Professional Trading NZX Shares

[QOH]

Can a professional trader please give me and others who may be in the same position information on how to go about share trading in regards to IRD.
Does one need an accountant?
Can one claim losses or any expenses?
it seems such a gray area on how often one can sell shares.
My position is that I don't really have a relationship with IRD, just pay my correct tax on dividends,
don't claim imputation credits, and don't fill in tax return.
I'd like to do more trading but not sure if I'm opening a big can of worms.
Would love to hear the pros or cons or any ideas where I can get this info.

[baller18]

Yes, you can claim loses and expenses (such as internet, rates, eletricity bills n extra).

[couta1]

Can a professional trader please give me and others who may be in the same position information on how to go about share trading in regards to IRD.
Does one need an accountant?
Can one claim losses or any expenses?
it seems such a gray area on how often one can sell shares.
My position is that I don't really have a relationship with IRD, just pay my correct tax on dividends,
don't claim imputation credits, and don't fill in tax return.
I'd like to do more trading but not sure if I'm opening a big can of worms.
Would love to hear the pros or cons or any ideas where I can get this info.
The whole area is a can of worms a PhD student from AUT put out a paper on the history of share trading in nz and tax(Haven't got the link but sure you could find it) highlighting all the test cases that have gone before and there was some scary results in there where obvious investors had been deemed traders and traders investors,basically it comes down to intent at time of purchase so if you purchased to hold and then sold quickly for some reason there's no tax payable,have a look at IRD website and find Tax Info Bulletin Dec 1992 vol 4. #5 to get their definition of share sales/losses,you could claim home office expenses if your a pro.Actually in Aussie you have to have a solid case and meet strict criteria to be deemed a ligitamate share trader,you don't need an accountant if your confident doing your own accounts and keep up with tax changes,I've been doing my business accounts for 20 years now and have never had any hassle with IRD other than mistakes they have made at there end by applying my payment to the wrong tax type,mind you I never get refunds and always pay my tax on time.

[Harvey Specter]

Can a professional trader please give me and others who may be in the same position information on how to go about share trading in regards to IRD.
Does one need an accountant?NO - but if you are asking you may do. if you can keep good records and fill out a form, no need. Sharesite.co.nz could help
Can one claim losses or any expenses? Yes
it seems such a gray area on how often one can sell shares. Correct. if you have a history of short term trades, it will be hard to prove a mid term hold isnt just a short term one you let run.
My position is that I don't really have a relationship with IRD, just pay my correct tax on dividends
don't claim imputation credits, and don't fill in tax return.I dont recommend a relationship. Youll have to pay for dinner and they never put out. YOu should start doing tax returns though if you are required to.
I'd like to do more trading but not sure if I'm opening a big can of worms.
Would love to hear the pros or cons or any ideas where I can get this info.

[couta1]

QOH,I think your going to get a lot of incorrect info from people on here and end up getting more confused,read the above article I mentioned and have an anonymous talk with IRD, if you have a full time job elsewhere your probably a hobby trader rather than a pro,cheers

[Citizen Erased]

An account at sharesight.co.nz will make keeping track of your tax liability a piece of cake.

[couta1]

Bye the way QOH you don't need to file an IR3 if you want to claim imputation credits I do it on behalf of my wife every year and she is on PAYE, just request personal tax summary and then ring then or send your total amount of imputation credits and they will adjust your gross income downwards accordingly,your paying too much tax if you don't use your imps on any non pie investment (Pie imps are only worth claiming if your on a lower tax rate)

[Jay]

Search this forum, there has been questions and answers previously (some from an accountant) - but as others say there is no black and white

[couta1]

The best advise I can give and I'm sure many will agree is always try to fly under the radar and don't put your hand up for anything you don't need to,cheers

[ratkin]

Would of thought it would be quite difficult being a bona fide Professional , just trading New Zealand shares.
Might look good when you have wynard etc going ballistic, but in the normal quiet times , think you might struggle

[Harvey Specter]

Would of thought it would be quite difficult being a bona fide Professional , just trading New Zealand shares.
Might look good when you have wynard etc going ballistic, but in the normal quiet times , think you might struggleProfessional is irrelevant.

