That’s according to Anthony Edmonds, of investment management firm Implemented Investment Solutions.

He said a lot of New Zealanders were putting their money into Australian unit trusts, under the two countries’ mutual recognition of securities regime.

But the tax issues were not always made clear to them.

He said there could be tax leakage and there was no deductibility of fees when money was in an Australian unit trust.  While there could be some tax benefits, that was not a given, he said.

“Under mutual recognition, there is no requirement on the managers to explain these complex tax issues. This is an anomaly in what is now an environment of a big focus on the regulation in terms of investors being able to clearly understand the consequence of the things they invest in.”

He said fund managers were only required to make a generic statement about investors seeking appropriate tax advice.

But he said because the issues were complex it was very hard to find tax advisers with the right investment knowledge to offer any help.

“The Australian managers are best placed to explain the tax nuances of their product. It is product specific. There should be a requirement for them to do so if they are positioning their funds to be sold to Kiwi investors. It’s a big loophole in New Zealand’s disclosure regime."

A spokesman for the FMA said it was an issue that market participants had raised.

“Inland Revenue notes that this area is complex and its website tells investors to seek professional advice. Tax implications often turn on an individual investor's circumstances and that is why it is important the individual seeks advice,” he said.

“Disclosure standards for Australian funds are the responsibility of ASIC. Further, ASIC and the FMA have also entered into an MOU relating to supervising, assessing, securing compliance with or enforcing the respective laws and regulations of each authority so in certain circumstances we will intervene to protect NZ investors. We currently do not think that this circumstance is one that warrants such intervention.”