFs (REITs, covered-call funds) push CV up but leave FDR unchanged.
For most multi-year buy-and-hold portfolios in normal markets, FDR is the default choice and has been the IRD-preferred method since the regime began. CV is a hedge — useful in specific years rather than a permanent strategy.
Frequently asked questions
Can I use FDR one year and CV the next?
Yes. Individuals and eligible trusts elect FDR or CV per income year. The same method must apply across all FIF holdings within a year, but you can change methods between years. Most filers elect whichever produces lower deemed income; this calculator picks for you.
Why does CV floor at zero — can I claim a FIF loss?
FIF losses cannot offset other taxable income. Comparative Value is calculated at the portfolio level: total closing + sales + dividends − total opening − total purchases. If the result is negative, your FIF income for the year is $0; the loss is not carried forward and is not deductible against salary or business income. This is the main reason CV is preferred in down years.
What's the $50,000 de minimis exactly measuring?
Historical cost basis (purchase price in NZD), not market value. Across all your FIF interests combined. If your $40,000 cost portfolio has grown to $90,000, you're still below the de minimis — you only pay tax on dividends received and skip the FDR/CV decision entirely. Companies do NOT get the de minimis regardless of size.
When does FDR include a quick-sale adjustment?
When you buy and sell the same FIF holding within one tax year. The QSA prevents short-term traders from escaping FIF tax via the 5% cap. The simplified IR461 method takes the lesser of shares bought vs sold during the year × average gain — capped at 5% of peak holding cost. The QSA adds to FDR only; CV already captures intra-year trading via its purchases/sales formula.
Does my company get to choose FDR or CV?
No. Companies (and look-through companies treated as companies for FIF purposes) must use FDR. They also do NOT get the $50k de minimis, so even small offshore holdings trigger the 5% deemed income annually.
What if FDR and CV produce the same number?
Either method works — there's no preference. In practice they almost never tie because CV reflects actual market movement and FDR is a fixed 5% of opening. The recommended-method picker defaults to FDR in a tie since FDR is the IRD default election.
Sources
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Last updated April 2026. Worked examples use the 2025-26 bracket. Method election is per income year — confirm with your tax agent before electing CV in a year of significant trading.