The question is, in the IRD's eyes, are you investing or trading.

With enough capital, anything is possible.

[Billy Boy]

Is a trader up for ACC levies ??
BB

[couta1]

Professional is irrelevant.

The question is, in the IRD's eyes, are you investing or trading.

With enough capital, anything is possible.
Which brings us back to the point can of worms no one on here can make a determination so its a merry go round and most at IRD wouldn't apply the very grey ruling consistently either

[couta1]

Is a trader up for ACC levies ??
BB
Yes if its taxable income

[MAC]

Do also ask yourself what kind of investor you want to be for the long term.

Once you start paying tax the IRD will most probably look at you like you are a trader in the future, that’s not to say there’s no going back, but it could be a tough sell to convince the IRD that you want to be an investor again, those medium term 3 to 6 month investments may still look like trades for profit to the IRD.

Consider also the top quartile of the stock picking contest, those portfolio gains are routinely achievable without paying tax, perhaps even a bit higher as a one year holding time is within an acceptable range of a non-tax paying investor’s average holding time. This is a unique opportunity for New Zealand investors not shared by those in most other countries.

As a trader you have to gross much higher than those levels to compensate for all that tax and brokerage in order to receive similar net return’s to a growth or value investor.

[couta1]

Do also ask yourself what kind of investor you want to be for the long term.

Once you start paying tax the IRD will most probably look at you like you are a trader in the future, that’s not to say there’s no going back, but it could be a tough sell to convince the IRD that you want to be an investor again, those medium term 3 to 6 month investments may still look like trades for profit to the IRD.

Consider also the top quartile of the stock picking contest, those portfolio gains are routinely achievable without paying tax, perhaps even a bit higher as a one year holding time is within an acceptable range of a non-tax paying investor’s average holding time. This is a unique opportunity for New Zealand investors not shared by those in most other countries.

As a trader you have to gross much higher than those levels to compensate for all that tax and brokerage in order to receive similar net return’s to a growth or value investor.
Wise advise Mac if I hadn't moved stock around so much last year I would be better off by an embarrassing sum of money compared to where I sit now not to mention all the extra stress,actually in some countries the one year rule applies so any stock held for a year and sold is not deemed trading for profit

[QOH]

Thanks everyone for all the helpful advice, I'm leaning towards letting sleeping dogs lie.
At the moment I'm in the position of having to try not to make money, my only income is being attached to my husband's Super, and what I've earned through divs . Will be entitled to my own Super late this year.
Until the last year capital gains on sharemarket haven't been a big problem.

WINZ seem to have singled me out this year, and basically I'd like to tell them to forget my pension until I'm 65, and that I will support myself but then I might be opening another can of worms, by being the only person in history to give up my pension.
As couta said I pay my correct tax on divs and declare my divs to WINZ and want to remain under the radar.
I just don't like trying not to make money, when one has always tried to. Darn if only PEB hadn't been so good.!!

[QOH]

It's hard to win with WINZ, if you put your money in Bonus bonds they can call it deprivation of income, they also want to know why my husband has shares that aren't producing an income .

This is the reason I'd like to just cash in a bonus bond and live off that, but that might end up another can of worms.
It's all causing me a lot of stress.

[JBmurc]

Can a professional trader please give me and others who may be in the same position information on how to go about share trading in regards to IRD.
Does one need an accountant?
Can one claim losses or any expenses?
it seems such a gray area on how often one can sell shares.
My position is that I don't really have a relationship with IRD, just pay my correct tax on dividends,
don't claim imputation credits, and don't fill in tax return.
I'd like to do more trading but not sure if I'm opening a big can of worms.
Would love to hear the pros or cons or any ideas where I can get this info.

I started out as a investor for several years but started to trade bit more becomes a very grey area ,,,accountant talked me into becoming a trader and paying taxes on my profits and back when we were allow LAQC even got my personal TAX back from Share
trading losses(these days I just carry forward any losses )
I claim for everything I can i.e Mysky,internet,laptop,cellphone,power....
I like the freedom being a trader gives me ...but unless your trading more than several times a year and not with large amount of money
I'd just stay a investor

[Leftfield]

Wise advise Mac if I hadn't moved stock around so much last year I would be better off by an embarrassing sum of money compared to where I sit now not to mention all the extra stress,actually in some countries the one year rule applies so any stock held for a year and sold is not deemed trading for profit

Good advice Mac, and thanks Couta for your honesty.

I find it easier to pick long term trends while struggling to pick daily variations and I like to sleep well at night, so I prefer long term investing - especially when approx 30% of my hard earned gains may well disappear to the IRD if I take a 'trading' approach.

[brend]

Just to confirm you only hold shares listed on NZX?

[winner69]

It's hard to win with WINZ, if you put your money in Bonus bonds they can call it deprivation of income, they also want to know why my husband has shares that aren't producing an income .

This is the reason I'd like to just cash in a bonus bond and live off that, but that might end up another can of worms.
It's all causing me a lot of stress.

Owning a stock that was not producing a dividend was how I got caught out by the IRD.

Years ago they did a trawl through the PRG register and asked 'Mr Winner, why do you own PRG shares when they have never and very unlikely to pay a dividend? Did you buy them just to make a profit?' And then Winner was asked to disclose his other share transactions. There wasn't that many but enough for IRD to deem me a trader.

And once a trader always a trader in their eyes (even if you try to convince them you have a trading portfolio as well as an investment portfolio - oh really Mr Winner!!

So just found another way of buying shares. Hardly ever any day or short term stuff but when the charts say sell I sell etc so maybe more annual transactions some years than the buy and hold types.

Every time I buy some more PEB I think of this experience ....punters really buying for the dividend ....of course they are .....aren't they?

[bull....]

If labour get voted in nobody will have to worry your all pay capital gains tax irrespective if your a trader or investor

[brend]

wtf? was this an IRD audit...just because a company might not pay a dividend might AT A SPECIFIC POINT IN TIME doesn't mean they won't in the future.

Share trading is a subjective test.

IRD are so wrong...If you hold a share with the intention of holding it long term (even though it might not pay a dividend currently) it doesn't make you a share trader.

[winner69]

wtf? was this an IRD audit...just because a company might not pay a dividend might AT A SPECIFIC POINT IN TIME doesn't mean they won't in the future.

Share trading is a subjective test.

IRD are so wrong...If you hold a share with the intention of holding it long term (even though it might not pay a dividend currently) it doesn't make you a share trader.

Why did you buy them then?

[Harvey Specter]

Owning a stock that was not producing a dividend was how I got caught out by the IRD.

Years ago they did a trawl through the PRG register and asked 'Mr Winner, why do you own PRG shares when they have never and very unlikely to pay a dividend? Did you buy them just to make a profit?' I do wonder if they will request XRO shareholder register and all other NZ companies whose stated policy is growth at the expense of profits (and dividends).

EDIT: they probably have the computer power now to request Links full details for a year and then see who buys and sells more than 10 times - then target them for audit. Thats what they did with the land transfer office.

[percy]

Why did you buy them then?

Because I thought the company's prospects were so good,in a few years time they will be paying HUGE dividends.
I have always brought with the view of never selling,but "sometimes" I have changed my mind,as I think ...... will pay more reliable dividends.

[Harvey Specter]

Because I thought the company's prospects were so good,in a few years time they will be paying HUGE dividends.
I have always brought with the view of never selling,but "sometimes" I have changed my mind,as I think ...... will pay more reliable dividends.BUt if you continually buy growth companies and sell out before they pay a dividend to buy different growth companies, or maybe the same growth company, then who is the judge going to believe.

Just stay well positioned in Heartland and you will be fine.

[peat]

Because I thought the company's prospects were so good,in a few years time they will be paying HUGE dividends.
I have always brought with the view of never selling,but "sometimes" I have changed my mind,as I think ...... will pay more reliable dividends.

but it seems clear to me (indeed a veritable truth) that buying a company that pays no dividend or has no intention of paying one anytime soon is NOT bought for income. If one was to sell it prior to it ever paying a dividend then clearly one is trading.

[Harvey Specter]

but it seems clear to me (indeed a veritable truth) that buying a company that pays no dividend or has no intention of paying one anytime soon is NOT bought for income. If one was to sell it prior to it ever paying a dividend then clearly one is trading for capital gain.The test is intention at the time of purchase so you can change your mind but if the rest of your actions show you are trading, using that excuse wont work.

[brend]

but it seems clear to me (indeed a veritable truth) that buying a company that pays no dividend or has no intention of paying one anytime soon is NOT bought for income. If one was to sell it prior to it ever paying a dividend then clearly one is trading.

Nope. the difference between between being taxable income or not is intention at time of purchase. The purpose of resale must exist at time of acquisition. Buying with the hope that it will be a good investment will not result in a taxable profit.

[QOH]

To whoever asked I only own NZ shares, we did have to replace an expensive wall this year, guess that might
explain some of my sales.
IRD should make some clear rules, either everyone gets taxed on share profits or no one does, or they could make a limit on how long you must hold, or they could put scarey ads on TV shouting "do you trade shares"
IRD could certainly have made a killing on share transactions this past year.
I'm sure there are many others here in the same boat as me. Think I'll take the dumb elderly and confused route.

[winner69]

I do wonder if they will request XRO shareholder register and all other NZ companies whose stated policy is growth at the expense of profits (and dividends).

EDIT: they probably have the computer power now to request Links full details for a year and then see who buys and sells more than 10 times - then target them for audit. Thats what they did with the land transfer office.

That's sort of what they did years ago. Went through the register of watsons PRG and asked questions of certain people who also meet some other criteria to indicate they bought and sold shares. In my case declared dividends meant I 'dealt' in shares and it just happened that at the time there were a few 'too many' held that weren't paying dividends which suggested ulterior motives ....and it wasn't like I had made hundreds of transactions either

I'm sure if IRD wanted to they could easily target XRO shareholders
'

[QOH]

I'm sure if IRD wanted to they could easily target XRO shareholders


That might produce a lot of unhappy National voters on top of unhappy MRP and MELCA shareholders in an election year?

[Harvey Specter]

That might produce a lot of unhappy National voters on top of unhappy MRP and MELCA shareholders in an election year?Rules are rules. If National gets back in, the power Co's will go up.

[brend]

just because you had to sell some shares to replace a wall doesn't = selling for profit. You had an investment but had to sell because you need funds elsewhere.

unfortunately tax rules aren't made to definitely and clear cut...they always set the fishing net wide. Hard to think but many overseas jurisdictions envy our tax system (simple GST, no stamp duty, no CGT, no inheritances tax etc)

[Harvey Specter]

just because you had to sell some shares to replace a wall doesn't = selling for profit. You had an investment but had to sell because you need funds elsewhere.

unfortunately tax rules aren't made to definitely and clear cut...they always set the fishing net wide. Hard to think but many overseas jurisdictions envy our tax system (simple GST, no stamp duty, no CGT, no inheritances tax etc)In theory the same capital revenue distinction still applies if there is a CGT as CGT is normally at a lower rate. Thats why Warren Buffets tax rate is lower than his secretaries. not sure how PE managers classify their Carry Interest is capital, but maybe the IRS dont care, as long as some tax is being paid?

[brend]

Im too young as a professional to know a great deal about the IRS. Personally I hate the US tax system and how your tax residency is tied to your citizenship...surrender your citizenship to get out then pay capital gains tax..FML

[percy]

After reading so many great posts I realise "I am buggered!."

[peat]

Brend and Harvey Spectre.
Yes I know its your intent at the time of purchase that the law deems pertinent
"All profits or gains from the sale of property acquired for the purpose of sale are taxable"
but what I said is that if there is no dividend (or prospect of any) then the only conceivable purpose of purchasing a share is to resell. Seems a reasonable conclusion for IR to come to.
I suppose there are semantic arguments against this view but to me they are too shakey as to constitute a defence if the IR gets on yo ass. .

[Harvey Specter]

Peat - agree.

XRO has said it is sacrificing income(dividends) for growth so what is your intention at purchase
DIL however has a huge cash pile so could pay a dividend, but never has
PEB may in the future if their plans come off
RYM pays a pitiful dividend compared to its growth. surely you aren't buying that for income

EDIT: hold all as long term investment

[brend]

Brend and Harvey Spectre.
Yes I know its your intent at the time of purchase that the law deems pertinent
"All profits or gains from the sale of property acquired for the purpose of sale are taxable"
but what I said is that if there is no dividend (or prospect of any) then the only conceivable purpose of purchasing a share is to resell. Seems a reasonable conclusion for IR to come to.
I suppose there are semantic arguments against this view but to me they are too shakey as to constitute a defence if the IR gets on yo ass. .

I haven't seen any case law specific to your question but I won't believe the courts would be entertained if the IR was to argue on a case of 'no prospect of a dividend'. To declare a dividend that is the sole responsibility of the director of the company. Also just because a company declared a dividend in Y1 doesn't mean they will in Y2 (in most cases they will regardless due to market signals).

the three limbs need to be satisfied.
1. Person A is in the business of dealing in shares (first limb of s CD 4);
2. the shares have been acquired for the (dominant) purpose of resale (the second limb); and/or
3. any amount derived from the transactions has arisen from a profit-making undertaking or scheme (the third limb).

[craic]

Any activity on this or any market that is undertaken for the purpose of making a profit is taxable. Buying shares as an investment with no clear vision of the future is investment and not taxable. However, regardless of your initial intention, your taxability will depend on your actions as judged by IRD. Its like car dealing - you can buy and sell cars to your hearts content - as long as you can show that its just a hobby. That is you buy and sell Model T Fords, belong to a club and you dont make any real money. If you sold a few cars of mixed makes ( I think six in a year) then the taxman will call you a dealer etc. I spent twenty or more years buying and selling shares without any real purpose, collected dividends and the tax rebates that came with them but recently started dealing. I know I am dealing ,now, and keep records accordingly. I will pay the tax. But losses come into the equation also now. If this laptop blows up I will probably be able to add that to the equation.
















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however

[MAC]

The ODT ran a reasonable summary late last year;

http://www.odt.co.nz/news/business/277763/opinion-grey-areas-share-trading-and-tax

I don’t use a broker and only trade online, thus I don’t leave any record of intent with one, I instead now record my intentions with an aim of keeping an annual certified photocopy on file, at least this will provide for some evidence if in years to come it may be so requested or required.

If you are truly a non tax paying investor you probably don’t make a lot of trades so keeping a log shouldn’t take much if any effort at all.

Another difficulty I’ve had since returning to NZ a little over a year ago is just simply finding an accountant that has half a clue when it comes to such matters, the last accountant I sat down with told me everything is taxed, …., fair to say he wasn’t my pick.

Any recommendations for Christchurch accountants experienced in this area ?

[couta1]

Too much worrying going on here,do you really think IRD has the time and resources to look into the millions of share transactions that occur that's if they are even that interested,property transactions will be their focus over the next few years I'd say more money to be made for them with less effort but for those that are interested here is the official IRD position. Profits from selling shares are taxable if there CLEAR and DOMINANT purpose at at time of PURCHASE was to RESELL to make a profit. Look at each individual parcel of shares that a taxpayer sells to make correct ruling. If shares are acquired to make CAPITAL gain from their GROWTH in VALUE as well as to earn income from dividends then their is no CLEAR PURPOSE of resale so profit is not taxable and losses not deductible. Now how grey is that and how many loopholes?

[couta1]

Further to the above IRD can target anyone,anytime if they have a reason to do so or sometimes just randomly or from a tip off but here are some simple ways to stay under the radar 1.Always file returns on time 2.Always pay what you owe on time 3.File your return as late as possible before due date (They have the heaviest volume of returns arriving at this time meaning less time to give special attention to any one return) 4.Keep your returns as even as possible from year to year especially expense claims(Anything out of the ordinary add a note to explain) 5.Call and sort any issues out ASAP don't get involved in a correspondence war if you can avoid it. Of course if you have an accountant you will know all of this already aye?

[craic]

Couple or five years ago they paid me thousands too much rebate. I phoned them and sorted on the phone and by cheque from me. Last year I waited and waited months for tax papers and summary of earnings return that never arrived. Spent hours on the net trying to do it that way but system would not allow me to enter my figures. Finally, I got a live person who was most helpful, recognised the glitch in the system, asked me for my figures over the phone, noted the amount of my rebate and promised it would be in my account by Friday ( four days) and it was in by Wednesday. Apart from the obvious targets, IRD have spot checks and a whole range of pointers - returns that should have related returns etc. Someone mentioned keeping returns. If you only deal through Direct Broking just log in and hit 'My Trades' and you have a complete summaryof all your buys and sells. Deposits and withdrawals are also recorded.

[BIRMANBOY]

Lots of opinions all based on individuals experiences ...who aint you..... My suggestion is stop worrying, stop trying to figure it out yourself and go to a professional who knows what they are doing and can apply your specific circumstances to the situation. I have used Donna Upchurch at http://www.cuaccountants.co.nz/ She is a chartered accountant in Upper Hutt and is value for money. We have used her for 20 plus years and she is a godsend as far as tax and IRD is concerned plus she is friendly and no I'm not related to her. if you don't live in Wellington she might be able to help you by email or suggest someone close to your residence.

[GarryB]

Surprised no one has mentioned seeking advice re the entity one uses.

Our strategy has been to compartmentalise - shares bought with trading as a focus sit in one business entity, and buy and hold long term investments sit in another - each with their own brokerage account. This is one way we demarcate intention. The trading entity has had years it's paid tax on modest profits, but also a year or two where it's claimed significant refunds on trading losses. ( Lesson #1 - Set a stop loss !, closely followed by Lesson #2 - don't underestimate risk ( ramped Aus resource stocks anyone ??:( ) ) Probably under-claim trading related expenses in the trading entity , so should look at that. There are times I hold parcels of the same share in each entity, and as others have mentioned, times the Buy-Hold portfolio smashes the Trading portfolio for return - RYM has been the gift that keeps giving.....

To be fair, the trading entity is more hobby than serious living income production, - so it's $ that can be lost and not necessarily missed ( nothing leveraged in there), to reduce risk - but because it's skin in the game in a different way than Buy & Hold or Buy 4 Div Flow, it does increase one's attention and focus levels, is a great incentive to monitor and learn, and hopefully means there's enough experience / capital amassed by the time semi-retirement arrives that it will produce an additional income stream. ( in other words, best to learnt now than then.....)

My 2c worth.............

[winner69]

My accountant reminds me very year that the IRD believe that tax professionals such as advisers and agents have a duty to uphold the integrity of the tax system ..... and that she ensures that me and the rest of her clients are operating within those rules.

I don't have a problem with that.

Maybe tax returns filed by a tax agent have already passed the first hurdle and less likely to be challenged or looked at too closely by the IRD

[QOH]

GaryB that's along the lines of what I was thinking when I started the thread. Just wondered how you start, if you can do an off market transaction and transfer shares from "investment" to "trading" account and whether you can use today's prices,. and then just open a new account at brokers.
Beginning to think it might be easier to tie my hands behind my back to keep me from pushing Buy/Sell button

[MAC]

We all perhaps speculate on how the IRD treat the grey zone, perhaps the best approach QOH is just to be a little conservative and to be sure.

The IRD have a set of guidelines that they must follow fairly and equitably for all folk and those guidelines are based on the intent at the time investments are made, the duration, and reasons investments are disposed.

It’s hard to imagine that the IRD would take much interest in what portfolio’s people consider they have, whether they use different brokers, or which portfolio that they consider to be long or short. As far as the IRD and their guidelines are concerned I suspect they don’t give a rats as to which buckets individuals consider that their investments happen to be kept in.

It would a difficult sell IMO to demonstrate to the IRD that a 3 to 6 month investment in one portfolio was not just as speculative as a 3 to 6 month investment in another. The IRD must treat them as the same.

[blackcap]

why not just incorporate a company and use that as your "trading or spec" account and pay tax on income as it is due, whilst in your own name have the buy and hold portfolio?

[couta1]

My accountant reminds me very year that the IRD believe that tax professionals such as advisers and agents have a duty to uphold the integrity of the tax system ..... and that she ensures that me and the rest of her clients are operating within those rules.

I don't have a problem with that.

Maybe tax returns filed by a tax agent have already passed the first hurdle and less likely to be challenged or looked at too closely by the IRD
Maybe but not necessarily,I've been doing my own returns for about 15 years now and have never had a problem with IRD except with the odd error they have made at their end which I corrected by phone,l keep up with tax law and get the IRD tax info bulletin every month,before that I had 2 different accountants one didnt want to claim anything basically and the other was too liberal for my liking,you can only hide behind an accountant to a certain extent and at the end of the day its going to come down to debate with IRD re the Grey area,time of holding an investment is only one deciding factor unless your a day trader,some trades I did last year were purchased with the intent of holding but other ideas come along and I sold in a relatively short space of time that doesn't alter the clear and dominant purpose being to hold at time of purchase so it will come down to debate in the case of being checked and you may have to cough up or not? In the coming year I will be doing very little buying and selling in short time frame as I've now learnt the hard way that long term holds produce more capital gain at the end of the day for most investors

[airedale]

This thread could easily be re-titled "The 40 shades of grey":)

[brend]

My accountant reminds me very year that the IRD believe that tax professionals such as advisers and agents have a duty to uphold the integrity of the tax system .....

That is correct. Charatered accountants do have a duty to act within the law as per the NZICA code of ethics.

But at the end of the day, accountants have statements of disclaimers that removes any liability. Regardless if you have an accountant or not, its the taxpayer that is liability and anyone can be targeted by IRD. I think NZ has around 7 million taxpayers and any ambiguities would come down to materially. IRD has specific target industries that they monitor regular and are in the process of benchmarking industries to flag any taxpayer that 'stands out from the crowd'.

[couta1]

That is correct. Charatered accountants do have a duty to act within the law as per the NZICA code of ethics.

But at the end of the day, accountants have statements of disclaimers that removes any liability. Regardless if you have an accountant or not, its the taxpayer that is liability and anyone can be targeted by IRD. I think NZ has around 7 million taxpayers and any ambiguities would come down to materially. IRD has specific target industries that they monitor regular and are in the process of benchmarking industries to flag any taxpayer that 'stands out from the crowd'.
Yes they currently have around 16 industries benchmarked and share trading isn't one of them,this benchmark changes also as hairdressing was in a benchmark classification but not now,I doubt they could ever benchmark share trading as an industry due to the wild fluctuations between individuals it would be hard to form standard income parameters for different turnover rates according to business size,my guess that their main focus will be on property transactions and trying to stop these multinationals from paying pitiful amounts of tax on massive profits

[BIRMANBOY]

Couta, unless you actually work for the IRD,?? your speculation is probably not particularly helpful. All you have are "doubts" and "guesses"... You can hazard guesses on whatever you like of course, but in this case I feel its unhelpful and potentially misleading. Even if you have personal experiences in dealing with the IRD, its not necessarily applicable to someone else. If you do work for the IRD then you should disclose your position/area of expertise so that readers could attach more or less credibility to your post.
Yes they currently have around 16 industries benchmarked and share trading isn't one of them,this benchmark changes also as hairdressing was in a benchmark classification but not now,I doubt they could ever benchmark share trading as an industry due to the wild fluctuations between individuals it would be hard to form standard income parameters for different turnover rates according to business size,my guess that their main focus will be on property transactions and trying to stop these multinationals from paying pitiful amounts of tax on massive profits

[couta1]

Couta, unless you actually work for the IRD,?? your speculation is probably not particularly helpful. All you have are "doubts" and "guesses"... You can hazard guesses on whatever you like of course, but in this case I feel its unhelpful and potentially misleading. Even if you have personal experiences in dealing with the IRD, its not necessarily applicable to someone else. If you do work for the IRD then you should disclose your position/area of expertise so that readers could attach more or less credibility to your post. No don't work for IRD and above info is factual based on their own publication of info,what I'm really trying to point out is at the end of the day each person must be able to justify what they claim,disclose or don't disclose and even if your honestly right you may still be wrong but everyone must weigh up their own risk just like buying a particular share and its not true what I've said is not helpful as I've already had some pm messages that say otherwise,cheers

[Harvey Specter]

BB - he did say "my guess" and the IRD have set out their priorities for 2014 which include property and multinationals so his guesses are well educated. They disclose their work program each year.

I agree with him. At this stage, IRD will only be interested if you claim lots of losses, rather than those that dont claim profits. Having said that, once they stop their property project, they will have to redeploy those staff somewhere.

[BIRMANBOY]

Deep sigh......more speculation. Proclaiming what the IRD is interested in or not interested in is somewhat irrelevant ......since it disguises the underlying idea that you can avoid IRD scrutiny by not claiming profits. This is obviously correct in that this may well be the outcome. More to the point is, if you do this then you face the prospect of perhaps being found out in the future and facing penalties and highly intrusive audits of perhaps many years activities. My point is, and I'll refer to it again see post #48, is that if investors are professional in how they conduct their affairs, then it is a small price to pay to clarify these issues and the original thread starter question. The only way to clarify them with any sense of accuracy is to either talk directly to the IRD or consult a chartered accountant with expertise in this area. I should also point out that the IRD are not that keen on giving advice...they actually told me that I should consult a tax specialist when I called them. As I said far too many opinions to be helpful. I'm sure all opinions are in good faith and there is undoubtedly there is some good accurate info in some. However if you want to sleep easy at night and know you are doing the right thing for your particular set of circumstances, there is only one way to do it. Each to his or her own however.
BB - he did say "my guess" and the IRD have set out their priorities for 2014 which include property and multinationals so his guesses are well educated. They disclose their work program each year.

I agree with him. At this stage, IRD will only be interested if you claim lots of losses, rather than those that dont claim profits. Having said that, once they stop their property project, they will have to redeploy those staff somewhere.

[Harvey Specter]

Deep sigh......more speculation. Proclaiming what the IRD is interested in or not interested in is somewhat irrelevant ......since it disguises the underlying idea that you can avoid IRD scrutiny by not claiming profits. The multi $B black economy suggests that this is the case. Dont get caught though - evasion is 150% penalties. They will also go back indefinitely and dont forget interest.

Assuming you have no ethics, that should be your incentive to do the right thing.

[couta1]

Birmanboy don't ever think you can sleep easy when it comes to IRD even if you do everything right and or use an accountant there's too many cases of innocent people being put through years of hell only to find out at the end of it that IRD got it wrong and they were left with a massive legal bill,a small glimmer of hope though in a recent case in Auckland the judge ruled that IRD pay the people they tried to nail court costs,hope this sets a precedent,anyway I'm off to work to earn more money to pay more tax,gst and acc levies even though its wellington ani day ,cheers

[Snoopy]

Can a professional trader please give me and others who may be in the same position information on how to go about share trading in regards to IRD.
Does one need an accountant?
Can one claim losses or any expenses?
it seems such a gray area on how often one can sell shares.
My position is that I don't really have a relationship with IRD, just pay my correct tax on dividends,
don't claim imputation credits, and don't fill in tax return.
I'd like to do more trading but not sure if I'm opening a big can of worms.
Would love to hear the pros or cons or any ideas where I can get this info.

This post seems a little incongruous. I can't reconcile the statement that you don't file a tax return, with the obvious need to keep meticulous records for your share trading. Is it not a legal requirement to file a tax return if you receive significant income from dividends? How can your share trading records have credibility with the IRD, if they can't even trust you to file a tax return? You may even get some money back if you file a tax return. The lowest risk way to make your money might be just to follow the rules!

SNOOPY

[777]

I stand to be corrected but if all your income (salary,interest, NZ dividends) is taxed at source, and you have given your correct RWT rate, then there is no requirement to file a return. However with any non taxed income or off shore income, including dividends, you would need to file , and include all your taxable income.

[couta1]

I stand to be corrected but if all your income (salary,interest, NZ dividends) is taxed at source, and you have given your correct RWT rate, then there is no requirement to file a return. However with any non taxed income or off shore income, including dividends, you would need to file , and include all your taxable income.
Correct plus you need to file if you have losses to bring forward from last year or excess imputation credits to bring forward from previous year plus the likes rental income, estate,trust or partnership income etc plus of course income from illegal activities and cash jobs,if we had a flat tax rate of 20% the last one would be cut right back but that's another story